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Asstt.Commissioner of Income Tax, Circle-II, Block-B, CGO Complex, Faridabad. Vs M/s Idicula Trust Society, Sainik Colony, Sector-49, NH-IV, Faridabad.
August, 06th 2014
                                     1                     ITA No. 1216/Del/2013
                                                              Asstt.Year: 2009-10

           IN THE INCOME TAX APPELLATE TRIBUNAL
                  DELHI BENCH `C' NEW DELHI

     BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER
                           AND
       SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

                         I.T.A.No.1216/Del/2013
                        Assessment Year : 2009-10

Asstt.Commissioner of Income Tax, vs M/s Idicula Trust Society,
Circle-II, Block-B,                      Sainik Colony, Sector-49,
CGO Complex, NH-IV,                      Faridabad.
Faridabad.
 (PAN: AAAC1511R)
(Appellant)                        (Respondent)
                               Appellant by: Shri Sat Pal Singh, Sr. DR
                             Respondent by : Shri K. Sampath

                               ORDER

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

      The above appeal has been preferred by the revenue against the order

of CIT, Faridabad dated 31.12.2012 in Appeal No. 335/2011-12 dated

31.12.2012 pertaining to AY 2009-10.

2.    The revenue has raised following grounds in this appeal:-

                 "1. Whether on facts and circumstances of the case
          the CIT(A) was right in law in deleting addition of Rs.
          14,64,000 made by the Assessing Officer on account of
          excessive payment made to persons specified in section
          13(3) of Income Tax Act, 1961 despite the observation of
          Ld. ITAT in earlier years that salary paid to office bearer
          of the Trust was excessive."
                                       2                     ITA No. 1216/Del/2013
                                                                Asstt.Year: 2009-10

                 2)      "Whether on facts and circumstances of the
           case and in law the Ld. CIT(A) was justified in deleting the
           addition of Rs. 14,64,000 despite the assessee owning and
           running a fleet of luxurious cars in contravention of
           section 13(l)(c)(ii) read with section 13(2)(c) of Income
           Tax Act, 1961."

                 3) "Whether on facts and circumstances of the case
           & in law the Ld. CIT(A) has erred in treating income of Rs.
           1,98,42,500/- as exempt under section 11 of the Income
           Tax Act, 1961 despite the assessee Trust having
           contravened the provisions of section 13(1)(c)(ii) read with
           section 13(2)(c) of the Income Tax Act, 1961."

3.    Briefly stated, the facts giving rise to this appeal are that the assessee

filed its return of income on 30.2.2009 declaring excess of income over

expenditure amounting to Rs. 1,98,42,500/- and claiming the same as

exempt income u/s 11 of the Income Tax Act. The AO completed regular

assessment u/s 143(3) of the Act at a total income of Rs.2,13,06,500/- vide

order dated 23.12.2011 treating the activities of the trust society as of

business assessable u/s 28 or u/s 56 of the Act and rejecting the claim of

exemption u/s 11 of the Act.        The AO also disallowed 2/3rd of the

expenditure amounting to Rs.14,64,000 incurred on the remuneration of four

persons u/s 40A(2b) of the Act.

4.    Aggrieved the assessee preferred an appeal before the CIT(A) which

was allowed on all grounds raised by the assessee. Now, being aggrieved by
                                       3                    ITA No. 1216/Del/2013
                                                               Asstt.Year: 2009-10

the above order of the CIT(A), which granted relief for the assessee, the

revenue is before this Tribunal with the grounds as reproduced hereinabove.

5.    We have heard rival arguments of both the sides and carefully perused

the record. Ld. DR submitted that the CIT(A) was not right in law and on

facts in deleting the addition of Rs.14,64,000 made by the AO on account of

excessive payment made to the persons specified u/s 13(3) of the Act despite

the observation of ITAT in earlier years that salary paid to the office bearer

of the trust was excessive. The DR further contended that the CIT(A) was

not justified in deleting the above addition by ignoring the important fact

that the assessee was owning and running a fleet of luxurious cars in

contravention of section 13(1)(c) of the Act. Apropos ground no.3, ld. DR

vehemently contended that the CIT(A) has erred in law and on facts in

treating the income of Rs.1,88,42,500/- as exemption u/s 11 of the Act

despite the assessee trust having contravened the provisions of section

13(1)(c) r/w section 13(2)(c) of the Act.

6.    Ld. DR has drawn our attention towards assessment order and

submitted that the ITAT in its order in assessee's own case for AY 2006-07

has observed that the salary paid to Mr. Joseph John should not exceed

Rs.20,000 per month and the amount of payment as disallowed by the

authorities below was upheld by ITAT. The DR further contended that the
                                       4                     ITA No. 1216/Del/2013
                                                                Asstt.Year: 2009-10




disallowance and addition made by the AO are based on justified and cogent

reasons and the CIT(A) deleted the same without any logical reasoning and

grounds.

