M/s Manav Mangal Society, Chandigarh V. DCIT, Circle -1 (Exemptions), Chandigarh

CO 8/CHANDI/2022

AI Insights

The case involves a series of appeals and cross objections between the Revenue and M/s Manav Mangal Society concerning the assessment years 2012-13, 2017-18, and 2018-19. The primary issues revolved around the exemption of surplus income under sections 11 and 12, and the reasonableness of salary and rent payments to specified persons under section 13(3) of the Income Tax Act. The Assessing Officer had made additions to the income of the society, which were contested in the appeals. The CIT(A) had ruled in favor of the assessee, a decision which was supported by the Tribunal based on precedents set in earlier years for the same assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127538 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 30-11-2022
• Other Referred Cases: Commissioner Of Customs (Import), Mumbai vs M/S. Dilip Kumar And Company, Sun Export
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 11; 143(3); 22

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “B” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी #व$म &संह यादव, लेखा सद+य BEFORE: SHRI A.D.JAIN, VICE PRESIDENT AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA Nos. 677, 678 & 679/CHD/ 2022 नधा रण वष / A.Y : 2012-13, 2017-18 & 2018-19 The DCIT, Circle-1(Exemptions), Chandigarh. बनाम M/s Manav Mangal Society, Sector 21-C, Chandigarh. थायी लेखा सं./PAN NO: AAAAM0564C अपीलाथ /Appellant यथ /Respondent & C.O. Nos. 8,9 & 10/CHD/2022 in आयकर अपील सं./ ITA NO. 677, 678 & 679/CHD/2022 नधा रण वष / A.Y : 2012-13, 2017-18 & 2018-19 M/s Manav Mangal Society, Sector 21-C, Chandigarh. बनाम The DCIT, Circle-1(Exemptions), Chandigarh. थायी लेखा सं./PAN NO: AAAAM0564C अपीलाथ /Appellant यथ /Respondent राज व क ओर से/ Revenue by : Shri Sarabjeet Singh, CIT-DR नधा "रती क ओर से/Assessee by : Shri Sudhir Sehgal, Advocate स ु नवाई क तार&ख/Date of Hearing : 07.06.2023 उदघोषणा क तार&ख/Date of Pronouncement : 12.06.2023 आदेश/Order PER BENCH: T h e s e a r e s e t s o f a p pe a l s f i le d b y t h e Re ve n ue a n d C r o s s O b j e c t i o n s b y t h e a s s e s s e e a ga i n s t t h e r e s p e ct i ve o r d e r s o f l d . C I T( A ) d a t e d 0 5 . 0 9 . 2 0 2 2 p e r ta i n i n g t o a s s e s sme n t ye a r ITA 677,678,679/CHD/2022 & CO 8,9,10/CHD/2022 2 2 0 1 2 - 1 3 , 2 0 1 7 - 1 8 a n d 2 0 1 8 - 1 9 r e s p e c t i ve l y . S i n c e co m m o n i s s u e s a re i n v o l v e d , a l l t he s e a p p e a l s w e r e he a r d to g e t h e r a n d a r e b e i n g d i s p o s e d o f f b y t h i s c o n s o l i d a te d o r d e r . 2 . W i t h t h e c o n s e nt o f b o t h t h e p a r t i e s , t h e c a s e o f t he a s s e s se e p e r ta i n i n g t o a s se s s m e n t y e a r 2 0 1 2 - 1 3 w a s t a k e n a s a l e a d ca se w h e r e i n t h e r e s pe c t i v e g r o u n d s o f a p p e a l r e a d a s u n d e r : ITA No. 677/CHD/2022 (A.Y. 2012-13) 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the surplus of income and expenditure account of the assessee for the A.Y. 2012-13 exempt u/s 11 and 12, even though the AO has proved that income of the society has been used to provide benefit "directly or indirectly" to any person referred to in section 13(3) i.e. specified persons ignoring the detailed findings given by the Assessing Officer in the Assessment order? 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the salary payment to the specified persons under section 13(3) as reasonable and justified by noting that nothing was found during the course of assessment proceedings for disallowing the salary paid to the specified persons ignoring the detailed findings given by the Assessing Officer in the Assessment order? 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the salary payments to the specified persons under section 13(3) as reasonable and justified when the assessee had failed to provide evidence of what work these specified persons were doing and had failed to justify the salaries paid to these specified persons? 