2019 (1) TMI 1209 - AT - Income Tax

Exemption u/s 11 - Disallowance of certain amounts paid to the persons specified in section 13(3) - Held that - Such payments are neither unreasonable nor excessive. Here is a case in which Dr. Shirish Prayag is a qualified MBBS, MD practising since 1986. His academic achievements have been set out in the assessment order. When we consider the amount of ₹ 30 lakhs paid to him, namely, ₹ 2,50,000/- per month as salary, the same cannot be termed as excessive in the backdrop of the hospital receipts of ₹ 3.90 crore. AO has compared his remuneration with certain other part time doctors visiting the assessee-trust on call, which is not a good comparison. The assessee was continuously paying remuneration to Dr. Shirish Prayag. A chart of has been placed on record, which shows that for the A.Y. 2007-08, assessee paid a sum of ₹ 18 lakhs to Dr. Shirish Prayag, that got allowed by the AO. For the A.Y. 2008-09, he was again paid a sum of ₹ 18 lakhs which was also allowed by the AO. For the A.Y. 2010-11, he was paid a sum of ₹ 24 lakhs. The AO in his assessment made u/s.143(3), has allowed deduction of ₹ 24 lakhs paid to Dr. Shirish Prayag vide his order dated 28-12-2012, a copy of which is available on page 92 onwards of the paper book. In this shade of the matter, a reasonable increase of ₹ 50,000/- per month during the year under consideration, in our considered opinion, cannot be termed as unreasonable or excessive. Thus delete the addition to this extent. Payment made to Dr. Aarti Prayag as noticed above that she is a qualified MBBS and DCP from B.J. Medical College, Pune and working as Senior Pathologist for last 32 years. The remuneration paid to her during the year has been ₹ 50,000/- per month plus 25% of IPD and OPD collection of Pathology Lab. It is pertinent to note that the assessee paid a sum of ₹ 25,91,597/- to Dr.Aarti Prayag during the previous year relevant to the A.Y. 2010-11. AO vide his aforesaid assessment order has allowed full deduction. When we consider the quantum of amount paid by the assessee during the year vis- -vis the amount paid and allowed in the immediately preceding assessment year, the payment during the year cannot be termed as unreasonable or excessive. We hold that the payment of ₹ 34.99 lakhs made by the assessee to Dr. Aarti Prayag is reasonable and does not call for any disallowance. Payment to Smt. Usha Prayag is amounting to ₹ 1,80,000/-, namely, ₹ 15,000/- per month. She was looking after the administration of the hospital since the inception of the trust and was handling safe-keeping of cash, supervision of banking transactions and also supervision of shift duties of staff nurses etc. She was also responsible for co-ordination between doctor-trustees and other trustees since beginning of the trust and her duties have been set out in the assessment order itself. When we consider the overall supervision of the hospital by Smt. Usha Prayag and payment of ₹ 15,000/- per month, the same appears to be quite reasonable and not excessive or reasonable in any manner. We, therefore, order to delete this addition. - Decided in favour of assessee.

Summary

Issues:
- Disallowance of payments to specified persons under section 13(3) of the Income-tax Act, 1961.

Analysis:
A.Y. 2011-12:
1. The primary issue in this appeal was the disallowance of payments made to individuals specified in section 13(3) of the Income-tax Act. The assessee, a trust providing medical relief, paid amounts to Dr. Shirish Prayag, Dr. Aarti Prayag, and Mrs. Usha Prayag. The Assessing Officer disallowed portions of these payments, which the CIT(A) upheld, leading to the appeal before the Tribunal.
2. Section 13 restricts exemptions under section 11 if payments to specified individuals are excessive or unreasonable. The crux of the matter was whether the payments made by the assessee to the mentioned individuals were unreasonable. The Tribunal analyzed the justification provided by the assessee for these payments.
3. The Tribunal found the payments to Dr. Shirish Prayag, Dr. Aarti Prayag, and Mrs. Usha Prayag to be reasonable and not excessive. Dr. Shirish Prayag's qualifications and the consistency of his remuneration were considered. The payment to Dr. Aarti Prayag was deemed reasonable based on her qualifications and past payments. The payment to Mrs. Usha Prayag for administrative duties was also found to be justifiable and not excessive.
4. The Tribunal compared the payments made in the previous assessment years and concluded that the payments in the current year were reasonable. Consequently, the Tribunal ordered the deletion of the disallowances made by the Assessing Officer.

A.Yrs. 2007-08 and 2008-09:
1. For the assessment years 2007-08 and 2008-09, similar disallowances were made in relation to payments to Dr. Aarti Prayag. The Tribunal, considering the reasoning and decision made for the A.Y. 2011-12, held that the payments to Dr. Aarti Prayag for these years were reasonable and not excessive based on her qualifications and experience.
2. Given the findings and decisions made for the A.Y. 2011-12, the Tribunal ordered the deletion of the disallowances for the A.Y. 2007-08 and 2008-09 related to payments made to Dr. Aarti Prayag.
3. Consequently, all appeals were allowed, and the Tribunal pronounced the order on 22nd January 2019, in favor of the assessee.