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TMI Blog2021 (12) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... infirmity in the order of the ld. CIT(A) on this issue - in the case in hand, it is duly proved on the file that the payments were made to the members for the purchase of land and such payments were made at arms length price. Therefore, in view of the above, we do not find any infirmity in the order of the CIT(A) and the same is upheld on this issue. Payment of salary to certain members of the society - only objection by the AO was that the payment during the year was increased to large extent as compared to the payments made in earlier years - The total percentage of expenses incurred by the society on account of payments made to these persons constitute less then 1% of the total expenses incurred by the society. Further the total payments made by the society on account of salaries to these persons are less then 2.5% of the total expenditure incurred on account of salaries. These facts and figures have not been considered by the AO before making the disallowance. Also, find that no adverse material has been brought on record by the AO to hold that services have not been rendered by these persons and payments made to these specified persons are excessive and unreasonable. We hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat advances paid to members of society amounts to misutilization of receipts of the school in the shape of transfer for property and as per scheme that doesn't reflect altruism on part of the members selling land to their own society. 7. That the Id. CIT(A)-2 Jalandhar has erred in law in deleting interest amount even when the advances paid were made to members of the society, much prior to execution of sale with two members in AY 2015-16 and whatsoever none with third member even till AY 2016-17, for purchase of land that was additionally not evidenced to be in pursuance of the society's objects 4. A perusal of the above grounds of appeal reveal that the revenue is aggrieved by the action of the CIT(A) in allowing exemption u/s 11 of the Income Tax Act,1961 (in short 'the Act') to the assessee society on two grounds. Firstly that the assessee society had made the interest free advances to its Members which transaction was covered under the provisions of Section 13(1)(c) and 13(1)(d) read with Section 13(3) of the Act and further that the assessee Society had paid excessive salary to its Members having contravened the provisions of Section 13(2)(c) of the Act. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been given to 3 persons namely- Sh. Harpreet Singh, Smt. Parminder Kaur and Sh. Manbir Singh. A copy of account of the three persons explaining the nature of transactions and purpose of the same has been filed in the course of assessment proceedings. It is stated that amount has been paid by the society as advance purchase of land for the purposes of society. The society is engaged in educational activities and therefore, funds have been paid over a period of time to these persons and details of payments made over a period of 4 years, is as under:- Name A.Y. 2012-13 A.Y. 2013-14 A.Y. 2014-15 A.Y. 2015-16 Harpreet Singh 2,20,00,000/- 6,20,00,000/- 6,86,80,000/- 9,60,00,000/- Parminder Kaur 1,10,00,000/- 5,50,00,000/- 6,40,00,000/- 7,05,15,000.- Manbir Singh 2,20,00,000/- 2,20,00,000/- 3,27,25,000/- 4,62,00,000-- Total 5,50,00,000/- 13,90,00,000/-, 16,54,05,000/- 21,27,15,000 - 4.7 The appellant has further stated that no un-due benefit has been taken by these persons as the sale of land has been executed by Sh. Harpreet Singh for ₹ 9.60 crores and by Sh. Manbir Singh for ₹ 4.62 crores in the name of the society. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the bank/market. This would have meant making the re-payment of loan to the bank/market of an amount which has been paid as advance in year 2, year 3 and year 4 along with an element of interest cost. 4.11 Thus, in view of the above mentioned facts, I find that it is the other way round as it is the members who have sold the land to the society have lost out on the interest component which they would have earned had the sale price been paid in one instalment. Therefore, this transaction amounts to suiting the convenience of the buyer of the property as the sale price has been paid over a period of time as and when the funds were available in their hands. Further, I find that these transactions have been accepted by the AO in the preceding three years. Accordingly, I do not find any justification in the action of the AO in charging notional interest @12% per annum on the amount of advances given by the society to the members against purchase of land. 4.12 In the course of appellate proceedings, the AR of the appellant was asked vide note sheet entry dated 23.03.2017 as to whether any TDS under the provisions of section 194-IA was made by the society on part payment of sale c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, a copy of this order is being forwarded to the Commissioner -TDS, having jurisdiction over the case of the case of the appellant being the buyer(who is responsible for deduction of tax source, while making part payment to the seller) for necessary action required under the provisions of the Act. 4.16 To sum up, an addition of ₹ 1,98,48,600 made by the AO on account of notional interest charged on the amount of advance paid by the society is deleted." 6. Before us, the ld. DR has submitted that the alleged Agreement to Sell executed by the members was unregistered and further that the payment was made over the years and that the same were infact interest free advances and further that the TDS was not effected on the payments and thus, the assessee society had violated the provisions of Section 194I(a) of the Act. 7. On the other hand the ld. counsel for the assessee has submitted that the TDS was duly deducted in respect of payments made by the Society to the sellers. However, in case of Smt. Parminder Kaur, whose Sale Deed was yet to be executed, the TDS was not deducted as the Society had deducted TDS at the time of full payment and registration of the Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to trustees by the assessee society without any justification. The facts in this case, as such are quite distinguishable. In all these case laws, the assessee society could not justify the payments made by the assessee trust to its members. However, in the case in hand, it is duly proved on the file that the payments were made to the members for the purchase of land and such payments were made at arms length price. Therefore, in view of the above, we do not find any infirmity in the order of the CIT(A) and the same is upheld on this issue. 13. So far as the second issue of payment of salary to certain members of the society is concerned, we find that it is not the case of the Department that the salary has been paid in excess of what may be reasonably paid for such services. The only objection by the AO was that the payment during the year was increased to large extent as compared to the payments made in earlier years. The ld. counsel for the assessee has submitted that merely because in earlier years the Members for their services had accepted lower payments as compared to the payments reasonably paid for such services, does not mean that any excess payment has been made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by the society on account of salary and interest as unreasonable mainly on account of the fact that these persons are engaged in other activities and have their other sources of income. I find that the total percentage of expenses incurred by the society on account of payments made to these persons constitute less then 1% of the total expenses incurred by the society. Further the total payments made by the society on account of salaries to these persons are less then 2.5% of the total expenditure incurred on account of salaries. 5.8 Thus, I find that these facts and figures have not been considered by the AO before making the disallowance. Also, I find that no adverse material has been brought on record by the AO to hold that services have not been rendered by these persons and payments made to these specified persons are excessive and unreasonable. In view of these facts, I hold that there is no justification in the action of the AO for making a disallowance under this head. Accordingly, this ground of appeal is allowed." 14. After considering the rival contentions of both the parties on this issue, we do not find any infirmity in the order of the ld. CIT(A) on this is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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