INCOME TAX ACT, 1961

Section 11

Charitable trust - Exemption under section 11 - Salary payment to the founder and the treasurer of the trust whether amounted to providing personal benefits -

Assessee-trust was registered under section 12AA and was claiming exemption under section 11. AO alleged that the assessee had made payments towards salaries to its founder and to the treasurer of trust, who were the persons specified under section 13(3) and disallowed the same by holding that the said payment of salary amounted to personal benefit to such persons. The assessee contended that the salary was paid to all these persons for the services rendered by them to the assessee-trust, which was not excessive and it was reasonable. Held: As decided in assessee's own case, even if the salary paid to the trustee are held to be unreasonable even then the exemption cannot be denied. Only excess/unreasonable salary paid to the trustee, would not be entitled to the benefit of section 11. Payments made to such persons clearly attracted the provisions of sections 13(1) and 13(2), however, only to the extent of the payments, which were found to be excess of what may be reasonably paid for such services. In case no services were rendered, only then the entire payments to such persons would be treated as the application of income of the trust in violation of the provision of section 13(1) read with section 13(3). Since AO did not examine as to whether all these persons possessed the requisite qualifications for holding the position or not, therefore, the matter was remanded back to the AO for re-adjudication.

Followed:Dy. CIT v. Jyoti Vidyapeeth Trust 2018 TaxPub(DT) 5257 (Jp-Trib).

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2015-16 & 2016-17

INCOME TAX ACT, 1961

Section 11

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