M/s Aryans Educational and Charitable Trust, Mohali V. DCIT, C-1, (E), Chandigarh

ITA 822/CHANDI/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0759 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-06-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 26-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TEJ MOHAN; SINGH
• Keywords: Charitable institution
• Section: 13

Judgement Text

आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘A’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & DR KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 822/CHD/2019 Ǔनधा[रण वष[ / Assessment Years : 2014-15 M/s Aryans Educational and Charitable Trust, # 2129, Phase-10, Mohali Vs. बनाम The DCIT, Circle-1 (Exemptions), Chandigarh èथायी लेखा सं./PAN No: AABTA7550L अपीलाथȸ/ APPELLANT Ĥ×यथȸ/ REPSONDENT Ǔनधा[ǐरती कȧ ओर से/Assessee by : Sh. Tej Mohan, Singh, Advocate राजèव कȧ ओर से/ Revenue by : Shri Rohit Sharma, CIT DR स ु नवाई कȧ तारȣख/Date of Hearing : 19.06.2024 उदघोषणा कȧ तारȣख/Date of Pronouncement : 25.07.2024 आदेश/Order Per Dr. Krinwant Sahay, A.M.: Appeal in this case has been filed by the Assessee against the order dated 05.03.2019 of the ld. Commissioner of Income Tax (Appeals)-2, Chandigarh, [herein referred to as “CIT(A)’] on the following Grounds: - 1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as of facts in upholding the 822--Chd-2019 – M/s Aryans Educational and Charitable Trust, Mohali 2 addition of Rs.30,28,729/- made by the Assessing Officer treating salary paid to trustees to be unreasonable applying the provisions of Section 13(l)(c) r.w 13(3) of the Act thereby restricting the denial of exemption to the amount that is held unreasonable which is arbitrary and unjustified. 2. That the submissions of the assessee justifying the payment of salary to the trustees has not been appreciated in the correct perspective and as such the order upheld is arbitrary and unjustified. 3. Without prejudice to the above, the Ld. Commissioner of Income Tax(Appeals) has erred on facts in not quantifying as to what is a reasonable amount of salary that ought to be allowable and as such the order passed is arbitrary and unjustified. 4. That the order of the Ld. Commissioner of Income Tax (Appeals) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. 2. There are four Grounds of appeal out of which Ground Nos. 1 to 3 are on only on one issue, i.e., against upholding the addition of Rs. 30,28,729/- made by the Assessing Officer treating salary paid to the trustee to be unreasonable applying the provisions of section 13 (1 )(c ) r.w.s. 13(3) of the Income Tax Act, 1961 (in short 'the Act') and thereby restricting the denial of exemption of the amount that has been held to be un-reasonable and unjustified. 822--Chd-2019 – M/s Aryans Educational and Charitable Trust, Mohali 3 3. Facts brought on record by the Assessing Officer in the assessment order is as under:- “7.1 During the assessment proceedings, the AO observed that the assessee had paid huge salaries to its trustees. A comparative chart of salaries paid to trustees for the relevant year and for preceding & succeeding year is as follows: Sr. Name of trustee Designation A.Y. 2013-14 A.Y 2014-15 A.Y. 2015-16 No 1 Dr. Anshu Kataria Chairman 8,40,000/- 11,13,071/- 9,86,333/- 2 Dr. Parveen Kataria General Secretary 8,40,000/- 11,01,504/- 10,48,919/- 3 Sh.Roshan Lal Kataria Vice Chairman 3,30,000/- 4,07,077/- 3,60,786/- 4 Smt. Rajni Kataria Treasurer 3,30,000/- 4,07,077 3,77,412/- Total 23,40,000/- 30,28,729/- 27,73,450/- The Assessing officer while making the disallowance did not prove that the services were not provided by the management employees. Therefore the salaries paid to the management persons are good in eyes of law and facts and should be allowed to the assessee. 4. During the proceedings before us, the ld. Counsel for the Assessee has filed the written submissions which is as under: - “7.2 The submission of the AR in this regard is as follows: 822--Chd-2019 – M/s Aryans Educational and Charitable Trust, Mohali 4 The Assessing officer while making this disallowance did not consider the following facts :- The Assessing officer while making the disallowance did not consider the fact that the salaries to these persons are being paid every year and have not been disallowed in any of the previous proceedings. During the year there was only a nominal increase in the salaries and this did not warrant the complete disallowance of the salaries. b. The management persons withdrawing the salaries are full time occupied in the running of the institution and withdraw salary and the salaries paid are normal expenditure of conducting and managing the colleges. c. These salary has been declared in the individual returns of the persons receiving the salary and the salaries paid to these persons are in commensurates with their educational qualification and no. of hours devoted for running the institutions. d. The management of running so many institutions has to be conducted by educationally qualified persons. e. The persons are regularly marking their attendance and are involved in day to day working of the institute kind. Copy of attendance records are enclosed for your Honour's reference and records. Even after considering the educational qualification (as detailed below) and experience of these persons the salary paid to these persons is quite below the market rate applicable. S.NO. NAME & ADDRESS DESIGNATION QUALIFICATION EXPERIENCE 822--Chd-2019 – M/s Aryans Educational and Charitable Trust, Mohali 5 AN SHU KATARIA CHAIRMAN M. COM PHD MORE THAN 15 YEARS PARVEEN KA TARIA GENERAL SECRETARY M. COM PHD MORE THAN 15 YEARS 3. ROSHANLAL KATARIA VICE CHAIRMAN M.A ECONOMICS MORE THAN 30 YEARS RAJNI KATARIA TREASURER M.A ECONOMICS MORE THAN 15 YEARS The Assessing officer while making the disallowance did not prove that the services were not provided by the management employees. Therefore the salaries paid to the management persons are good in eyes of law and facts and should be allowed to the assessee. 