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2012 (5) TMI 137 - AT - Income TaxDeleting the addition made by the A.O. on account of excessive payment to the persons specified in section 13(3)– Revenue appeal - Held that:- If an assessee made payments for availing benefit, services or any facility from the persons mentioned in section 40A(2(b) and similar type of benefit or service can be availed from the open market at a cheaper rate then the excess amount considered by the AO is to be disallowed to the assessee out of his business expenditure - Since the income of the assessee is being not computed as a business income and computed under sec. 11, 12 and 13 - Clause "b" of section 40A(2) provides no reference to an assessee who is a society or trust and whose income is to be assessed as per sections 11, 12 and 13 - Because a similar mechanism has been provided therein section 13(1)(ii) and 13(3) of the Act it appears that the Assessing Officer has made reference to this section unnecessarily - section 13(3) is an analogous to sub-clause (b) of section 40A(2)– against revenue. Violation of sec. 13(1)(c)(ii) r.w.s.13(3) and thus lose status of a charitable institution and exemption under sec. 11 – Held that:- Restriction is applicable to those amounts which have been applied directly or indirectly for the benefit of any person referred to in sub-section (3) of the Act and will not lead to any conclusion that assessee would loose its charity status - if a small amount is to be disallowed that would not disqualify to enjoy the status of charity- against revenue. Whether assessee has extended any undue benefit directly or indirectly to the persons referred to in sub-section (3) – Held that:- As far as the salary paid to two persons is concerned in assessment years 2005-06 and 2006-07, AO made the disallowance and the ITAT has upheld the deletion of disallowance – looking to 6th Pay Commission which resulted into a handsome enhancement by 30% to 40%. in the salary of government teaching staff the increase in the salary of Shri Joseph John allowed to him by the ITAT in 2004-05, is being looked into with this angle also then sum of ₹ 55,000 would not be on a higher side – against revenue.
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