4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the onus to prove the excessiveness of the salary/remuneration paid to the specified persons lies on the Revenue Authorities contrary to the decision of the Hon'ble Supreme Court in the case of Commissioner Of Customs (Import), Mumbai vs M/S. Dilip Kumar And Company dated 30 July, 2018 in CIVIL APPEAL NO. 3327 OF 2007, wherein the Hon'ble Apex Court held that the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification, overruling its own judgment in the case of Sun Export [2002-TIOL-118-SC-CX-LB] and all the decisions which took similar view as in Sun Export Case? ITA 677,678,679/CHD/2022 & CO 8,9,10/CHD/2022 3 5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the high salary payments to the specified persons under section 13(3) as reasonable and justified when the payments to other non-specified employees was much less? 6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the salary payment to Sh. G.S. Sardana as justified when the payment made to him in contradiction to the rules of Memorandum because he was a member of the executive committee and had the responsibility of managing the educational institutions of the assessee and, as per the clear terms of the Memorandum, he could not charge any remuneration for this function and had to work in honorary capacity? 7. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the salary payment to Sh. Sanjay Sardana and Sh. Sandeep Sardana as justified when non-specified principals of other schools under the assessee society were getting much less salary for the same work and same post? 8. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the rent payment to the specified persons under section 13(3) for H.No. 3085, sector-21/D, Chandigarh and H.No. 3084, sector-21/D, Chandigarh as justified ignoring that this was not a genuine transaction and that the specified persons had simply made an arrangement whereby they were being paid rent for staying in their own house and all the regular upkeep of the house including whitewashing, minor repairs, etc. was borne out of the funds of the assessee? 9. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the rent payment to the specified persons under section 13(3) for H.No. 3085, sector-21/D, Chandigarh and H.No. 3084, sector-21/D, Chandigarh as justified ignoring the fact that the assessee had wrongly claimed that the rent- free accommodation was given to the "directors" when the lease deed says that the premises was leased out to the "principal(s)" of its school and not to the directors and no other non-specified principal of the other schools of the assessee society were provided this facility? 10. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the interest on unsecured loans paid to the specified persons @ 12% as justified when the Assessing Officer had clearly brought out that the assessee had given out funds to the specified persons under section 13(3) in the form of excessive salary, rent and this was the source of income of these specified persons and also the source of unsecured loans and therefore, it was rightly noted that the funds of the assessee were given out to the specified persons and then a part of it was taken back and interest was paid on this money? 11. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the interest on unsecured loans paid to the specified persons @ 12% as justified without appreciating the fact that the assessee was paying interest for its own funds and had these funds not been diverted to the specified persons in the first place, there would not be any need for unsecured loans? 12. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the order of the Assessing Officer not right because the assessee ITA 677,678,679/CHD/2022 & CO 8,9,10/CHD/2022 4 had been running for the past many years and various assessments u/s 143(3) had been made for the earlier years and no such adverse view had been taken then completely ignoring that in the earlier assessments, the issues were not examined in detail and rather, material documents like lease deed, comparison of salaries with other employees, etc. was not asked/discussed? 13. That the appellant craves leave to add, delete or amend any grounds of appeal. C.O. No. 8/CHD/2022 in ITA No. 677/CHD/2022 (A.Y. 2012-13) 1. That the Ld. CIT(A), NFAC, Delhi has rightly held that the surplus of income over expenditure having been utilized for achieving the aims and objects of the society and, as such, the case of the assessee being not covered u/s 13(3) of the Income Tax Act and, accordingly, has rightly deleted the addition as made by the Assessing Officer. 