The Tax PublishersITA Nos. 1069 to 1071/Chd/2019
2020 TaxPub(DT) 5472 (Chd-Trib)INCOME TAX ACT, 1961
Section 13(1)(C) Section 13(3)
Salary payments made to the specified persons was reported by Tax Auditor and thus said payments were not in dispute and no comparable case was cited by AO to substantiate that how and in what manner payment made to members of society was excessive while invoking provisions of section. When assessee was availing services of members of society and if they had not provided those services to assessee-society, it would have engaged person from outside to whom salary was required to be paid. Then, disallowance made by AO invoking section 13(1)(C) was not justified, particularly when remuneration/salary paid to the same persons in earlier years had been accepted.
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Charitable trust - Exemption under section 11 - Invocation of section 13(1) read with section 13(3) - Payment of salary to members of society
Assessee was a society registered under section 12AA. AO by invoking section 13(1)(c) read with section 13(3) sought to disallow remuneration/salary amounting to Rs. 54 lakhs paid by assessee to members of society for the reason that no service was provided by them. Assessee contended that specified persons to whom salary/honorarium was paid were possessing requisite qualifications and they were providing guidance and support to management for selection of Teachers, management of capital expenditure, interaction with members of DPS society, liasoning with it, implementing its policies, interaction with CBSE and Teachers Association, etc., which involved lot of time and efforts for which otherwise assessee society would have to engage outside persons. As per AO, having qualification could not be a criteria to make payment of salary/remuneration to members of society. Held: Payments made to the specified persons was reported by Tax Auditor and thus said payments were not in dispute and no comparable case was cited by AO to substantiate as to how and in what manner payment made to members of society was excessive while invoking provisions of section 13(1)(c). AO himself admitted that specified persons were having higher qualification. When assessee was availing of services of members of society and if they had not provided those services to assessee-society, it would have engaged person from outside to whom salary was required to be paid. Therefore, disallowance made by AO was not justified, particularly when remuneration/salary paid to the same persons in earlier years had been accepted.
Relied:Prasad Multi Services (P) Ltd. v. Dy. CIT (2020) 423 ITR 542 (Guj-HC) : 2020 TaxPub(DT) 4445 (Guj-HC),CIT v. Dalmia Dadri Cement Ltd. (1970) 77 ITR 410 (P&H-HC) : 1970 TaxPub(DT) 240 (P&H-HC), Berger Paints India Ltd. v. CIT (2004) 266 ITR 99 (SC) : 2004 TaxPub(DT) 1388 (SC), Prasad Multi Services (P) Ltd. v. Dy.CIT (2020) 423 ITR 542 (Guj-HC) : 2020 TaxPub(DT) 4445 (Guj-HC), Dy.CIT v. United Vanaspati Ltd. (2005) 275 ITR 124 (Chd)(AT)(TM) : 2005 TaxPub(DT) 116 (Chd-Trib), Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC), CIT v. Arthur Andersen & Co. (2009) 318 ITR 229 (Bom-HC) : 2009 TaxPub(DT) 388 (Bom-HC) and CIT v. Leader Valves Ltd. (2007) 295 ITR 273 (P&H) : 2007 TaxPub(DT) 912 (P&H-HC).
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