5. The ld. CIT(A) in his order has given findings on this issue which is reproduced as under:- “7.3 The submissions of the assessee have been considered. The AO has made disallowance of salaries of Rs. 30,28,729/- paid to trustees by holding the salaries paid to be exorbitant (29.43% more than the last year). The counsel in contention stated that the trustees were full time occupied in running of institution and the salaries paid were commensurate with their educational qualifications. Salary has been paid to the trustees, apparently for functions being undertaken by them (which are a duplication of functions for which there are other functionaries in the set-up of institution, for e.g. chancellor, principal or bursar etc.). Further, the trustees to whom salaries 822--Chd-2019 – M/s Aryans Educational and Charitable Trust, Mohali 6 have been paid are a part of same family who dominate the constitution of the trust. When trust/society is set up and seeks exemption on the basis of the fact that they are submerged in the spirit of charity, there is no rationale in seeking salary from public funds particularly when the A.O. has come to conclusion that they had substantial separate business interests, a fact that has_a_clear bearing on the claims that they were undertaking these functions on a full time basis. The duty of the trustees is to safeguard the interest of the beneficiaries rather than eating into the public money intended for charitable purposes. Moreover, salary is paid to a person in lieu of duties performed by him / her and not for educational qualifications he/she possesses. In the present case, the emphasis of the counsel is only on the educational qualifications and experience without specifying nature of duties performed by them in order to justify the rationality/ reasonableness of salaries paid. To justify the roles of trustees, the counsel has used very vague terms like "overall management & administration." The AO has rightly held the salaries paid to trustees as unreasonable and a way of granting undue benefits to persons covered u/s 13 of the Act. It was and would be rational to treat the entire payment of salaries as unreasonable. The assessee would not get any additional benefit due to section 13(2). In that light, the AO is directed to restrict the denial of exemption to the amount that has been held unreasonable. Accordingly, the ground of appeal is dismissed.” 6. The ld. DR relied on the order of the CIT(A). 822--Chd-2019 – M/s Aryans Educational and Charitable Trust, Mohali 7 7. During the proceedings before us, the ld. counsel of the Assessee submitted that it is not the only year where salary has been paid to trustee. In fact, he brought it on record that in the immediately preceding year as well as in the subsequent year, on the same set of facts, both under scrutiny payment of salary to trustee has been allowed. It is only during this year that the Assessing Officer has disallowed the payment of salary to trustee treating it as unreasonably high and the CIT(A) has confirmed the disallowance on this issue. 8. We find that although there is an increase of 29.43% in payment of salaries to the trustee but it is important to note that trustee were full time occupied in running of the institutions. In our considered view payment of salary of Rs. 11,13,000/- to Dr. Anshu Kataria, Rs. 11,01,000/- to Mrs. Parveen Kataria, Rs. 4,07,000/- to Shri Roshan Lal Kataria and Rs.4,07,000/- to Smt. Rajni Kataria totalling Rs. 30,28,729/- is not a very big amount paid to them keeping in view their full time working in the institution. It is true that all these four people belong to the same family and they are managing trust but it is equally true that they are devoting the entire working hours for the purpose of the trust and therefore, such payment made to them by the Trust does not look unjustified more importantly the Department has accepted 822--Chd-2019 – M/s Aryans Educational and Charitable Trust, Mohali 8 payment of salary to these people in the previous year in the scrutiny assessment and in the subsequent years also in their scrutiny assessment so there is no reason to make disallowance of salary paid to them in just one year in between, i.e., A.Y. 2014-15. Thus, the findings given by the ld. CIT(A) is not logical or justified. Accordingly, Assessee’s appeal on this issue is allowed. 9. Appeal on Ground No. 4 is general in nature. 10. In the result, Assessee’s appeal is allowed. Order pronounced on 25.07.2024 Sd/- Sd/- ( A.D. JAIN ) (DR KRINWANT SAHAY) Vice President Accountant Member “आर.के.” आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आय ु Èत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar