ADIT (E), New Delhi V. Parivar Sewa Sansthan, New Delhi

ITA 977/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4238 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 21-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Assessee Lawyers: V K JAIN
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.977/DEL./2011 (ASSESSMENT YEAR : 2007-08) ASSTT. DIRECTOR OF INCOME-TAX (E), VS. PARIVAR SEW A SANSTHAN, INV. CIRCLE II, NEW DELHI. C-374, DEFENCE COLONY , NEW DELHI 110 024. (PAN : AAATP0314J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. JAIN, CA REVENUE BY : SMT. BANITA DEVI NAOREM, DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER OF CIT (APPEALS)-XXI, NEW DELHI DATED 14.12.2010. THE GRO UNDS OF APPEAL ARE AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) HAS ERRED IN JUSTIFYING EXCESSIVE INCREASE IN THE SALARY/PERQUISITES PAID TO MRS. SUDHA TEWARI, AN EX -OFFICIO MEMBER/PRESIDENT OF THE SOCIETY, WHEN THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C) AND 13( 2)(C) OF THE ACT. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER OR A MEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. ITA NO.977/DEL/2011 2 2. THE ASSESSEE IS A TRUST REGISTERED UNDER THE REG ISTRATION TRUST ACT, 1860. THE ASSESSEE TRUST IS ALSO REGISTERED U/S 12 A OF THE INCOME-TAX ACT. THE ASSESSEE TRUST IS PROVIDING CHARITABLE SERVICES IN THE FIELD OF FAMILY PLANNING, BIRTH CONTROL AND CONTRACEPTION, ABORTION , STERILIZATION, HEALTH OR NUTRITION AND / OR FOR REMOVAL OR CURING ANY MALFUN CTIONING OF NECESSARY LINKS OR BIRTH RELATED OR ORGANS OF THE HUMAN BODY WITH T HE HELP OR ASSISTANCE OF SPECIALISTS OF EXPERTS IN THE RELATIVE FIELDS. SMT . SUDHA TIWARI IS THE MANAGING DIRECTOR-CUM-MEMBER OF THE GOVERNING BODY. SHE IS A SPECIFIED PERSON AS PER SECTION 13 OF THE ACT. THE SALARY PA ID TO HER OF RS.21,58,356/- WAS CONSIDERED EXCESSIVE BY THE ASSESSING OFFICER. THE ASSESSEE FILED THE APPEAL AND CIT (A) GRANTED THE RELIEF BY HOLDING AS UNDER :- 3. GROUND NO.1 TO 8:- DURING THE COURSE OF APPELLA TE PROCEEDINGS LD. AR OF THE ASSESSEE HAS SUBMITTED A DETAILED SUBMISSION AS ON 26.11.2010, IN WHICH HE HAS RELIED ON THE ORDER OF THE HON'BLE ITA T, NEW DELHI FOR ASSESSMENT YEAR 2006-07 IN THE ASSESSEE'S OWN CASE. THE RELEVANT PORTION OF THE SUBMISSION IS AVAILABLE FROM PAGE NO.16 TO PAGE 18 WHICH IS AS UNDER:- 'AGAIN A SIMILAR ISSUE AROSE IN THE ASSESSMENT FOR ASSESSMENT YEAR 2006-07 AND THE HON'BLE ITAT, NEW DELHI BY ORDER DA TED 28.5.2010 [REFER PAGE NO.209 TO 211 OF THE PAPER BOOK] HAS HELD IN F AVOUR OF THE APPELLANT AS UNDER:- 'WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMI SSIONS MADE BEFORE US. FROM THE ASSESSMENT ORDER IT IS FOUND TH AT MRS. SUDHA TEWARI HAS BEEN PAID TOTAL SALARY OF RS.25,60,212/-. IN THE PA ST, ANNUAL INCREASE OF 20% HAS BEEN CONSIDERED REASONABLE. FURTHER, SALARY OF RS.23,19,840/- HAS BEEN FOUND TO BE REASONABLE IN ASSESSMENT YEAR 2004-05. ITA NO.977/DEL/2011 3 THE RELEVANT PORTION OF