2. That the appellant craves leave to add, delete or amend any grounds of appeal.” 3 . B r i e f l y t he f a c ts o f t h e ca se a r e t ha t t h e a s s e ss e e S o c i e t y i s r e g i s te r e d u / s 1 2 A A o f t h e A c t . F o r t he ye a r u n de r c o n s i d e ra t i o n , t h e a s se s se e s o c i e t y h a d f i l e d i t s re t u r n o f i n c o m e de c l a r i n g t o t a l i n c o m e a t ‘n i l ’ . Th e c a se of t h e a s se s s e e w a s o r i g i n a l l y a s s e s se d u / s 1 4 3 ( 3 ) a n d t h e r e a f t e r the m a t te r w a s r e o p e n e d a n d a f te r i s s ui n g n e c e s sa r y n o t i c e s , the a s s e s s m e n t w a s c o m p l e t e d u / s 1 4 7 r e a d w i t h 1 4 3 ( 3 ) da te d 1 8 . 1 2 . 2 0 1 9 . Th e A O i n v o k e d t h e p r o v i s i o n s o f S e c t io n 1 1 re a d w i t h S e c t i o n 2 ( 1 5 ) , 1 3 ( 1 ) ( c ) r e a d w i t h Se c t i o n 1 3 ( 3) o f t h e A c t a n d ha d ma d e a n a d d i t i o n o f R s .5 , 2 3 , 5 8 , 7 3 2 / - f o r t he s u r p l u s o f i n c o m e o ve r t h e e x pe n d i t u r e a n d ha s a l s o d i s a l l ow e d t he p a y m e n t s m a d e t o s p e c i f i e d p e r s o n s a m o u n t i n g t o ITA 677,678,679/CHD/2022 & CO 8,9,10/CHD/2022 5 R s . 1 , 2 5 , 8 4 , 9 6 8 / - a n d t h e r e a f te r , t h e a s se s s m e n t w a s c o m p l e te d a t a n a s se s s e d i nc o m e o f R s . 6 , 4 9 , 3 , 7 0 0 / - . 4 . B e i n g a g g r i e ve d , t h e a s s e s s e e ca r r ie d t h e ma t t e r i n a p pe a l b e f o re t h e l d . C I T( A ) a n d a f t e r ta k i n g i n t o c o n s i d e r a t i o n t h e s u b m i s s i o n s f i l e d b y t he a s s e s s e e , t h e l d . C I T(A ) h a s r e c o r d e d h i s f i n d i n g s w h i c h a r e c o n t a i ne d a t pa r a 4. 2 o f t he i m p u g n e d o r d e r a n d w h i c h a r e un d e r c ha l l e n ge b e f o re u s , r e a d s a s u n d e r : “4.2 Decision on Ground of Appeal No. 1 to 22 4.2.1 I have carefully gone through the submission of the Appellant. I have also gone through the records and facts of the case and case laws cited by the appellant, it is seen that in appellant's own case for A.Y.2010-11 and 2011-12 and A.Y.2013-14 to 2016-17 ITAT has passed an order dated 27.05.2021 in favour of the appellant. Jurisdictional ITAT has further stated that issue relating the A.Y.2003-2004 which was affirmed by High Court and SLP against High Court was dismissed by Apex Court. It is further seen that the CIT(A) on appellant’s case for A.Y. 2013-14 to 2016-17 wherein similar issues were involved has deleted the addition made by the AO on account of salary, rent and interest expenditure which has been upheld by ITAT. Since the facts in the case of the appellant are in pari material with the assessment years mentioned above, I am inclined to accept the decision of ITAT in appellant's own case. The addition made by the AO is therefore deleted and the issue is decided in favour of the appellant.” 5 . A g a i n s t t he sa i d f i n d i n g s o f t h e l d . C I T( A ) , t h e Re v e n ue i s i n a p p e a l b e f o r e u s a n d t h e a ss e s se e i n i t s C r o ss O b j e c t i o n s u p p o r t s t h e f i n d i n g s o f t h e l d . C I T ( A ) . 6 . D u r i n g t h e c o u rs e o f he a r i n g , l d . C I T- D R d r a w i n g o u r r e f e r e n c e t o t h e a f o re sa i d f i n d i n gs o f t he l d . C I T(A ) s u b m i t t e d t h a t t he l d . C I T( A ) h a s b a s i ca l l y f o l l o w e d t h e d e c is i o n o f h i s ITA 677,678,679/CHD/2022 & CO 8,9,10/CHD/2022 6 p r e de ce s s o r a n d t h e Tr i b u n a l i n a s s e s se e ' s o w n c a s e p e r ta i n i n g t o e a r l ie r ye a r s w h e r e i n t he m a tt e r h a s b e e n d e c i d ed b y t he C I T( A ) a n d t h e T r i b u n a l i n f a v o u r o f t h e a s se s s e e . I t w a s s u b m i t t e d t h a t s i n c e t h e R e ve n ue h a s n o t a c c e p te d th e o r d e r o f t h e Tr i b u n a l a n d t h e a p p e a l ha s a p p a re n t l y b e e n f i le d be f o r e t h e H o n ' b l e H i g h C o u r t , t h e r e f o re , t h e p r e se n t a p p ea l h a s be e n f i l e d b y t h e Re ve n ue i n o r d e r t o k e e p i t s c l a i m a l ive f o r t h e a s s e s s m e n t y e a r 2 0 1 2 - 1 3 . 