The order of the Bench was delivered by
Chandra Mohan Garg, Judicial Member - The above appeal has been preferred by the Revenue against the order of the Commissioner of Income-tax, Faridabad, dated December 31, 2012, in Appeal No. 335/2011-12, dated December 31, 2012, pertaining to the assessment year 2009-10.
2. The Revenue has raised following grounds in this appeal :
"1. Whether, on facts and circumstances of the case the Commissioner of Income-tax (Appeals) was right in law in deleting addition of Rs. 14,64,000 made by the Assessing Officer on account of excessive payment made to persons specified in section 13(3) of the Income-tax Act, 1961, despite the observation of the learned Income-tax Appellate Tribunal in earlier years that salary paid to office bearer of the trust was excessive.
(2) Whether, on facts and circumstances of the case and in law the learned Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 14,64,000 despite the assessee owning and running a fleet of luxurious cars in contravention of section 13(1)(c)(ii) read with section 13(2)(c) of the Income-tax Act, 1961.
(3) Whether, on facts and circumstances of the case and in law the learned Commissioner of Income-tax (Appeals) has erred in treating income of Rs. 1,98,42,500 as exempt under section 11 of the Income-tax Act, 1961, despite the assessee-trust having contravened the provisions of section 13(1)(c)(ii) read with section 13(2)(c) of the Income-tax Act, 1961."
3. Briefly stated, the facts giving rise to this appeal are that the assessee filed its return of income on February 30, 2009, declaring excess of income over expenditure amounting to Rs. 1,98,42,500 and claiming the same as exempt income under section 11 of the Income-tax Act. The Assessing Officer completed regular assessment under section 143(3) of the Act at a total income of Rs. 2,13,06,500 vide order dated December 23, 2011, treating the activities of the trust society as of business assessable under section 28 or under section 56 of the Act and rejecting the claim of exemption under section 11 of the Act. The Assessing Officer also disallowed two-third of the expenditure amounting to Rs. 14,64,000 incurred on the remuneration of four persons under section 40A(2)(b) of the Act.
4. Aggrieved the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) which was allowed on all grounds raised by the assessee. Now, being aggrieved by the above order of the Commissioner of Income-tax (Appeals), which granted relief for the assessee, the Revenue is before this Tribunal with the grounds as reproduced hereinabove.
5. We have heard rival arguments of both sides and carefully perused the record. The learned Departmental representative submitted that the Commissioner of Income-tax (Appeals) was not right in law and on facts in deleting the addition of Rs. 14,64,000 made by the Assessing Officer on account of excessive payment made to the persons specified under section 13(3) of the Act despite the observation of the Income-tax Appellate Tribunal in the earlier years that salary paid to the office bearer of the trust was excessive. The Departmental representative further contended that the Commissioner of Income-tax (Appeals) was not justified in deleting the above addition by ignoring the important fact that the assessee was owning and running a fleet of luxurious cars in contravention of section 13(1)(c) of the Act. Apropos ground No. 3, the learned Departmental representative vehemently contended that the Commissioner of Income-tax (Appeals) has erred in law and on facts in treating the income of Rs. 1,88,42,500 as exemption under section 11 of the Act despite the assessee-trust having contravened the provisions of section 13(1)(c) read with section 13(2)(c) of the Act.
6. The learned Departmental representative has drawn our attention towards assessment order and submitted that the Income-tax Appellate Tribunal in its order in the assessee's own case for the assessment year 2006-07 has observed that the salary paid to Mr. Joseph John should not exceed Rs. 20,000 per month and the amount of payment as disallowed by the authorities below was upheld by the Income-tax Appellate Tribunal. The Departmental representative further contended that the disallowance and addition made by the Assessing Officer are based on justified and cogent reasons and the Commissioner of Income-tax (Appeals) deleted the same without any logical reasoning and grounds.
7. Replying to the above, learned counsel for the assessee has drawn our attention towards submissions of the assessee before the Commissioner of Income-tax (Appeals) reproduced in the impugned order in paragraph 5 on pages 4 to 13 of the impugned order and submitted that the inadvertent mistake in payment of salary was made in the assessment year 2006-07 which was corrected in the assessment years 2007-08 and 2008-09 and the Commissioner of Income-tax (Appeals) followed the assessment order of these years while granting relief for the assessee. Learned counsel has drawn our attention towards paragraph 6 of the impugned order which is a conclusive part of the impugned order which reflects the findings and conclusion of the Commissioner of Income-tax (Appeals) for allowing the appeal of the assessee.