THE ORDER, CONTAINED IN PAR AGRAPH 11, IS REPRODUCED BELOW:- ' 11. GROUND NOS. 1 TO 10 ARE IN RELATION TO THE STATUS OF MRS. SUDHA TEWARI AND THE FINDINGS OF THE LOWER AUTHORITIES TH AT THE SALARY PAID TO HER WAS EXCESSIVE U/S.13 OF THE ACT. ON THE BASIS OF TH E REASONABLE SALARY FOR THIS YEAR WORKED OUT FOR THE IMMEDIATELY PRECEDING YEAR AND BY GIVING AN INCREASE OF 20% THEREOF, THE REASONABLE SALARY FOR THIS YEAR WORKS OUT AT ABOUT RS.25,23,288/-, SAY RS.25,24,290/-. AGAINST T HIS, SHE WAS PAID SALARY OF RS.23,19,840/-, WHICH IS REASONABLE HAVING REGAR D TO THE SERVICES RENDERED BY HER, IT MAY BE MENTIONED THAT THERE WAS DECREASE OF 34.46% IN THE REVENUE AND 46.38% IN THE SURPLUS OVER LAST YEA R. HOWEVER, THAT DOES NOT COME IN THE WAY OF GIVING A FINDING THAT LOOKIN G TO SERVICES RENDERED BY HER AND TAKING INTO ACCOUNT REASONABLE INCREASE OVE R LAST YEAR, THE SALARY PAID IN THIS YEAR WAS REASONABLE. THEREFORE, WHILE IT IS HELD THAT SHE IS A PROHIBITED PERSON U/S.13. IT IS ALSO HELD THAT THE SALARY PAID TO HER WAS REASONABLE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE FOR THIS YEAR. THUS, GROUND NOS. 2 AND 6 REGARDING HER STATUS ARE DISMISSED THE OTHER GROUNDS REGARDING REASONABLENESS OF SALARY PAID TO HER ARE ALLOWED. THE AO IS ALSO DIRECTED TO RECOMPUTED INTEREST U/S.234B OF THE ACT, AFTER GIVING EFFECT TO THIS ORDER. IT MAY ALSO BE MENTIONED THAT NO APPEAL LIES AGAINST INITIATION OF PENALTY U/S.271(1)(C) OF THE ACT.' LOOKING TO THE AFORESAID FACTS AND THE DECISION OF THE TRIBUNAL, IT IS HELD THAT SALARY OF RS.25,60,212/- PAID TO HER IN T HIS YEAR IS REASONABLE. THEREFORE, EXEMPTION U/S.11 CANNOT BE DENIED TO THE ASSESSEE ON, THIS GROUND. IN THE RESULT, THE APPEAL IS ALLOWED IS DIS CUSSED ABOVE.' THEREFORE, YOUR HONOUR WILL OBSERVE THAT THE REASON ABLENESS OF THE SALARY PAID TO SMT. SUDHA TEWARI HAS ALREADY BEEN DECIDED BY THE HON'BLE ITAT IN THE APPELLATE ORDERS FOR ASSESSMENT YEAR 2004-05, 2005- 06 AND 2006-07 AND AS PER DIRECTIONS OF THE ITAT THE COMPLETE CHART SHOWING R EASONABLE SALARY AND SALARY ACTUALLY PAID TO SMT. SUDHA TEWARI IN THE RELEVANT YEARS ARE ENCLOSED AT PAGE NO.214 OF THE PAPER BOOK AND IS REPRODUCED HEREWITH :- SALARY INCREASE @ 20% BASED ON THE COMBINED ORDER P ASSED BY IT AT FOR ASSESSMENT YEAR 1999-00 TO 2004-05. ASST. YEAR. ACTUAL SALARY PAID INCREASE @ 20% TAK ING JUSTIFIED SALARY TO MS.SUDHA TEWARI 1997-98 AS BASE. ON THE BASIS OF INCREASE OF 20% --------------------------------------------------- ------------------------------------------------- 1997-98 7,04,200. - 7,04,200. 1998-99 11,17,600. 1,40,840. 8,45,040 1999-2000 14,06,500. 1,69,008. 10,14,048. 2000-01 16,83,040 2,02,81. 12,16,858. ITA NO.977/DEL/2011 4 2001-02 18,20,520. 2,43,372. 14,60,229. 2002-03 20,14,800. 2,92,046. 17,52,275. 2003-04 22,10,400. 3,50,455. 21,02,730. 2004-05 23,17,840. 4,20,546. 25,23,276. 2005-06 24,39,552. 5,04,655. 30,27,931. 2006-07 25,60,212. 6,05,586. 36,33,517 2007-08. 21,58,356. 7,26,703. 