PNR Spciety for Relief & Rehabilitation of the Disabled, Bhavnagar V. The DY.Director of Income tax(Exe.), Bhavnagar

ITA 2729/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80274 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 08-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 21-09-2010
• Court: TRIBUNAL
• Keywords: Charitable institution; Principle of natural justice; Fair market value
• Section: 12AA; 11

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , , , 0 00 0 0 00 0 ' ' ' ' , , , , #$ #$ #$ #$ # % # % # % # % BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO. 2729/AHD/2010 (ASSESSMENT YEAR 2007-08) PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, VIDHYANAGAR, BHAVNAGAR. PAN: AAAPT1877E VS THE DDIT (EXEMPTION), BHAVNAGAR. &'/ APPELLANT )*&' / RESPONDENT REVENUE BY : SHRI ROOPCHAND, SR. DR ASSESSEE(S) BY : SHRI TUSHAR HEMANI, AR + , $/ // / DATE OF HEARING : 08/08/2014 -./ , $ / DATE OF PRONOUNCEMENT: 14/08/2014 #0 #0 #0 #0/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XXI, AHMEDABAD DATED 15.07.2010. 2. GROUND NO. 1 OF THE APPEAL READS AS UNDER: 1.0 THE LEARNED CIT (A) HAS GROSSLY ERRED IN LAW AN D ON FACTS IN PASSING A NON-SPEAKING ORDER WITHOUT ANY REASONI NG AND MISERABLY FAILED TO DEAL WITH ANY OF THE ARGUMENTS PUT FORTH BY THE APPELLANT. THIS ACTION OF LD. CIT (A) IS IN GROSS ITA NO. 2729/A/2010 PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, BHAVNAGAR. AY 2007-08 - 2 - ABUSE OF HIS POWERS AND IN BLATANT VIOLATION OF PRI NCIPLES OF NATURAL JUSTICE. THE APPELLANT, BEING A TRUST, HAS TO APPROACH THIS HONBLE TRIBUNAL AS LD. CIT(A) FAILED IN HIS DUTIES. THE APPELLANT PRAYS THAT EXEMPLARY COST BE AWARDED TO IT FOR HAVING TO FILE THIS APPEAL. 3. AT THE TIME OF HEARING, THE AUTHORIZED REPRESEN TATIVE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THIS GRO UND OF APPEAL. HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NOS. 2, 3 AND 4 READ AS UNDER: 2.0 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS O F THE CASE BY CONFIRMING THE ACTION OF THE LD. A.O. IN DISALLOWIN G RS 4,80,000/- ON ACCOUNT OF REMUNERATION PAID TO THE T RUSTEE SHRI ANANTBHAI K. SHAH U/S 131(1)(C)/13(3)(CC) OF T HE ACT WITHOUT APPRECIATING THE FACTS THAT THE APPELLANT T RUST HAS PAID ADEQUATE REMUNERATION TO HIM AGAINST THE SERVI CES PROVIDED BY HIM FOR THE OBJECT OF THE TRUST ONLY. 3.0 ALTERNATIVELY AND WITHOUT PREJUDICE, IF REMUNER ATION IS DISALLOWED, THE INCREASED INCOME OF THE TRUST MAY K INDLY BE ALLOWED TO BE ACCUMULATED U/S 11(2) OF THE ACT. 4.0 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AN D ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT AND THAT HE FURTHER ERRED IN GROSSLY IGNORING VARIO US SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BREACH OF LAW A ND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVE S TO BE QUASHED. 5. AS THESE GROUNDS OF APPEAL WERE ARGUED TOGETHER BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AND THE F ACTS AND ISSUE ARE INTER- CONNECTED, THEY ARE BEING DISPOSED TOGETHER AS UNDE R. ITA NO. 2729/A/2010 PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, BHAVNAGAR. AY 2007-08 - 3 - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE IS A CHARITABLE TRUST REGISTERED U/S. 12AA OF THE ACT. THE ASSESSEE TRUST PAID REMUNERATION OF RS 4,80,000/- TO SHRI AN ANTBHAI K. SHAH WHO IS A FULL TIME SECRETARY AND TRUSTEE OF THE ASSESSEE TRU ST. THE ASSESSING OFFICER DISALLOWED THE DEDUCTION CLAIMED FOR ABOVE PAYMENT ON THE GROUND THAT THE SERVICES RENDERED BY SHRI ANANTBHAI K. SHAH WERE A DUTY OF HIM AS A TRUSTEE AND THE REMUNERATION PAID TO HIM BEING VIOLATIVE OF PROVISIONS OF SECTION 13(1)(C) AND 13(3)(CC). THE ASSESSING OFFICER ALSO OPINED THAT REMUNERATION OF RS 4,80,000/- PAID TO SAID SHRI ANA NTBHAI K. SHAH CANNOT BE TREATED AS APPLICATION TOWARDS OBJECTS OF THE TR UST AND THEREFORE HE DISALLOWED THE ENTIRE AMOUNT OF RS 4,80,000/- AND T REATED THE SAME AS TAXABLE INCOME IN THE HANDS OF THE ASSESSEE CHARITA BLE TRUST. 7. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPE ALS) QUOTED THE OBSERVATIONS OF THE ASSESSING OFFICER MADE IN T HE ASSESSMENT ORDER AND SUBMISSIONS OF THE ASSESSEE AND THEREAFTER WITHOUT CONTROVERTING OR DEALING WITH THE SUBMISSIONS OF THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE BY STATING THAT I AM INCLINED TO AGREE WITH THE LD. ASSESSING OFFI CER, HENCE, THE ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OF FICER IS APPROVED AS IT IS. 8. BEFORE US, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT IN VIEW OF THE PROVISIONS OF SECTION 13(2)(C), NO DISALLOWANCE OF REMUNERATION PAID TO THE TRUSTEE WHICH IS NOT MO RE THAN THE FAIR MARKET VALUE CAN BE MADE, AND THEREFORE, THE REVENUE WAS N OT JUSTIFIED IN MAKING ARBITRARY DISALLOWANCE. HE ALSO POINTED OUT THAT S IMILAR REMUNERATION WAS PAID TO THE SAME TRUSTEE IN EARLIER YEARS ALSO WHIC H WAS ACCEPTED AND ALLOWED BY THE DEPARTMENT. ITA NO. 2729/A/2010 PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, BHAVNAGAR. AY 2007-08 - 4 - 9. WE FIND THAT THE RELEVANT SECTIONS READ AS UNDE R: SECTION 13(1)(C)(II) (1) NOTHING CONTAINED IN SECTION 11 [OR SECTION 12] SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF T HE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF- (A) .. (B) .. (BB) (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THEREOF- (I) . (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DURING THE PREVIOUS YEAR USED OR APPLIED. SECTION 13(2)(C) (2) WITHOUT PREJUDICE TO THE GENERALITY OF THE PROV ISIONS OF CLAUSE (C) [AND CLAUSE (D)] OF SUB-SECTION (1), TH E INCOME OR THE PROPERTY OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY, SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRED TO IN SUB-SECTION (3)- (A) (B) (C) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWAN CE OR OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB-SECTION (3) OUT OF THE RESOURCES OF THE TRUST OR INSTITUTION FOR SERVICES RENDERED BY T HAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FO R SUCH SERVICES; ITA NO. 2729/A/2010 PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, BHAVNAGAR. AY 2007-08 - 5 - SECTION 13(2)(C) (3) THE PERSONS REFERRED TO IN CLAUSE (C) OF SUB-SE CTION (1) AND SUB-SECTION (2) ARE THE FOLLOWING, NAMELY:- (A) . (B) . (C) . (CC) ANY TRUSTEE OF THE TRUST OR MANAGER (BY WHATEV ER NAME CALLED) OF THE INSTITUTION; 10. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT SHRI ANANTBHAI K. SHAH WAS QUALIFIED IN B.A. (SP.) DEGREE IN SOCIOLOGY PASSED IN 1962 FROM GUJARAT UNIVERSITY WHICH WAS TH E ONLY SPECIALIZED DEGREE IN FIELD OF SOCIOLOGY. HE HAS VAST EXPERIEN CE OF OVER 45 YEARS IN THE FIELD OF SOCIAL WORKING AND DEVELOPING INSTITUTIONS IN THIS FIELD. HE HAS BEEN AWARDED WITH THE FOLLOWING AWARDS FOR HIS ACHIEVEME NTS AND HIS NOBLE SERVICES IN THE FIELD OF HELPING HANDICAPPED PEOPLE PARTICULARLY CHILDREN: RAJIV GANDHI MANAV SEVA AWARD 1998 FELICITATED BY FORMER PRIME MINISTER OF INDIA LATE SHRI MORARJI DESAI NAGARDAS DOSHI SMARAK NIDHI TRUST AWARD 1997 ALPALWALA AWARD 2007 HE HAS BEEN DECLARED AS MAN OF THE YEAR 2006 BY THE WEEK. THE ASSESSEE TRUST IS ENGAGED IN VARIOUS ACTIVITIES FOR RELIEF AND REHABILITATION OF DISABLED PERSONS SUCH AS PREVENTION AND EARLY INTER VENTION, POLIO ERADICATION, CORRECTIVE SURGERY POLIO/CATARACT/CLEF