TMI Blog2021 (8) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2013-14, similar denial of exemption u/s 11 of the Act was made and the Tribunal vide order [ 2018 (11) TMI 1864 - ITAT LUCKNOW] had confirmed the findings of learned CIT(A). We find that learned CIT(A) while deciding the above ground has considered various judicial pronouncements and has exhaustively dealt with the issue which needs no interference from our side - Decided against revenue. - ITA No. 719/Lkw/2017 - - - Dated:- 13-8-2021 - SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER Appellant by : Shri Ajay Kumar, D. R. Respondent by : Shri Sandeep Kumar, C. A. ORDER PER T. S. KAPOOR, A.M. This is an appeal filed by the Revenue against the order of learned CIT(A)-4, Lucknow dated 27/09/2017 pertaining to assessment year 2014- 2015. The grounds of appeal taken by the Revenue are reproduced below: 1. Ld. Commissioner of Income Tax (A) has erred in law and facts by allowing the benefit of section 11 thereby deleting the addition of surplus of ₹ 83,78,034/- ignoring the fact that the activities of the society are not in accordance with the aims and objects of the society. 2. Ld. Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The only reason for disallowing these expenses was that the assessee had not produced evidence which could prove that those NGOs, to whom assessee had made payments, had filed their respective returns of income. The other reason for disallowing these expenses was that the Assessing Officer, in earlier paragraph, had held that the assessee had not spent any expenditure on the objects stated in the Memorandum of Association. The learned CIT(A) has elaborately dealt with the issue and after relying on a number of case laws has deleted the addition by holding as under: 5. The undersigned has gone through the assessment order and written submissions of the appellant. The grounds of appeal are discussed and decided in following paragraphs of this order. The appellant society renders rural development services for poverty alleviation through economic empowerment programmes and is registered since 26.02.1993. Society is governed by Management Committee. Only one of the original signatories to MOA is there in present Management Committee and none of the members are related to one another nor related to the original signatories of MOA. Donors to society are reputed names lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant has further contended that:- The assessee vide reply dated 29.11.201C in response to show cause notice dated 04-11-2016 of the assessing office/ made detailed submissions before the assessing officer on the particulars of activities conducted under the said programme and the way community was benefited. In addition to the particulars of activities the assessee also produced photographs, CDs, reports and documents of the project. Relevant page of show cause dated 04- 11-2016 of assessing officer is attached at page 78-79 of paper book and written submissions dated 29.11.2016 filed before the assessing officer is enclosed at pages 93, 131 to 138 of the paper book b) DOWNSTREAM RESEARCH ON SEED SYSTEM, AWARENESS GENERATION AND SEED MULTIPLICATION, UPSCALING, DEVELOPMENT AND IMPROVEMENT OF BUSINESS MODEL AND DOCUMENTATION OF SUCCESS STORIES (vii) The assessee society has in Annexure XXIII forming part of its Balance Sheet (erroneously referred to as note sheet of the Chartered Accountant by the learned assessing officer) has given a detailed write up on the aforesaid programme as under: (viii)International Rice Research Institute supported GDS tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air of the business man or in position of Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It has been further held that no businessman can be compelled to maximise his profit and that the IT Authorities may step in the shoes of the appellant to decide as to how a prudent business man should act meaning there by that the AO must not look at the matter from his/her own point of view but that of a prudent businessman. It is evident from the above that the projects of the appellant are funded by the grants received from reputed Nations and International organisations which have their own check and Balances on the projects funded by them. It is not open to the appellant society to deviate from the terms and condition on which the grant has been received. Furthermore, the assessee had incurred an expenditure of ₹ 5,13,912/- under the same project at point (a) in the A.Y. 2013-14 and no adverse inference was drawn by the department although the same case was assessed u/s 143(3). The AO at best could have added the expenses incurred on these two projects to the income of appellant but the AO did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of income for purpose of section 11 and 12 of the Act. The Hon'ble Jurisdictional High Court in the case of J.K Charitable Trust (1992) 196 ITR 31(All) held that Donation to another charitable trust out of contributions received by assessee trust is application of income for charitable purpose and such donation cannot be treated as income of assessee trust in year of contribution either under unamended as amended section 12 of the Act. CBDT instruction No. 1132 dated 05.01.1978 stated that The payment of sum by one charitable trust to another for utilization by donee trust towards its charitable objects is proper application of income for charitable purpose in hands of donor trust and donor trust will not loose exemption u/s 11 of the Act of the donations during the year of receipt itself. The decision of Hon'ble Gujrat High Court in case of Nirmala Baku Bhai Foundation (1997) 226 ITR 394 (Guj.) too is in favour of the appellant on this issue itself. The recent decisions in case of Delhi State Aids Control vs. ITO in ITAT No. 2906/Del/2010 and in case of Ram Ashram Trust, Nashik vs. Deptt of Income Tax in ITA No. 975/PN/2012 are also in the favour of appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Accordingly, the. addition made by the AO is hereby deleted and Grounds of appeal No. 2.1 and 2.2 are allowed. 5.1 We further find that the Revenue has filed appeal against the order of learned CIT(A) before the Tribunal and Tribunal, vide order dated 16/11/2018, has dismissed this ground of appeal by holding as under: 4. We have heard the rival parties and have gone through the material placed on record. Vide ground No. 1 2 the Revenue is aggrieved with the action of learned CIT(A) by which he has deleted the addition of ₹ 50,000/- and ₹ 96,152/- made by the Assessing Officer u/s 13(1)(c)(ii) and 13(2)(c) and 13(3) on account of excessive salary paid to regular/part time employees. We find that learned CIT(A) has deleted both the additions made by the Assessing Officer by holding as under: 5.1 The AO has held that salary paid to Shri S.K. Dwivedi (Secretary), Shri Amitabh Mishra(Treasurer) and Shri Probir Bose (Member) is excessive and disallowed ₹ 20,000/-, ₹ 20,000/- and ₹ 10,000/- out of their salaries u/s 13 of the Act. Total Disallowance made was ₹ 50,000/-. The AO was provided with detailed job descriptions of these t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given is in excess of services rendered. No such finding has been given by the AO. To find out whether the payment of salary is excessive then same has to be examined on commercial considerations i.e. in comparison to market value of services rendered. The AO has not brought anything on record to show that salary paid to these three persons was excessive in comparison to the market value of services rendered. Merely because there is increase in salary by 15% compared to earlier year will not lead to conclusion that salary paid is excessive or it is personal benefit as envisaged in Section 13(1) of the Act Excessive salary has to be shown not with reference to increase in salary over earlier year but with reference to excessiveness in comparison to market value of the services that is with reference to commercial considerations. Such a finding is clearly missing in the assessment order. The AO has just made a general comment that salary given is excessive and disallowed ₹ 50,000/- out of salary given. No finding has been given as to why it is excessive or what is the basis of making the disallowance. No comparative case has been given to justify the disallowance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal No. 1 and 2 are allowed. 4.1 We find that learned CIT(A) has dealt with the issues exhaustively and finding no infirmity in the findings of learned CIT(A), ground No. 1 2 of the Revenue s appeal are dismissed. 5.2 In view of the above facts and circumstances and judicial precedents, ground No. 2 is also dismissed. 6. Now coming to ground No. 3, we find that similar issue arose in assessment year 2013-14 also and the Tribunal dismissed similar ground of appeal raised by the Revenue by holding as under: 5. Vide ground No. 3 the Revenue is aggrieved with the action of learned CIT(A) by which he has deleted the addition of ₹ 62,40,012/- made by the Assessing Officer on account of amounts paid to other partner NFOs. We find that learned CIT(A) has deleted the addition made by the Assessing Officer by holding as under: Appellant claimed ₹ 2,01,70,662/- as application of income for charitable purposes. This utilization includes donations given out of current years receipts of ₹ 62,40,012/- being expenses incurred by partner NGO's out of grants by the appellant. The AO disallowed this claim of ₹ 62,40,012/- for reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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