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Spank Hotels Pvt. Ltd.,B-6/17, Safdurjung Enclave,New Delhi-29 Vs. ACIT,Circle-9(1),C.R.Building,New Delhi.
October, 12th 2012
                   DELHI BENCH: `G' NEW DELHI


                          I.T.A .No.-3306/Del/2010
                        ASSESSMENT YEAR-2007-08

Spank Hotels Pvt. Ltd.,                Vs.   ACIT,
B-6/17, Safdurjung Enclave,                  Circle-9(1),
New Delhi-29                                 C.R.Building, New Delhi.
(APPELLANT)                                  (RESPONDENT)

                       Appellant by: Sh. V.K.Jain, CA
                  Respondent by: Dr. Prabha Kant, Sr. DR

                       Date of Hearing:-04.10.2012
                   Date of Pronouncement:- 10.10.2012



       This is an appeal filed by the assessee against the order of Ld. CIT(A)-XII,

New Delhi dated 17.03.2010 relating Assessment Year 2007-08. Ground No-2

which is in respect to disallowance of expenses u/s 40A(2)(b) was not pressed.

Therefore, the same is dismissed as not pressed.

2.     The main issue is against confirmation of Rs. 20 lacs u/s 40(A)(2)(b) of the


3.     Ld. Counsel of the assessee submitted that on similar facts, the

disallowance was made for immediately succeeding year i.e AY 2008-09 which

was deleted by Ld. CIT(A) and order of the Ld. CIT(A) has been confirmed by
                                         2                      I.T.A .No.-3306/Del/2010

the Tribunal while deciding appeal in ITA No. 4631/Del/2011 vide order dated

22.06.2012. Copy of the same was also filed.

4.    On the other hand, Ld. DR strongly objected the contention of Ld. AR.

There is no due income of except income from interest and dividend. Dividend is

considered u/s 14A and drawing interest i.e from FDR, no service could be

attributed for earning the interest. The Assessing Officer has already given a

reasonable deduction on account of salary i.e Rs. 5 lacs out of Rs. 30 lacs claimed

by assessee. Ld. CIT(A) again has given further relief of Rs. 5 lacs. It was,

further submitted that salary is to be proportionate to the services provided and

reasonable salary has already been allowed, therefore, the assessee should not be

allowed for further relief.

5.    After considering the submissions and perusing the material on record, we

find that assessee deserves to succeed on the issue involved.      It is seen that

A.O has disallowed salary u/s 40(A)(2)(b) for succeeding year i.e AY 2008-09

also. The salary was disallowed u/s 40(A)(2)(b) which was deleted by Ld.

CIT(A) and Tribunal has confirmed the order of the Ld. CIT(A) for AY 2008-09.

There is no change in facts and circumstances. In subsequent year, the salary

paid to the same Director, has been held as reasonable by the Tribunal.

Therefore, in our considered view in preceding year, it cannot be said that the

salary amount is not justified.    Same activities are involved i.e earning of

dividend and as earning of interest in subsequent year. Now Ld. DR wants that

salary should be allowed only of the proportionate amount of the services
                                         3                      I.T.A .No.-3306/Del/2010

rendered. It is very difficult to attribute the part of services provided by the

Director that how much proportionate is correct or how much is not correct. This

has to be seen in view of the section 40(A)(2)(b) in which basis the Assessing

Officer has disallowed.

6.    As stated above, the order of Assessing Officer was not approved either by

Ld. CIT(A) or by Tribunal for immediately succeeding year.               Respectfully

following the Tribunal, we direct to allow his claim for the year under

consideration also.

7.    In the result, the appeal of the assessee is allowed.

      Order pronounced in the Open Court on 10.10.2012.

      Sd/-                                                                Sd/-

(S.V.MEHROTRA)                                                      (R.K.GUPTA)
ACCOUNTANT MEMBER                                             JUDICIAL MEMBER

Dated: 10/10/2012

Copy forwarded to:
1.   Appellant
2.   Respondent
3.   CIT
4.   CIT(Appeals)
5.   DR: ITAT

                                                        ASSISTANT REGISTRAR
                                                             ITAT, NEW DELHI
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