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2019 (4) TMI 501 - AT - Income TaxRectification u/s 254(2) - excessive salary to the Secretary of the society - Argument in MA that FCRA guidelines do not apply to our Society and no specification of Rules to utilized only 50% of the foreign contribution to meet administrative expenses and decision of the Hon’ble Supreme Court is not applicable, - HELD THAT:- As per the Charter for Associations who have been granted registration or prior permission under FCRA, 2010, it has been clearly stated that “Not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the Association”. In this case, the point is 10% of the amount earmarked for charitable purposes was given to Shri M. Krishna Kumar as salary, who is the Secretary in excess of what may be reasonably paid for such services as defined in section 13(2)(c). Considering the qualification, experience, etc. the CIT(A) allowed 50% of the disallowance of salary paid to the Secretary, which was confirmed by the Tribunal. Thus, we find no mistake apparent on the face of the order passed by the Tribunal. Therefore, the petition filed by the assessee stands dismissed. The administrative expenses work out to 95.4% which “is a clear violation of Foreign Contribution Regulation Rules 2011, wherein it is defined that not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the Association”, which was repeated in Tribunal order at page 6 para 6, which is a rectifiable mistake. Accordingly, we replace the sentence with same terminologies that “The above claim of the assessee is a clear violation as per the Charter for Associations, who have been granted Registration or prior permission under FCRA,2010 that not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the Association”. Not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the association. What constitutes 'administrative expenses' has been defined in Rule 5 of the Foreign Contribution (Regulation) Rules, 2011 (FCRR, 2011). Once these facts are not in dispute, we are of the considered opinion that the Tribunal has rightly followed the decision of the Hon’ble Supreme Court in the case of Maddi Venkatraman and Co. Pvt. Ltd. [1997 (12) TMI 3 - SUPREME COURT] to reverse the findings of the ld. CIT(A) and restore that of the Assessing Officer. Thus, the petition filed by the assessee is partly allowed.
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