43,60,221. ON GOING THROUGH THE AFORESAID DETAIL YOUR HONOUR W ILL OBSERVE THAT AS PER DIRECTIONS OF. THE HON'BLE ITAT SALARY RS.43,60,221 /- IS REASONABLE WHEREAS IN ASSESSMENT YEAR 2007-08 SALARY OF ONLY RS.21,58,356 /- HAS BEEN PAID TO SMT. SUDHA TEWARI WHICH IS ALMOST 50% OF THE SALARY CONSIDERED REASONABLE AS PER DIRECTIONS OF THE HON'BLE ITAT AND THEREFORE YOUR HONOUR WILL OBSERVE THAT THE SALARY PAID TO SMT. SUDHA TEWARI DURING ASSESSMENT YEAR 2007-08 IS VERY REASONABLE. IN VIEW OF THE ABOVE YOUR HONOUR IS REQUESTED TO PA SS THE NECESSARY ORDER AS PER DIRECTIONS OF HONBLE ITA T ALLOWING APPEAL OF THE APPELLANT SOCIETY AND ALLOWING THE EXEMPTION CLAIMED U/S.11 OF THE INCOME TAX ACT.' 3.1 THE ISSUE HAS BEEN DEALT BY THE AO IN THE ASSE SSMENT ORDER. IN THE RELEVANT PARAGRAPH THE AO HAS DISCUSSED THE ISSUE AS UNDER:- 'FOR THE SAKE OF BREVITY AS THE FACTS OF THE CASE I N HAND ARE EXACTLY SIMILAR TO A.Y. 1998-99, 2001-02 AND 2002-03, 2003-04, 2004-05 AND 2005-06 AND FOR THE REASONS DISCUSSED IN DETAIL IN ASSESSMENT ORDERS PE RTAINING TO THESE YEARS DATED 27.3.2001, 19.3.04 AND 120.3.05, 24.3.06, 27.12.06 AND 31.12.2007 RESPECTIVELY WITH WHICH I AM FULLY IN AGREEMENT AND AS THE ASSES SEE HAS FAILED TO ADDUCE ANY COGENT EVIDENCE JUSTIFYING EXCESSIVE INCREASE IN TH E SALARY/PERQUISITES PAID TO MRS. SUDHA TEWARI, I HOLD THESE AS VIOLATION OF SECTION 13(1)(C) & 13(2)(E) OF THE ACT AND DENY THE EXEMPTION U/S.11 OF THE ACT TO THE ASS ESSEE. 3. BOTH THE SIDES WERE HEARD IN DETAIL AND AFTER HE ARING BOTH THE PARTIES, WE DECIDE AS UNDER :- DURING THE YEAR, SALARY PAID OF RS.21,58,356/- WAS LESSER THAN THE SALARY PAID FOR THE PERIOD RELEVANT TO ASSESSMENT YEAR 200 6-07 OF RS.25,60,212/-. ITAT F BENCH, DELHI CONSIDERED THE SALARY OF RS.2 5,60,212/- AS REASONABLE. THIS WAS CONSIDERED REASONABLE BY CONSIDERING 20% I NCREASE AS REASONABLE ITA NO.977/DEL/2011 5 OVER LAST YEAR (A.Y. 2004-05). THE CIT (A) HAS GR ANTED THE RELIEF BY RELYING ON THE DECISION OF ITAT FOR A.Y. 2006-07. THE RELE VANT PORTION REPRODUCED ABOVE. THE SALARY PAID DURING THE YEAR WAS LESSER THAN THE IMMEDIATE PRECEDING YEAR. THERE IS NO CHANGE IN DUTIES AND R OLE OF SMT. SUDHA TEWARI TO THE ASSESSEE. IN VIEW OF THIS, THE SALARY PAID WAS REASONABLE. HOWEVER, WE WOULD ALSO LIKE TO STATE THAT FLAT INCREASE OF 20% IN EVERY YEAR CANNOT BE SAID TO BE A REASONABLE WITHOUT CONSIDERING THE SITUATIO N AND ALL ASPECT FOR THE YEAR. THE INCREASE OF SALARY DEPENDED/AFFECTED BY VARIOUS FACTORS WHICH VARIES FROM YEAR TO YEAR. THE INFLATION, CHANGE IN ROLE AND ALSO THE OTHER FACTORS LIKE PROMOTION TO HIGHER GRADES ETC. CAN EF FECT THE CHANGE IN SALARY. WE SUSTAIN THE RELIEF WITH ABOVE OBSERVATIONS. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 1 ST DAY OF APRIL, 2011. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 21 ST DAY OF APRIL, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XXI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. ITA NO.977/DEL/2011 6 AR, ITAT, NEW DELHI.