8. On a careful consideration of above rival submissions and careful perusal of relevant material on record, we observe that the Commissioner of Income-tax (Appeals) granted relief for the assessee with following conclusion :
"6. I have considered the submissions of learned counsels for the appellant and gone through the documents filed on record as well as the relied upon judicial rulings. There is no dispute to the fact that the appellant-society has been granted registration under section 12A of the Act as per certificate, dated July 15, 1996, filed at page 13 of the paper book. There is also no dispute to the fact that the appellant has claimed exemption of its income under section 11(1)(a) of the Act. The main reason assigned by the Assessing Officer while denying the claim of exemption is that the appellant has provided salary to the office bearers resulting into contravention of the provisions of section 13(1)(c) of the Act. The identical issues were also involved in the case of appellant for the assessment year 2008-09, wherein the Assessing Officer disallowed claim of salary paid to same three office bearers of the appellant-society to the extent of Rs. 14,64,000 and assessed the appellant in the status of an association of persons. The appellant claimed similar salary to aforesaid three office bearers aggregating to Rs. 21,96,000 in the assessment year 2007-08 also but the Assessing Officer did not make any disallowance in the assessment order passed under section 143(3) on December 30, 2009. Keeping in view the fact that entire salary paid to the three office bearers was allowed by the Assessing Officer in the assessment year 2007-08, I did not sustain the disallowance made by the Assessing Officer in the assessment year 2008-09. I have also held that the Assessing Officer was not justified in denying the claim of exemption under section 11(1) on the ground of contravention of the provisions of section 13(1)(c) of the Act as per my appellate order, dated July 27, 2011, passed in Appeal No. 278/ 2010-11 for the assessment year 2008-09. The Department preferred appeal against my aforesaid order before the hon'ble Income-tax Appellate Tribunal. The hon'ble Income-tax Appellate Tribunal, Delhi Bench "C" New Delhi, vide order, dated April 30, 2012, passed in appeal I. T. A. No. 4514/Del/2011 in the case of appellant for the assessment year 2008A-09 has upheld my order as such. Respectfully following the decision of the hon'ble Income-tax Appellate Tribunal for the assessment year 2008-09 in the appellant's own case, the disallowance of Rs. 14,64,000 made by the Assessing Officer is deleted. The status of the appellant is held to be that of a charitable society eligible for claim of exemption under section 11(1) of the Act. The Assessing Officer is directed to allow claim of exemption under section 11(1) of the Act. All the grounds of appeal taken up by the appellant are allowed."
9. In view of above, we clearly observe that the Commissioner of Income-tax (Appeals) granted relief for the assessee pertaining to the disallowance of Rs. 14,64,000 by observing that the Assessing Officer did not make any disallowance in the assessment year 2007-08 in the assessment order passed under section 143(3) of the Act, dated December 30, 2009. The Commissioner of Income-tax (Appeals) further observed that keeping in view the fact that the entire salary paid to the three office bearers was allowed by the Assessing Officer in the assessment year 2007-08, the Commissioner of Income-tax (Appeals) did not uphold the disallowance made by the Assessing Officer in the assessment year 2008-09 on this issue. In this situation, we are in agreement with the conclusion of the Commissioner of Income-tax (Appeals) that the Assessing Officer was not justified in disallowing two-third of the expenditure incurred in the remuneration of the four persons under section 40A(2)(b) of the Act. On this issue, we are unable to see any infirmity or perversity in the impugned order and conclusion of the Commissioner of Income-tax (Appeals) is upheld.
