ACIT, Faridabad V. M/s Idicula Trust Society, Faridabad

ITA 1216/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81483 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Earning of tax free income
• Section: 143(3); 12A; 56; 28; 11

Judgement Text

ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 1 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 ID ICULA 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 O R D E R 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. 33 5/2011-12 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 SECT ION 13(3) OF INCOME TAX ACT, 1961 DESPITE THE OBSERVATI ON OF LD. ITAT IN EARLIER YEARS THAT SALARY PAID TO OFFIC E BEARER OF THE TRUST WAS EXCESSIVE.' ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 2 2) 'WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DEL ETING THE ADDITION OF RS. 14,64,000 DESPITE THE ASSESSEE OWNI NG 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 INCOM E OF RS. 1,98,42,500/- AS EXEMPT UNDER SECTION 11 OF THE INC OME 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 AP PEAL ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.2.2009 DECLARING E XCESS OF INCOME OVER EXPENDITURE AMOUNTING TO RS. 1,98,42,500/- AND CLAI MING 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 T HE 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 DISALLOWE D 2/3 RD OF THE EXPENDITURE AMOUNTING TO RS.14,64,000 INCURRED ON T HE REMUNERATION OF FOUR PERSONS U/S 40A(2B) OF THE ACT. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A) WHICH WAS ALLOWED ON ALL GROUNDS RAISED BY THE ASSESSEE. NOW, BEING AGGRIEVED BY ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 3 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 N OT 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 SALAR Y PAID TO THE OFFICE BEARER OF THE TRUST WAS EXCESSIVE. THE DR FURTHER CONTEND ED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ABOVE ADDITION BY IGN ORING 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. APRO POS GROUND NO.3, LD. DR VEHEMENTLY CONTENDED THAT THE CIT(A) HAS ERRED IN L AW AND ON FACTS IN TREATING THE INCOME OF RS.1,88,42,500/- AS EXEMPTIO N U/S 11 OF THE ACT DESPITE THE ASSESSEE TRUST HAVING CONTRAVENED THE P ROVISIONS OF SECTION 13(1)(C) R/W SECTION 13(2)(C) OF THE ACT. 6. LD. DR HAS DRAWN OUR ATTENTION TOWARDS ASSESSMEN T ORDER AND SUBMITTED THAT THE ITAT IN ITS ORDER IN ASSESSEES OWN CASE FOR AY 2006-07 HAS OBSERVED THAT THE SALARY PAID TO MR. JOSEPH JOH N SHOULD NOT EXCEED RS.20,000 PER MONTH AND THE AMOUNT OF PAYMENT AS DI SALLOWED BY THE AUTHORITIES BELOW WAS UPHELD BY ITAT. THE DR FURTH ER CONTENDED THAT THE ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 4 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 ASSES SEE HAS DRAWN OUR ATTENTION TOWARDS SUBMISSIONS OF THE ASSESSEE BEFOR E 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 O F 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 TOWA RDS PARA 6 OF THE IMPUGNED ORDER WHICH IS A CONCLUSIVE PART OF THE IM PUGNED 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 SUBMISSI ONS 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 DOC UMENTS 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 1 3 OF THE PAPER BOOK. THERE IS ALSO NO DISPUTE TO THE FACT TH AT THE APPELLANT HAS CLAIMED EXEMPTION OF ITS INCOME UNDER ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 5 SECTION 11 (1)( A) OF THE ACT. THE MAIN REASON ASSI GNED 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 S ECTION 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 OFFIC E BEARERS OF THE APPELLANT SOCIETY TO THE EXTENT OF RS.14,64,000 /- AND ASSESSED THE APPELLANT IN THE S TATUS OF AN AOP. THE APPELLANT CLAIMED SIMILAR SALARY TO AFO RESAID THREE OFFICE BEARERS AGGREGATING TO RS.21 ,96,000/ - IN A.Y. 2007-08 ALSO BUT THE AO DID NOT MAKE ANY DISALLOWAN CE IN THE ASSESSMENT ORDER PASSED U/S 143(3) ON 30.12.200 9. KEEPING IN VIEW THE FACT THAT ENTIRE SALARY PAID TO THE THREE OFFICE BEARERS WAS ALLOWED BY THE AO IN A.Y.2007 -0 8, I DID NOT SUSTAIN THE DISALLOWANCE MADE BY THE AO IN A.Y. 2008-09. I HAVE ALSO HELD THAT THE AO WAS NOT JUSTI FIED IN DENYING THE CLAIM OF EXEMPTION U/ S 11 (1) ON THE G ROUND OF CONTRAVENTION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT AS PER MY APPELLATE ORDER DATED 27.07.2011 PASS ED IN APPEAL NO. 278/2010-11 