7.    Replying to the above, ld. Counsel for the assessee has drawn our

attention towards submissions of the assessee before the CIT(A) reproduced

in the impugned order in para 5 on pages 4 to 13 of the impugned order and

submitted that the inadvertent mistake in payment of salary was made in AY

2006-07 which was corrected in AY 2007-08 and 2008-09 and the CIT(A)

followed the assessment order of these years while granting relief for the

assessee.   Ld. Counsel has drawn our attention towards para 6 of the

impugned order which is a conclusive part of the impugned order which

reflects the findings and conclusion of the CIT(A) for allowing the appeal of

the assessee.

8.    On careful consideration of above rival submissions and careful

perusal of relevant material on record, we observe that the CIT(A) granted

relief for the assessee with following conclusion:-

               "6. I have considered the submissions of learned
            counsels for the appellant and gone through the documents
            filed on record as well as the relied upon judicial rulings.
            There is no dispute to the fact that the appellant society
            has been granted registration under section 12A of the Act
            as per certificate dated 15.07.1996 filed at page 13 of the
            paper book. There is also no dispute to the fact that the
            appellant has claimed exemption of its income under
                                     5                     ITA No. 1216/Del/2013
                                                              Asstt.Year: 2009-10

          section 11 (1)( a) of the Act. The main reason assigned by
          the AO while denying the claim of exemption is that the
          appellant has provided salary to the office bearers
          resulting into contravention of the provisions of section
          13(1)(c) of the Act. The identical issues were also involved
          in the case of appellant for A.Y. 2008-09, wherein the AO
          disallowed claim of salary paid to same three office
          bearers of the appellant society to the extent of
          Rs.14,64,000 /- and assessed the appellant in the status of
          an AOP. The appellant claimed similar salary to aforesaid
          three office bearers aggregating to Rs.21 ,96,000/ - in A.Y.
          2007-08 also but the AO did not make any disallowance in
          the assessment order passed u/s 143(3) on 30.12.2009.
          Keeping in view the fact that entire salary paid to the three
          office bearers was allowed by the AO in A.Y.2007 -08, I
          did not sustain the disallowance made by the AO in A.Y.
          2008-09. I have also held that the AO was not justified in
          denying the claim of exemption u/ s 11 (1) on the ground of
          contravention of the provisions of section 13(1)(c) of the
          Act as per my appellate order dated 27.07.2011 passed in
          appeal No. 278/2010-11 for A.Y. 2008-09. The department
          preferred appeal against my aforesaid order before the
          Hon'ble ITAT. The Hon'ble ITAT, Delhi Bench 'C' New
          Delhi, vide order dated 30.04.2012 passed in appeal ITA
          No. 4514/Del/2011 in the case of appellant for A.Y. 2008-
          09 has upheld my order as such. Respectfully following the
          decision of Hon'ble ITAT for A.Y. 2008-09 in appellant's
          own case, the disallowance of Rs.14,64,000/- made by the
          AO is deleted. The status of the appellant is held to be that
          of a charitable society eligible for claim of exemption u/s
          11(1) of the Act. The AO is directed to allow claim of
          exemption u/s 11(1) of the Act. All the grounds of appeal
          taken up by the appellant are allowed."

9.    In view of above, we clearly observe that the CIT(A) granted relief for

the assessee pertaining to the disallowance of Rs.14,64,000 by observing

that the AO did not make any disallowance in AY 2007-08 in the assessment
                                      6                      ITA No. 1216/Del/2013
                                                                Asstt.Year: 2009-10

order passed u/s 143(3) of the Act dated 30.12.2009. The CIT(A) further

observed that keeping in view the fact that the entire salary paid to the three

office bearers was allowed by the AO in AY 2007-08, the CIT(A) did not

uphold the disallowance made by the AO in AY 2008-09 on this issue. In

this situation, we are in agreement with the conclusion of the CIT(A) that the

AO was not justified in disallowing 2/3rd of the expenditure incurred in the

remuneration of the four persons u/s 40A(ii)(b) of the Act. On this issue, we

are unable to see any infirmity or perversity in the impugned order and

conclusion of the CIT(A) is upheld.

10.   From para 6 of the impugned order as reproduced hereinabove, we

also observe that the CIT(A) has followed its own order in assessee's own

case dated 27.07.2011 passed in Appeal No. 278/2010-11 for AY 2008-09

which was upheld by the ITAT `C' Bench, New Delhi vide order dated

30.4.2012 passed in ITA No. 4514/D/2011 in assessee's own case for AY

2008-09. On perusal of above order of the Tribunal, we observe that the

Tribunal has decided the issue in favour of the assessee dismissing the

appeal of the revenue with following observations and findings:-

             "12. Let us examine whether assessee has extended any
           undue benefit directly or indirectly to the persons referred
           to in sub-section(3). As far as the salary paid to two
           persons, namely, Mr. T.I. John and Mr. A. John of
           Rs.8,16,000 and Rs.7,20,000 is concerned, we find that a
           similar salary was paid in assessment years 2005-06 to
                                     7                    ITA No. 1216/Del/2013
                                                             Asstt.Year: 2009-10

          2007-08. In assessment years 2005-06 and 2006-07,
          Assessing Officer made the disallowance and the ITAT has
          upheld the deletion of disallowance. Thus, the issue is
          squarely covered by the order of the ITAT. As far as the
          salary paid to Mr. Joseph John is concerned, we find that
          the salary of Rs.55,000 per month has been paid. Assessing
          Officer disallowed the salary to the extent of 2/3rd. We
          find that Learned CIT(Appeals) has considered the order
          of the ITAT in assessment years 2003-04 to 2006-07
          wherein salary in the case of Mr. Joseph John has been
          partly disallowed. It was brought to our notice that in
          assessment year 2007-08, Assessing Officer has allowed
          the total salary paid to Mr. Joseph John and the salary
          was @ Rs.55,000 per month. We further find that in this
          year, Assessing Officer has independently not brought any
          evidence which can show how much salary a person
          having qualification equivalent to Mr. Joseph John could
          fetch in the open market. What are the rates of salary paid
          by other institution to a person who is teaching as well as
          managing the school. We have noticed the duties
          performed by Shri Joseph John. Assessing Officer is
          harboring upon the evidence collected by the Assessing
          Officer in assessment year 2003-04. He has made
          reference to the salary of the staff in those years. With
          effect from 01.01.2006, Government of India has notified
          the 6th Pay Commission which resulted into a handsome
          enhancement in the salary of the employees including the
          government teaching staff and the salaries have almost
          enhanced by 30% to 40%. If the increase in the salary of
          Shri Joseph John allowed to him by the ITAT in 2004-05,
          is being looked into with this angle also then sum of
          Rs.55,000 would not be on a higher side. Considering all
          these aspects and the detailed order of the Learned
          CIT(Appeals), we do not find any reason to interfere in it
          and the appeal of revenue is dismissed."




11.   In view of above conclusion of the Tribunal in assessee's own case for

AY 2008-09, we observe that the Tribunal has taken cognizance of this fact
                                       8                     ITA No. 1216/Del/2013
                                                                Asstt.Year: 2009-10

that from 1.1.2006, the Govt. of India has notified Sixth Pay Commission

which resulted into handsome enhancement in the salary of the employees

including the government teaching staff and the salary have almost enhanced

by 30 to 40%. The Tribunal further held that if the increase in the salary of

Shri Joseph John allowed to him by the Tribunal itself in 2004-05 is being

looked into with this angle, then also, a sum of Rs.50,000 would not be on

the higher side. Considering these facts, the Tribunal upheld the order of the

CIT(A) which granted relief for the assessee in AY 2008-09.

12.   Accordingly, we are of the view that the CIT(A) was right in granting

relief for the assessee by following earlier assessment order for AY 2007-08,

CIT(A)'s own orders for AY 2008-09 and order of the Tribunal upholding

the order of the CIT(A) for AY 2008-09 as discussed above. Finally we

hold that there is no infirmity or perversity in the impugned order.

13.   Since the status of the appellant trust is held to be that of charitable

society eligible for claim of exemption u/s 11(1)(a) of the Act, then the

CIT(A) rightly directed the AO to allow the claim of the assessee for

exemption u/s 11(1) of the Act. On the basis of foregoing discussion and

observation, we reach to a conclusion that the CIT(A) granted relief for the

assessee on cogent and justified reasons and the CIT(A) was also justified in

allowing the claim of the assessee for exemption u/s 11(1) of the Act. We
                                      9                        ITA No. 1216/Del/2013
                                                                  Asstt.Year: 2009-10

are unable to see any infirmity or any other valid reason to interfere with the

findings of the CIT(A) in the impugned order and thus we uphold the same.

Finally, we hold that the grounds raised by the revenue are devoid of merits

and deserve to the dismissed and we dismiss the same.

14.   In the result, the appeal of the revenue is dismissed.

      Order pronounced in the open court on 5.8.2014.


     Sd/-                                        Sd/-
 (S. V. MEHROTRA)                          (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER                              JUDICIAL MEMBER

DT. 5th AUGUST, 2014
`GS'

Copy forwarded to:-
  1. Appellant
  2. Respondent
  3. C.I.T.(A)
  4. C.I.T. 5. DR                                      By Order

                                                    Asstt.Registrar

 
 
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