2014 (8) TMI 717 - AT - Income Tax

Remuneration paid to trustee u/s 13(1)(c) and 13(3)(cc) disallowed Adequate remuneration paid against the services provided Held that - The revenue could not bring any material to controvert the contentions of the assessee - the total receipts of the assessee trust were to the tune of ₹ 443.24 lakhs during the year and the activity undertaken by the assessee trust was to the tune of ₹ 469.87 lakhs - the remuneration of ₹ 4,80,000/- which is about 1% of the total value of activities of the trust for looking after which the same was paid, cannot be said to be excessive or unreasonable revenue could not controvert that the remuneration of ₹ 4,80,000/- per year was paid to the trustee by the trust in earlier years also for rendering similar services which were allowed by the Department since AY 2003-04 - in absence of any material brought to show that the remuneration paid to Shri Anantbhai K. Shah for actually rendering services as full time secretary of the trust was in excess of the amount which can be reasonably paid for services Decided in favour of Assessee.

Summary

Issues involved:
1. Disallowance of remuneration paid to a trustee under sections 13(1)(c) and 13(3)(cc) of the Income Tax Act.
2. Disallowance of interest under sections 234B/C/D of the Act.
3. Initiation of penalty proceedings under section 271(1)(c) of the Act.

Analysis:

Issue 1: Disallowance of remuneration paid to a trustee
The appeal was against the disallowance of remuneration paid to a trustee under sections 13(1)(c) and 13(3)(cc) of the Income Tax Act. The Assessing Officer disallowed the deduction, treating the remuneration as taxable income, citing it as violative of the mentioned provisions. The Commissioner of Income Tax (Appeals) upheld the decision without addressing the submissions of the assessee. The Authorized Representative argued that no disallowance should be made if the remuneration is not more than the fair market value. The trustee had relevant qualifications and experience in social work, and the remuneration was a small percentage of the trust's activities. The tribunal found no evidence to show the remuneration was excessive and allowed the appeal, deleting the disallowance.

Issue 2: Disallowance of interest under sections 234B/C/D
The tribunal dismissed the ground of appeal related to the interest levied under sections 234B/C/D of the Act as the assessee made no submissions during the hearing. The tribunal considered the interest levied as consequential and upheld its imposition.

Issue 3: Initiation of penalty proceedings under section 271(1)(c)
The ground of appeal regarding the initiation of penalty proceedings under section 271(1)(c) was dismissed as the assessee did not make any submissions during the hearing. The tribunal ruled the dismissal due to lack of prosecution.

In conclusion, the appeal was partly allowed concerning the disallowance of remuneration paid to the trustee, while the grounds related to interest and penalty proceedings were dismissed. The tribunal's decision was pronounced on August 14, 2014, at Ahmedabad.