TMI Blog2006 (10) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been disallowed, in the event it is held there was violation of ss. 11 and 12 of IT Act. 3. Briefly stated facts are that assessee is a society registered under the Societies Registration Act 1860. It is engaged in the field of family planning as well as maternal and child health care. There is no change in the aims and objects during this year. The society is registered under s. 12A of IT Act, 1961. In the asst. yrs. 1996-97 and 1997-98 the exemption under s. 11 was denied to the assessee trust for violation of provision of s. 13(1)(c) of the Act. During the course of assessment the assessee was asked to give details of payments to persons who are covered under s. 13(1)(c) of the Act. As per the audit report filed by assessee under s. 12A(b), payments has been made during the year to: (i) Mrs Sudha Tewari, member/executive secretary of governing body of the Sanstha and managing director of all amount of Rs. 10,21,820 and (ii) M/s B.C. Dasgupta Co., solicitors and advocate for professional services. Mrs. V.K. Govil, partner in this firm is a governing member of the Sanstha. 4. The AO pointed out that this was the first year when the assessee had itself disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince 22nd Jan., 1982, she was a person covered by s. 13(3), as had also been mentioned in the audit report. The AO looked into the justification for the increase in salary of Smt. Sudha Tewari. She was informed that she was a highly qualified person and the CYP of the organization since instruction was furnished before the AO along with data of growth of the income since inception. It was stated before her that the rise in salaries was related to the growth in CYP of the organization and the growth in the total income of the Sanstha. The AO examined the same and found that the income from CYPs had increased by 10.68 per cent, 40.07 per cent and 17.79 per cent over the preceding year in the financial years 1995-96, 1996-97 and 1997-98. As against this, the percentage increase in the salary etc. paid to Smt. Sudha Tewari was 27.9, 23.6, 27.4, 31.8 and 98.4 from the financial years 1993-94 to 1997-98. After examining the above, the AO stated that the increase in salary etc. paid to Smt. Sudha Tewari was not related to the growth of the organization and was not justified considering that in the asst. yr. 1998-99 the performance of the Sanstha was not extraordinary. Hence, she invoked t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been done by a person which translates into a better performance or higher relieves/profits for the organization. The percentage income of the Sanstha for asst. yr. 1998-99 was only 17.79 per cent over the preceding assessment year as compared to 40.07 per cent in asst. yr. 1997-98 over 1996-97. That is to say that in terms of total income of the Sanstha, the rate of increase had actually decreased compared to asst. yr. 1997-98, whereas the salaries to Smt. Sudha Tewari had increased disproportionately by 59 per cent. The financial results achieved by any organization are a safe and scientific parameter to judge whether higher payments made for achieving such result were justified. Thus he has held that since there had been fall in the rate of increase of income, there was no justification for enhancing the salary etc. of Smt. Sudha Tewari much higher than the increase of any of the earlier years. He has further mentioned that the Tribunal in its order for asst. yrs. 1995-96 and 1996-97 have stated that increase of about 25 per cent per annum in the salary and perquisites could be considered to be the normal increase given by an organization. However, in its order for asst. yr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore not justified in bringing to tax the entire gross receipts of the appellant. The AO is, therefore, directed to allow the expenses reflected in the income and expenditure account amounting to Rs. 9,28,83,209 and bring to tax the resulting income of Rs. 3,62,64,825. The appellant's objection that the amount of closing stock of medicines reflected in the income and expenditure account should be excluded, however, cannot be accepted since the purchases of medicines debited in the income and expenditure account are also reflected in this account on the debit side and have been allowed as expense in the total expenditure mentioned above. Also, the appellant's plea that donations and contributions should be excluded as they did not constitute income can also not be accepted. In the case of a trust, the receipts in the form of donations and contributions are income and amounts spent on charitable objects are the expenditure. All donations are income as long as they are not exempt under some provision of the Act. Once exemption is withdrawn, they are to (be) brought to tax after allowing the expenses incurred towards the charitable objects. Thus, the AO was justified in considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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