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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