T LIP CONGENITAL HEART DEFECT, RESEARCH, TRAINING COURSE, WORKSHOP FOR ART IFICIAL LIMBS, AIDS, TECHNOLOGY TRANSFER, PHYSIO-OCCUPATIONAL THERAPY CE NTRE, AT &T TECHNOLOGICAL PARK CENTRE ETC. THE AUTHORIZED REPR ESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT SHRI ANANTBHAI K. S HAH WAS FULL TIME SECRETARY IN THE ASSESSEE TRUST. HE WAS ENGAGED FU LL TIME IN THE ACTIVITIES OF ITA NO. 2729/A/2010 PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, BHAVNAGAR. AY 2007-08 - 6 - THE TRUST. THEREFORE, BY NO STRETCH OF IMAGINATION IT CAN BE HELD THAT ANNUAL REMUNERATION OF RS 4,80,000/- PAID TO SAID SHRI ANA NTBHAI K. SHAH WAS MORE THAN THE FAIR MARKET VALUE OF HIS SERVICES REN DERED TO THE ASSESSEE TRUST. 11. WE FIND THAT THE REVENUE COULD NOT BRING ANY M ATERIAL BEFORE US TO CONTROVERT THE SUBMISSIONS OF THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE. WE FIND THAT THE TOTAL RECEIPTS OF THE A SSESSEE TRUST WERE TO THE TUNE OF RS 443.24 LAKHS DURING THE YEAR UNDER CONSI DERATION AND THE ACTIVITY UNDERTAKEN BY THE ASSESSEE TRUST WAS TO THE TUNE OF RS 469.87 LAKHS. THUS, THE REMUNERATION OF RS 4,80,000/- WHICH IS ABOUT 1% OF THE TOTAL VALUE OF ACTIVITIES OF THE TRUST FOR LOOKING AFTER WHICH THE SAME WAS PAID, CANNOT BE SAID TO BE EXCESSIVE OR UNREASONABLE. 12. FURTHER, WE FIND THAT THE DEPARTMENTAL REPRESE NTATIVE COULD NOT CONTROVERT THE SUBMISSIONS OF THE ASSESSEE THAT THE REMUNERATION OF RS 4,80,000/- PER YEAR WAS PAID TO THE SAID TRUSTEE BY THE TRUST IN EARLIER YEARS ALSO FOR RENDERING SIMILAR SERVICES WHICH WERE ALLO WED BY THE DEPARTMENT SINCE ASSESSMENT YEAR 2003-04. IN THE ABOVE CIRCUM STANCES, IN ABSENCE OF ANY MATERIAL BROUGHT BEFORE US TO SHOW THAT THE REM UNERATION OF RS 4,80,000/- PAID TO SHRI ANANTBHAI K. SHAH FOR ACTUA LLY RENDERING SERVICES AS FULL TIME SECRETARY OF THE TRUST WAS IN EXCESS OF T HE AMOUNT WHICH CAN BE REASONABLY PAID FOR SUCH SERVICES, WE DELETE THE DI SALLOWANCE OF RS 4,80,000/-. THUS, THE GROUNDS OF APPEAL OF THE ASS ESSEE ARE ALLOWED. 13. GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE REA DS AS UNDER: 5.0 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE IN THE CONFIRMING ACTION OF THE LD. AO IN LEVY ING INTEREST U/S. 234B/C/D OF THE ACT. ITA NO. 2729/A/2010 PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, BHAVNAGAR. AY 2007-08 - 7 - 14. AT THE TIME OF HEARING, THE ASSESSEE MADE NO S UBMISSION IN RESPECT OF THIS GROUND OF APPEAL. WE, THEREFORE, H OLD THAT THE INTEREST LEVIED U/S. 234B/C/D OF THE ACT IS CONSEQUENTIAL AND ACCOR DINGLY DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 15. GROUND NO. 6 OF THE APPEAL READS AS UNDER: 6.0 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE IN INITIATING PENALTY PROCEEDINGS U/S. 271(1)( C) OF THE ACT. 16. AT THE TIME OF HEARING, THE ASSESSEE MADE NO SUBMISSION IN RESPECT OF THIS GROUND OF APPEAL. WE, THEREFORE, D ISMISS THIS GROUND OF APPEAL FOR WANT OF PROSECUTION. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED AS ABOVE. ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE 14 TH OF AUGUST, 2014 AT AHMEDABAD. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 14/08/2014 GHANSHYAM MAURYA, SR. P.S. ITA NO. 2729/A/2010 PNR SOCIETY FOR RELIEF & REHABILITATION OF THE DISABLED TRUST, BHAVNAGAR. AY 2007-08 - 8 - TRUE COPY #0 , )1 2#1/ #0 , )1 2#1/ #0 , )1 2#1/ #0 , )1 2#1// COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. )*&' / THE RESPONDENT. 3. 3 / CONCERNED CIT 4. 3() / THE CIT(A)-III, AHMEDABAD 5. 167 ) , , / DR, ITAT, AHMEDABAD 6. 78 9+ / GUARD FILE. #0 #0 #0 #0 / BY ORDER, : :: :/ // / ; ; ; ; ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD