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TMI Blog2025 (4) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... n by this Hon'ble Tribunal on this ground alone. 2. The Appellant submits before the Hon'ble Tribunal that the objection of the Department that there is violation of the provision of section 13(3) is baseless and lacks evidence. Without prejudice to the basic contention, that the section 13(3) cannot be pressed into play while processing the application under section 12A, the appellant submits that the trust has NOT paid salaries to the trustees. The fact of non-payment of salaries is not in dispute. Hence the Appellant urge the Hon'ble Tribunal to hold that the provisions of section 13(3) of the Income Tax Act, 1961 are not yiolated. Attention of the Hon'ble Tribunal is drawn to the provisions of section 13(3) that makes it abundantly clear that for pressing into play the provisions of section 13 what is critical is to the trust must of made payments to persons mentioned in the section 13(3) of the Income Tax Act, 1961. 3. The Appellant submits that the provisions of section 13 provide exceptional circumstances under which section 11 or 12 shall not operate so as to exclude from the total income (certain amounts) of the previous year. Reading of the section 13 make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion that in the instant case no honorarium has been paid to e trustees. The reasoning accorded by the Ld. Commissioner are legally flawed due to the following reasons: a. The provision of section 13 can be pressed into play only during the assessment of income to ascertain whether the said honorarium can form part of application of income or not. b. As there was no honorarium paid there was no contravention at all. 8. The Founder of the Trust Smt. Sangeetha has been working very hard and has dedicated her life for the welfare of animal and environment. This rejection of the application without valid reason is causing extraordinary hardship. Donations from public is the source of resources to run the operations. If the impugned order is up-held it will jeopardize the both the legal and the social intent/objectivity. 10. Along with detailed point by point reply and all the documents in support of application were filed' at the CIT (Exemption), KOCHI office on 29th Jan 2024 during the personal hearing. 11. The personal hearing was conducted by ITO (Exemption) KOCHI. Following objection was raised during the personal hearing. "The Applicant trust is having provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the eligibility of registration filed in the form IOAB. Even if it is assumed that this provision can pressed into play we re-iterate that no salary has been paid to any trustee." 3.4 The reply of the assessee was not accepted by the ld. CIT (Exemption)on the ground that when the said clause is in the trust deed of the assessee, which is in violation of section 13(3) of the Act, regardless of whether any payment in honorarium or salary is made to specified persons, the assessee is ineligible for registration u/s 12A of the Act. 3.5 In view of the above, the application in Form 10AB filed u/s. 12A(1)(ac)(iii) of the Act by the assessee was rejected and the provisional approval u/s 12A in Form in 10AC was also cancelled by the ld. CIT (Exemption). 4. Aggrieved by the order of ld. CIT(E), Kochi the assessee has filed the present appeal before this Tribunal. 5. Before us, ld. A.R. of the assessee vehemently submitted that the order passed by ld. CIT(E) suffers from incurable defects as it is passed by violating the principles of natural justice as no personal hearing was granted. Further, ld. A.R. of the assessee submitted that the ld. CIT(E) erred in law in rejecting the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration. 7.2 In the present case, the ld. CIT(E) found in the trust deed that under the head "Powers of Trustees" there exist clause regarding payment of honorarium or salary to the trustee against the services or involvement which in his opinion is in violation of section 13(3) of the Act. The CIT(E) is of the view that the assessee is ineligible for registration u/s 12A of the Act regardless of whether any payment of honorarium or salary is made to the specified persons or not. We are of the considered view that mere fact that the trust deed is having clause under the head "Powers of the Trustees" to receive honorarium or salary against the services or involvement by the trustee does not render the trust non-genuine or its activity becomes ineligible for registration u/s 12AB of the Act. Further, as rightly contended by the ld. A.R. of the assessee, as per provisions contained in section 13(2)(c) of the Act, if any amount is actually paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the Board members or interested functionaries. Section 13(1)(c) does not prohibit payment of remuneration; it gets attracted if any benefit is provided to interested persons. If the functionary is a salaried employee under an employment contract and therefore, is being paid salary which is a contractual obligation on the part of the Trust then such remuneration is permissible. There has to be a reason or cause of action to infer and conclude that any benefit was provided to the functionary. A benefit implies payment of anything which is not legally due to a person, therefore, the salaries paid cannot be treated as a benefit. It may also be noted that payment of salary per se is not a benefit. To establish that some benefit was passed undersection 13(1)(c) of the Act, it will be incumbent on the AO to have reasons to believe that the remuneration were legally not due to the employees/functionaries. Once the legal eligibility of the trustees/board members to receive salary as full time employee is not disputed, then the only option available is to see the reasonableness of the salaries under section 13(2)(c) of the Act. Therefore, we agree with the contention of the ld. A.R. o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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