9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (10) TMI 426 - AT - Income TaxDenial of exemption u/s 11 - alleged violation of certain provisions of Section 13 - Excess salary paid to the trustee - rule of consistency - Held that - Nothing on record suggest that there was any change in the activities being carried out by the assessee. The copies of scrutiny Assessment orders for AYs 2010-11 & 2011-12 as placed on record vouch for the fact that the assessee has been granted deduction u/s 11 by Ld. AO and its claim has not been doubted by the revenue. The perusal of the table reveal that the assessee is regular in making salary payments to the Trustee right from AY 2005-06 onwards, which has not been doubted by the revenue until impugned AY. The aforesaid Trustee was exclusively working for the Trust which is evident from copy of her Income Tax Return for the impugned AY as placed on record wherein we find that her major source of income is Salary income from the Assessee Trust. A brief profile of Ruchira Gupta reveal that she is stated to have worked with United Nations in various capacities in 12 countries for over ten years. She was on the board of coalition against trafficking in women and the advisory councils of Polaris Project, Vital Voices, Ricky Martin Foundation, Asia Society, Nomi Network, the coalition against trafficking in women and cents for relief. The primary objective of the all these forums matches with some of the objectives of the Assessee Trust. The aforesaid Trustee had rich experience of over 25 years which was in line with the objectives of the Assessee Trust. As against the above credentials, the revenue has failed to place on record any comparative chart or any other corroborative evidence to establish that the aforesaid payment was excessive or unreasonable, in any manner. This being the case, the payment of salary as aforesaid, in our opinion, could not be a ground to deny the deduction to the assessee. Motor Car funded out of assessee Trust has been registered in assessee s name and the same is alleged to be under the control of the Trustee - Held that - We find that the said car was purchased in the year 2010-11 and this is the third year since purchase of the car. The revenue, except for mere allegations, is unable to point out as to how the said car was under personal use of the Trustee particularly when she had no other source of income. This being the case, the same, in our opinion, could also not be a ground for denial of deduction to the assessee. Rental payments of ₹ 60,000/- per month stated to be paid by the assessee to use office premises - Held that - We find that the aforesaid payments are being made by the assessee pursuant to sub-lease agreement dated 01/04/2010 and the payment is in accordance with the terms of the agreement. The assessee has made the said payment in earlier AYs also, which has been accepted by the revenue. Keeping in view all these factors, we concur with the stand of Ld. AR that the same could not be a ground to deny the deduction of the assessee. Denial of deduction u/s 11 for alleged violations of Section 13 was not justified - Decided in favour of assessee. Amounts written-off in the books of accounts but not treated as application of Trust Income by the revenue - Held that - Keeping in view the submissions made by Ld. AR, the claim of the assessee is, prima-facie, allowable subject to the verification of the stated assertions made by Ld. AR. Therefore, the write-off of donations as well as fixed assets shall be treated as application of funds subject to verification of the facts as narrated by Ld. AR before us. The Ld. AO is directed to allow the claim after due verification. This ground stands allowed for statistical purposes. Difference in grants amount as reflected by the assessee in Receipts & Payments Account and Income & Expenditure Account - Held that - A perusal of the financial statements for impugned AY as placed on record reveal that the assessee has expanded an amount of ₹ 387.71 Lacs as including write-off of fixed assets & donations aggregating to ₹ 44.73 Lacs. Since we have already allowed assessee s claim with respect to amounts written-off as stated in para 6.2, we find that the application of funds translates into application rate of more than 85% of total grants of ₹ 411.99 Lacs. Therefore, the assessee has fulfilled the conditions of Section 11(2) and eligible to claim the full deduction - Decided in favour of assessee.
Issues Involved:
1. Confirmation of assessed income at ?4,16,77,269/- against Nil declared income. 2. Applicability of the rule of consistency. 3. Application of provisions of Section 13(1)(c)/13(2)(c) read with Section 13(3) of the Income Tax Act. 4. Disallowance of amounts written off as application of funds. 5. Treatment of grants received as income. 6. Rejection of exemption claim under Section 11 due to alleged violation of Section 13. Detailed Analysis: 1. Confirmation of Assessed Income: The assessee contested the order confirming the assessed income of ?4,16,77,269/- against the declared Nil income. The root issue was the denial of exemption under Section 11 due to alleged violations of Section 13 provisions. 2. Rule of Consistency: The assessee argued that the rule of consistency should apply as the factual position remained unchanged from previous assessment years where exemptions were granted. However, it was noted that the principle of res judicata does not apply to income tax proceedings, and each assessment year is a separate proceeding. The CIT(A) cited multiple judgments, including M.M. Ipoh & Ors Vs CIT and Bharat Sanchar Nigam Ltd Vs Union of India, to support that legal issues arising anew must be examined independently each year. 3. Application of Provisions of Section 13: The CIT(A) upheld the AO's findings on several points: - Salary to Trustee: The salary of ?36,00,000/- paid to Ms. Ruchira Gupta was deemed unreasonable. The CIT(A) noted that her salary had increased significantly from ?2,40,000/- in AY 2005-06 to ?36,00,000/- in the current AY without comparable increases for other trustees or justification for the substantial increase. - Motor Car Purchase: The car purchased in the trustee's name was considered a violation of Section 13(1)(c) as the title and control were with the trustee. - Rent Payment: The rent paid to a specified person was deemed unreasonable as the appellant failed to provide reliable evidence to substantiate the market rate comparison. 4. Disallowance of Amounts Written Off: The CIT(A) confirmed the disallowance of amounts written off as application of funds, including: - Donations Receivable: ?1,71,313/- written off as donations receivable was not considered application of income. - Fixed Assets: ?43,02,556/- written off as fixed assets were also not considered application of income. 5. Treatment of Grants Received: The CIT(A) upheld the AO's decision to treat grants of ?76,41,943/- as income. The appellant's argument that these were specific-purpose grants to be considered in the year of application was rejected, as the AO did not allow exemption under Section 11. 6. Rejection of Exemption Claim Under Section 11: The CIT(A) confirmed the rejection of the entire exemption claim under Section 11 due to violations of Section 13. The appellant's contention that only the amounts hit by Section 13 should be disallowed was rejected, citing the judgment of CIT Vs. Ramaswamy Iyer. Tribunal's Decision: The Tribunal reversed the CIT(A)'s decision on several grounds: - Rule of Consistency: The Tribunal emphasized the principle of consistency, noting that the assessee had been granted exemption under Section 11 in previous years under similar circumstances. - Salary to Trustee: The Tribunal found the salary payment justified given the trustee's extensive experience and contributions, and no evidence was provided by the revenue to prove the payment was excessive. - Motor Car Purchase: The Tribunal noted the car was purchased in AY 2010-11 and used for trust purposes, with no evidence of personal use by the trustee. - Rent Payment: The Tribunal found the rent payment reasonable and consistent with earlier years, supported by a sub-lease agreement. The Tribunal allowed the appeal, directing the AO to verify the write-off claims and confirming that the assessee met the conditions of Section 11(2) for claiming full deduction. Conclusion: The assessee's appeal was allowed, reversing the CIT(A)'s decision and granting the exemption under Section 11, subject to verification of the write-off claims. The Tribunal emphasized the importance of consistency and found no substantial change in facts or circumstances to justify the denial of exemption.
|