10. From paragraph 6 of the impugned order as reproduced hereinabove, we also observe that the Commissioner of Income-tax (Appeals) has followed its own order in the assessee's own case, dated July 27, 2011, passed in Appeal No. 278/2010-11 for the assessment year 2008-09 which was upheld by the Income-tax Appellate Tribunal "C" Bench, New Delhi, vide order dated April 30, 2012, passed in I. T. A. No. 4514/D/2011 in the assessee's own case for the assessment year 2008-09. On perusal of above order of the Tribunal, we observe that the Tribunal has decided the issue in favour of the assessee dismissing the appeal of the Revenue with following observations and findings :
"12. Let us examine whether the assessee has extended any undue benefit directly or indirectly to the persons referred to in sub-section (3). As far as the salary paid to two persons, namely, Mr. T. I. John and Mr. A. John of Rs. 8,16,000 and Rs. 7,20,000 is concerned, we find that a similar salary was paid in the assessment years 2005-06 to 2007-08. In the assessment years 2005-06 and 2006-07, the Assessing Officer made the disallowance and the Income-tax Appellate Tribunal has upheld the deletion of disallowance. Thus, the issue is squarely covered by the order of the Income-tax Appellate Tribunal. As far as the salary paid to Mr. Joseph John is concerned, we find that the salary of Rs. 55,000 per month has been paid. The Assessing Officer disallowed the salary to the extent of two-third. We find that the learned Commissioner of Income-tax (Appeals) has considered the order of the Income-tax Appellate Tribunal in the assessment years 2003-04 to 2006-07 wherein salary in the case of Mr. Joseph John has been partly disallowed. It was brought to our notice that in the assessment year 2007-08, the Assessing Officer has allowed the total salary paid to Mr. Joseph John and the salary was at Rs. 55,000 per month. We further find that in this year, the Assessing Officer has independently not brought any evidence which can show how much salary a person having qualification equivalent to Mr. Joseph John could fetch in the open market. What are the rates of salary paid by other institution to a person who is teaching as well as managing the school. We have noticed the duties performed by Shri Joseph John. The Assessing Officer is harbouring upon the evidence collected by the Assessing Officer in the assessment year 2003-04. He has made reference to the salary of the staff in those years. With effect from January 1, 2006, the Government of India has notified the sixth pay commission which resulted into a handsome enhancement in the salary of the employees including the Government teaching staff and the salaries have almost enhanced by 30 per cent. to 40 per cent. If the increase in the salary of Shri Joseph John allowed to him by the Income-tax Appellate Tribunal in 2004-05, is being looked into with this angle also then sum of Rs. 55,000 would not be on a higher side. Considering all these aspects and the detailed order of the learned Commissioner of Income-tax (Appeals), we do not find any reason to interfere in it and the appeal of the Revenue is dismissed."
11. In view of the above conclusion of the Tribunal in the assessee's own case for the assessment year 2008-09, we observe that the Tribunal has taken cognizance of this fact that from January 1, 2006, the Government of India has notified sixth pay commission which resulted into handsome enhancement in the salary of the employees including the Government teaching staff and the salary have almost enhanced by 30 to 40 per cent. The Tribunal further held that if the increase in the salary of Shri Joseph John allowed to him by the Tribunal itself in 2004-05 is being looked into with this angle, then also, a sum of Rs. 50,000 would not be on the higher side. Considering these facts, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals) which granted relief for the assessee in the assessment year 2008-09.
12. Accordingly, we are of the view that the Commissioner of Income-tax (Appeals) was right in granting relief for the assessee by following earlier assessment order for the assessment year 2007-08, the Commissioner of Income-tax (Appeals)'s own orders for the assessment year 2008-09 and order of the Tribunal upholding the order of the Commissioner of Income-tax (Appeals) for the assessment year 2008-09 as discussed above. Finally we hold that there is no infirmity or perversity in the impugned order.
13. Since the status of the appellant-trust is held to be that of charitable society eligible for claim of exemption under section 11(1)(a) of the Act, then the Commissioner of Income-tax (Appeals) rightly directed the Assessing Officer to allow the claim of the assessee for exemption under section 11(1) of the Act. On the basis of foregoing discussion and observation, we reach to a conclusion that the Commissioner of Income-tax (Appeals) granted relief for the assessee on cogent and justified reasons and the Commissioner of Income-tax (Appeals) was also justified in allowing the claim of the assessee for exemption under section 11(1) of the Act. We are unable to see any infirmity or any other valid reason to interfere with the findings of the Commissioner of Income-tax (Appeals) in the impugned order and thus we uphold the same. Finally, we hold that the grounds raised by the Revenue are devoid of merits and deserve to the dismissed and we dismiss the same.
14. In the result, the appeal of the Revenue is dismissed.
The order pronounced in the open court on August 5, 2014