FOR A.Y. 2008-09. THE DEPART MENT 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 FOLLOW ING THE DECISION OF HON'BLE ITAT FOR A.Y. 2008-09 IN APPEL LANT'S OWN CASE, THE DISALLOWANCE OF RS.14,64,000/- MADE B Y THE AO IS DELETED. THE STATUS OF THE APPELLANT IS HELD TO BE THAT OF A CHARITABLE SOCIETY ELIGIBLE FOR CLAIM OF EXEMP TION 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.1 4,64,000 BY OBSERVING THAT THE AO DID NOT MAKE ANY DISALLOWANCE IN AY 200 7-08 IN THE ASSESSMENT ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 6 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 ENT IRE 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 2008-0 9 ON THIS ISSUE. IN THIS SITUATION, WE ARE IN AGREEMENT WITH THE CONCLU SION OF THE CIT(A) THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING 2/3 RD 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 TH E 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 O RDER IN ASSESSEES 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 V IDE 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 ASS ESSEE DISMISSING THE APPEAL OF THE REVENUE WITH FOLLOWING OBSERVATIONS A ND FINDINGS:- 12. LET US EXAMINE WHETHER ASSESSEE HAS EXTENDED AN Y 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 T HAT A SIMILAR SALARY WAS PAID IN ASSESSMENT YEARS 2005-06 TO ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 7 2007-08. IN ASSESSMENT YEARS 2005-06 AND 2006-07, ASSESSING OFFICER MADE THE DISALLOWANCE AND THE ITA T HAS UPHELD THE DELETION OF DISALLOWANCE. THUS, THE ISSU E IS SQUARELY COVERED BY THE ORDER OF THE ITAT. AS FAR A S THE SALARY PAID TO MR. JOSEPH JOHN IS CONCERNED, WE FIN D THAT THE SALARY OF RS.55,000 PER MONTH HAS BEEN PAID. AS SESSING OFFICER DISALLOWED THE SALARY TO THE EXTENT OF 2/3R D. WE FIND THAT LEARNED CIT(APPEALS) HAS CONSIDERED THE O RDER OF THE ITAT IN ASSESSMENT YEARS 2003-04 TO 2006-07 WHEREIN SALARY IN THE CASE OF MR. JOSEPH JOHN HAS B EEN PARTLY DISALLOWED. IT WAS BROUGHT TO OUR NOTICE THA T IN ASSESSMENT YEAR 2007-08, ASSESSING OFFICER HAS ALLO WED THE TOTAL SALARY PAID TO MR. JOSEPH JOHN AND THE SA LARY WAS @ RS.55,000 PER MONTH. WE FURTHER FIND THAT IN THIS YEAR, ASSESSING OFFICER HAS INDEPENDENTLY NOT BROUG HT 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 SAL ARY 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 ASSESS ING 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 NOT IFIED THE 6TH PAY COMMISSION WHICH RESULTED INTO A HANDSO ME ENHANCEMENT IN THE SALARY OF THE EMPLOYEES INCLUDIN G THE GOVERNMENT TEACHING STAFF AND THE SALARIES HAVE ALM OST ENHANCED BY 30% TO 40%. IF THE INCREASE IN THE SALA RY 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. CONSIDERIN G ALL THESE ASPECTS AND THE DETAILED ORDER OF THE LEARNED CIT(APPEALS), WE DO NOT FIND ANY REASON TO INTERFER E IN IT AND THE APPEAL OF REVENUE IS DISMISSED. 11. IN VIEW OF ABOVE CONCLUSION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09, WE OBSERVE THAT THE TRIBUNAL HAS TAKEN COGNIZANCE OF THIS FACT ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 8 THAT FROM 1.1.2006, THE GOVT. OF INDIA HAS NOTIFIED SIXTH PAY COMMISSION WHICH RESULTED INTO HANDSOME ENHANCEMENT IN THE SAL ARY OF THE EMPLOYEES INCLUDING THE GOVERNMENT TEACHING STAFF AND THE SAL ARY HAVE ALMOST ENHANCED BY 30 TO 40%. THE TRIBUNAL FURTHER HELD THAT IF TH E INCREASE IN THE SALARY OF SHRI JOSEPH JOHN ALLOWED TO HIM BY THE TRIBUNAL ITS ELF 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 TRIB UNAL 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 ASSESS MENT 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 TH E 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 O F THE ASSESSEE FOR EXEMPTION U/S 11(1) OF THE ACT. ON THE BASIS OF FO REGOING DISCUSSION AND OBSERVATION, WE REACH TO A CONCLUSION THAT THE CIT( A) GRANTED RELIEF FOR THE ASSESSEE ON COGENT AND JUSTIFIED REASONS AND THE CI T(A) WAS ALSO JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/ S 11(1) OF THE ACT. WE ITA NO. 1216/DEL/2013 ASSTT.YEAR: 2009-10 9 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 TH US WE UPHOLD THE SAME. FINALLY, WE HOLD THAT THE GROUNDS RAISED BY THE REV ENUE ARE DEVOID OF MERITS AND DESERVE TO THE DISMISSED AND WE DISMISS THE SAM E. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 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