7 . P e r c o n t ra , t h e l d . A R t a k e n u s th r o u g h t h e f i n di n g s o f t h e Tr i b u n a l i n a s se s se e ' s o w n c a se w he r e i n t he m a tte r ha s b e e n e x ha u s t i v e ly e xa m i ne d a n d d e ta i l e d f i n d i n gs h ave be e n r e c o r d e d b y t h e Tr i b u n a l i n p a r a 1 0 - 1 0 . 9 , 1 7 - 1 7 . 2 , 2 4 , 3 2 , 4 2 t o 4 2 . 1 2 o f i t s o r d e r d a te d 2 7 . 0 5 . 2 0 2 1 i n r e s p e c t of e a c h o f t he i s s u e d r a i s e d b y t h e Re ve n u e i n t h e p re se n t a p p e a l r e l a ti n g t o p a y m e n t o f r e m u n e r a t i o n , r e n t a nd i n t e re s t o n u n s e cu r e d l o a n s t o s p e c i f ie d p e r so n s . I t w a s s u b m i t t e d t h a t s i n ce t h e r e a r e no c h a n ge s i n t h e f a c t s a n d c i r c u m s t a n ce s o f t h e c a s e , t h e l d C I T( A ) h a s r i g h t l y f o l l o w e d t h e d e c i s i o n o f t h e Tr ib u n a l i n t he e a r l ie r ye a r s a n d t h e sa m e m a y b e f o l l o we d f o r t h e i m p u g ne d a s s e s s m e n t y e a r . 8 . A f t e r h e a r i n g b o t h t h e p a r t i e s a n d p e r u s i n g t h e m a t e r i a l o n r e c o r d , a d m it t e d l y t h e r e a r e n o c h a n ge s i n t h e fa c t s a n d c i r c u m s t a n ce s o f t h e ca s e a n d g i v e n t h a t t h e l d . C IT( A ) h a s ITA 677,678,679/CHD/2022 & CO 8,9,10/CHD/2022 7 f o l l o w e d t h e de ci s i o n o f t h e C o - o r d i n a te B e n c h i n as s e s se e 's o w n c a s e f o r t h e p r e v i o u s y e a r s , w e s e e n o r e a so n to d e v i a te f r o m t h e e a r l ie r f i n d i n g s o f t h e C o - o r d i na te B e n c h i n t he d e c i s i o n re fe r r e d s u p r a . N o t h i n g h a s b e e n b r o u g h t o n r e c o r d to s u g g e s t t h a t t he d e c i s i o n o f t he Tr i b u n a l i n e a r l i er ye a r s ha s b e e n s ta ye d o r m o d i f i e d b y t h e C o u r t s . M e r e f i l i n g a n a p p e a l b e f o r e t h e H o n ’ b l e H i g h C o u r t d o e s n ’ t ta k e a wa y t h e f a c t t ha t t h e sa i d d e c i s i o n c o n t i n u e t o r e m a i n e f f e c t i ve a n d b i n d s t h e l d C I T( A ) w h o h a s r i g h t l y f o l l o w e d th e s a m e . I n v i e w o f t h e sa m e , a p pe a l o f t h e Re v e n u e i s d i s m i s se d a n d C r o s s O b j e c ti o n o f t he a s s e s se e w h i c h b a s i c a l l y s u p p o r t s t h e o r d e r o f t he l d . C I T( A ) , i s h e r e b y a l l o w e d . 9 . I n t he r e s u l t , a p p e a l o f t h e R e ve n ue i n I TA N o . 6 7 7 / C H D / 2 0 2 2 i s d i s m i s s e d a n d t h e C . O . N o . 8 / C H D / 2 0 22 o f t h e a s s e s s e e i s a l l o w e d . 1 0 . S i n c e t h e fa c t s a n d c i r c u m s ta n ce s i n I TA N o s . 67 8 & 6 7 9 / C H D / 2 0 2 2 a r e i d e n t i ca l t o I TA N o . 6 7 7 / C H D / 2 0 2 2 , t h e r e f o r e , o u r f in d i n g s g i v e n i n I TA N o . 6 7 7 / C H D / 2 02 2 w o u l d a p p l y m u ta t i s - mu t a n d i s t o I TA N o s . 6 7 8 & 6 7 9 / C H D / 2 02 2 a l s o . S i m i l a r l y , s i n ce f a c t s a n d c i r c u m s t a n ce s i n C . O s 9 & 1 0 / C H D / 2 0 2 2 a r e i de n t i ca l t o C . O . N o . 8 / C H D / 2 0 2 2 t h er e f o r e , o u r f i n d i n g s g i v e n i n C O / 8 / C H D / 2 0 2 2 w o u l d a p p l y m u ta t i s - m u t a n d i s t o C . O . N o s . 9 & 1 0 / C H D / 2 0 2 2 a l s o . ITA 677,678,679/CHD/2022 & CO 8,9,10/CHD/2022 8 1 1 . I n t h e r e s u l t , a l l t h e a p pe a l s o f t h e Re ve n ue ar e d i s m i s s e d a n d t he C r o s s O b je c t i o n s o f t h e a s s e s s e e a re a l l o w e d . O r d e r p r o n o u n c e d i n t h e O p e n C o u r t o n 1 2 . 0 6 . 2 0 2 3 . Sd/- Sd/- आकाश द प जैन #व$म &संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद+य/ ACCOUNTANT MEMBER Poonam Date: 12.06.2023 आदेश क त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. -वभागीय त न2ध, आयकर अपील&य आ2धकरण, च5डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar