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2017 (5) TMI 15 - AT - Income TaxCancelling the registration u/s 12AA(3) - salary have been paid to specified persons in violation of clause 5 of the Memorandum of Association, because these two persons were also the office bearers of the society - Held that:- As seen that so far as the first allegation that the assessee has paid salary to the office bearers in violation of clause 5, we find that the said clause itself provides that remuneration can be paid to any members of the institution if he is appointed as officer of the school. Such a payment again has not been held to be excessive under the terms of section 13(2)(c) read with section 13(3) in order to show that the payment of salary is in violation of section 13. It is incumbent that certain bench marking vis-a-vis some comparable instances should be brought on record to show that if these services would have been rendered by the person from outside he would have been paid lesser amount. Thus such a payment cannot lead to any adverse inference for doubting the genuineness of the activities carried out by the assessee’s society. So far as the observation of the Ld. CIT that their appointment cannot be said to be fair and transparent, this again is a very general proposition, because unless it is pointed out that the payment made to such person falls within the realm of diversion of funds or giving undue benefit to the persons specified u/s 13(3), no adverse inference can be drawn. Even if it is held that no salary at all was required to be paid to these persons, then also after invoking the provisions of section 13, the entire surplus can be taxed. Thus, these allegations do not hold ground for the cancellation of registration within the scope of section 12AA (3) albeit it could be subject matter of scrutiny and addition or forfeiting of surplus amount during the course of assessment proceedings and in terms of section 13 the entire surplus of the assessee can be taxed if the assessee’s society is being found to be violating the conditions laid down in various clauses of section 13. Assessee has been charging bus fees from the students - Held that:- Providing of bus facilities to students and charging fees is directly related to the objects of the society, i.e. imparting education to the students and facilitating the students for picking and dropping to and from the school. Even if certain buses plied were belonging to the office bearers then also no adverse inference can be drawn on the facts of the present case for the reason that none of the expenditure relating to buses have been borne by the school and again nothing has been brought on record that any payment for plying of bus or the fees charged for the bus fees violates the concept of reasonableness as enshrined in section 13(2)(c). As regards the filing of an affidavit of the Principal before the RTA that bus charges will not be charged from the students, then again it cannot be point of adverse inference to doubt the genuineness of the activities of the assessee albeit it can be some kind of violation under Road Transport Laws which is not relevant for the conditions laid in section 12AA (3). Again this is subject matter of scrutiny during the assessment proceedings and from the perusal of the reassessment orders passed in the subsequent to the cancellation of the registration it is seen no adverse inference with regard to the bus charges or for violation of any law has been drawn. Assessee has been found to maintained two parallel registers for annual general meeting for certain period - Held that:- Maintenance of two parallel registers does not lead to any adverse inference because it is neither in violation of any of the objects nor leads to any inference regarding non genuine activity if any carried out by the assessee, because nothing incriminating is indicated from such parallel register maintained for the brief period. Assessee appeal allowed.
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