ITO (EXEMPTION) 2(3), MUMBAI V. SMT. RAMA GULAB JOSHI, MUMBAI

ITA 3271/MUM/2022

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the decision of the Commissioner of Income Tax (Appeals) which partially allowed the exemption claim of Smt. Rama Gulab Joshi Charitable Trust for the Assessment Year 2018-19. The primary contention was regarding the disallowance of certain payments made to specific persons, which the A.O. initially disallowed in full, citing excessiveness and lack of justification for the services rendered. The CIT(A) later allowed partial relief, disallowing only 25% of these payments. The Revenue challenged this partial relief, arguing that the assessee failed to substantiate its claims. The Tribunal, after hearing the Departmental Representative and reviewing the materials, decided to remit the matter back to the A.O. for a detailed examination with directions to provide the assessee an opportunity to substantiate its claims.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125789 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-03-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 27-12-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Charitable institution; TDS
• Section: 12; 11; 10B; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI B. R. BASKARAN, AM AND MS. KAVITHA RAJAGOPAL, JM I TA N o. 327 1/ M u m / 20 22 ( A s s e ss me nt Y ea r: 20 1 8- 19 ) ITO (Exemption)-2(3) Mumbai V s. Smt. Rama Gulab Joshi Charitable Trust Chandan Niwas Rama Gulab Apartment, Tejpal Scheme, Main Road, Vile Parle (E), Mumbai-400 057 P A N / G I R N o. AA BT S 845 3 N (Appellant) : (Respondent) Assessee by : None Revenue by : Smt. Mahita Nair D a te o f H e a r i n g : 20.03.2023 D ate of P ro n ou n ce me n t : 31.03.2023 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the Revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2018-19. 2. As there was no representation on behalf of the assessee, we hereby proceed to decide the appeal ex parte by hearing the learned Departmental Representative (ld. DR for short) for the Revenue and on perusal of the materials available on record. 3. The Revenue has challenged the ground that the ld. CIT(A) has erred in holding that only 25% of the payments made to specific persons need to be disallowed, instead of the entire exemptions as per the provisions of section 13(1) of the Act by relying on the 2 ITA No. 3 2 7 1 / M u m / 2 0 2 2 ( A . Y . 2 0 1 8 - 1 9 ) ITO (Exemption) vs. Smt. Rama Gulab Joshi Charitable Trust amendment to section 13(1)(c)/(d) of the Act which is said to come into effect from 01.04.2023. 4. The brief facts are that the assessee is a Trust registered which operates as a charitable trust and is engaged in running of educational institution called Mode Art International which imparts education on Modern Art, affiliated with INSTITUT INTERNATIONAL DES ARTS ET DE LA MODE DE PARIS, FRANCE. The assessee trust is also into charities in the nature of Education Aid and Medical Aid. The assessee filed its return of income for the impugned year dated 03.102.2018, declaring total income at Rs. Nil. The assessee’s case was selected for limited scrutiny through CASS. It is observed that the assessee has received gross receipts at Rs.3,59,15,593/- against which the assessee has applied Rs.4,01,35,639/- towards Revenue expenditure and Rs.58,88,007/- towards capital expenditure thereby aggregating to Rs.4,60,23,646/- and for which the assessee is said to have met the deficit from the past accumulation. It is also observed that the assessee has total outlay on the object of the trust at Rs.3,87,01,537/- which includes salary at Rs.75,73,624/- and rental paid at Rs.40,11,683/-. The salary and rental expenses is said to include payments given to specific persons as per the provisions of section 13(3) of the Act. The assessee in Form No. 10B has given the details of the following persons to whom payments have been made u/s. 13(3) of the Act: Sr. No. Name of the person Service Description Amount paid 1 Nishant Joshi Remuneration for being teacher cum administrator 1335000 2 Jitendra Joshi HUF Rent 2575874 3 Alka Joshi Remuneration for being teacher 818000 5. When confronted with the explanation for making such payment to the specific persons, the assessee has stated that Smt. Alka Jitendra Joshi was a Teacher in assessee’s 3 ITA No. 3 2 7 1 / M u m / 2 0 2 2 ( A . Y . 2 0 1 8 - 1 9 ) ITO (Exemption) vs. Smt. Rama Gulab Joshi Charitable Trust Trust and Shri Nishant Jitendra Joshi was a Teacher cum Administrator for whom salary has been paid along with TDS deduction. The assessee further submitted that rent was paid to M/s. Jitendra Joshi HUF which amounts to Rs.1,81,912/- per month aggregating to Rs.21,82,944/- + GST @ 18% amounting to Rs.3,92,930/- which comes to around Rs.25,75,874/-. The assessee contended that the salary and the rent paid were reasonable and was well within the limits. 6. The Assessing Officer (A.O. for short) failed to consider the submission of the assessee for the reason that the said amount was paid in excess of what may be reasonably paid for such services as per the provision of section 13(2)(c) of the Act for which the assessee was not eligible for exemption u/s. 11 & 12 of the Act. The A.O. further stated that the assessee has failed to justify the services rendered by Smt. Alka Jitendra Joshi and Shri Nishant Jitendra Joshi as the said persons was also engaged in other activities. The A.O. further stated that the assessee has failed to prove that Smt. Alka Jitendra Joshi was a Teacher with the assessee Trust as it was seen that she was a proprietor of firms viz. Rama, Vaibhavi & Nishan Enterprises and in case of Shri Nishant Jitendra Joshi who was also an employee of the family partnership firm viz. Lamaison Service, Rama, Vaibhavi & Nishan Enterprises. The A.O. rejected the exemption claimed by the assessee u/s. 11 of the Act amounting to Rs.3,59,15,593/- and added the same to the total income of the assessee. 7. The assessee was in appeal before the ld. CIT(A). 4 ITA No. 3 2 7 1 / M u m / 2 0 2 2 ( A . Y . 2 0 1 8 - 1 9 ) ITO (Exemption) vs. Smt. Rama Gulab Joshi Charitable Trust 8. In an appeal before the ld. CIT(A) who held that 25% of the payments made to specific person was disallowed and had allowed the remaining payments made by the assessee. 9. The Revenue is in appeal before us, challenging the order of the ld. CIT(A) in giving partial exemption to the assessee. 10. The ld. DR for the Revenue contended that the assessee has failed to substantiate its claim before the A.O./ld.CIT(A). The ld. DR further stated that the ld. CIT(A) has given partial relief to the assessee without considering the fact that the assessee has failed to discharge the onus extended upon it to substantiate the claim. The ld. DR relied on the order of the A.O. 11. We have heard the ld. DR and perused the materials on record. It is evident that the assessee trust has not furnished the documentary evidence and other details pertaining to the salary and the rent paid to the specific person. The ld. CIT(A) has also not considered the fact that the assessee in respect of repeated notices have not furnished any evidence pertaining to its claim. 12. Considering the nature of the Trust, we deem it fit to provide the assessee with last opportunity to present its case before the A.O. and to furnish the details for the payments to justify the fact that the claim of the assessee is not in excess of the provisions of the Act. We hereby remit this issue back to the file of the A.O. and direct the A.O. to decide this issue in light of the evidence to be filed by the assessee substantiating its claim. 5 ITA No. 3 2 7 1 / M u m / 2 0 2 2 ( A . Y . 2 0 1 8 - 1 9 ) ITO (Exemption) vs. Smt. Rama Gulab Joshi Charitable Trust 13. In the result, the appeal is allowed for statistical purpose. Order pronounced in the open court on 31.03.2023 Sd/- Sd/- (B. R. Baskaran) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 31.03.2023 Roshani , Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai