TaxTMI 
TaxTMI 
2012 (10) TMI 254
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....Rs.12,47,450/- on account of disallowance of honorarium even though the assessee violates the provisions of section 11(5) of the Income Tax Act. 4. Whether on the facts and in the law of the case the CIT(Appeals) has erred in deleting the addition of Rs.10,00,000/- on account of donations treated as non business expenses holding that the assessee is entitled to exemption u/s. 11 of the Income Tax Act even though the assessee violates the provision of section 13(1)(c)/2(c) of the Income Tax Act." 2. We have heard the ld. Representatives of both the parties, perused the findings of the authorities below and considered the material available on record. 3. The brief facts of the case are that the assessee has filed return of income in form No. ITR-7 on 31.10.2007, declaring Nil income by claiming exemption u/s. 11 of the IT Act. The assessee-society is registered u/s. 12AA of the IT Act. The assessee has enclosed Form No. 10B as per Rule 17-B alongwith annexure regarding application of its income. During the year, the assessee has shown receipt of Rs.10,32,51,702/- out of which Rs.9,15,40,595/- have been utilized which comes to 88.6% of the total gross receipts. The surplus of....
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....In appeal before the ld. CIT(A), the ld. Counsel for the assessee submitted as under:- "Submission on Ground no.2" It is submitted that the assessing officer without any supporting material in a subjective manner and on his imagination held that the annual honorarium paid @ 2,40,000/- or 2,60,000/- or 2,54,900/- to certain office bearer were excessive looking to the age, qualification, experience, expertise & services, although he had not raised any query regarding the age, qualification, experience and expertise - The A.O. had only asked to file the details and reasonability about the services rendered and honorarium paid, which were duly reported to him vide letter dated 16.11.2009 as under:- There was no direct or indirect benefit derived by any person of precluded class, the payment made to all the persons is fully commensurate to the services rendered by them, the details of services rendered and the honorarium paid are detailed as under: Name of the person (office bearer) Duties fulfilled Honorarium paid during the year. Shri Lokendre Singh Dhakre He was holding treasurer post in the society and in the institutions run by them, he involved on day to da....
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....by the society and looking after the office administration work and govt. liaison work at Bhopal Rs. 260000/- Smt. Pratibha Chouksey She involved on day to day working of the institutions run by the society and looking after the office administration work and govt. liaison work at Bhopal Rs. 254900/- Total Honorarium paid to office bearers Rs. 2494900/- The same amount of honorarium was also paid to the above person in the earlier assessment years & the Department has accepted the same. It is further submitted that the above persons are deeply involved in carrying out the functions for the development and efficient management of the institutions run by the society, they are all the time in the campus or contacting various agencies for adding new courses, getting new affiliations for academics and fulfilling the prescribed standards for continuation of the courses, which are affiliated to various educational, apex and nodal bodies/statutory bodies of the state and central government. If these duties are given to some experts them they would charge much more remuneration than what we have paid. The few examples of experts services are detailed as under:....
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.... AO has not examined the past history of the case nor examined any comparable cases of educational institutions paying remuneration to office bearer deeply involved in administrative, management, financial, monitoring functions etc. as held in the following cases. 1. RMP Perianna Pillai & Co. V/s. CIT 42 ITR 370(Mad) In the past the Assessing officer have allowed honorarium vide orders passed u/s. 143(3) as under: Assessment year Order dated 2000-2001 28.03.2003 2001-2002 10.03.2004 2003-2004 14.03.2006 The copies of relevant assessment orders are annexed as Annexure-4 to this submission. And therefore u/s 143(1), the entire honorarium has been allowed and the AO did not consider it expedient or necessary to verify the same. The AO has also not specified as in respect of which office bearer the honorarium is considered as excessive or unreasonable. The A.O. has not placed himself in the position & place of the assessee and in a subjective manner & on conjunctive and surmise held that honorarium paid is excessive." 4.2 The ld. CIT(A), considering the explanation of the assessee and the material on record set aside the order of the AO rejecti....
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....rer) Age & Qualification Honorarium paid during A.Y. 2007-08 (current year) Honorarium paid during A.Y. 2006-07 Honorarium paid during A.Y. 2005-06 Honorarium paid during A.Y. 2004-05 Honorarium paid during A.Y. 2003-04 Sh. Lokendre Singh Dhakre 48 yrs. & Bachelor of Art Rs. 240000/- Rs. 200000/- Rs. 120000/- Rs. 120000/- Rs. 120000/- Sh. Narendra Singh Dhakre 40 yrs. & Bachelor of Science Rs. 240000/- Rs. 200000/ Rs. 120000/ Rs. 120000/ Rs. 120000/ Sh. Shailendra Singh Dhakre 29 yrs. & Bachelor in Engineering & Master in Business administration Rs. 240000/ Rs. 200000/ Rs. 120000/ Rs. 120000/ Rs. 120000/ Smt. Kamlesh Chauhan 45 yrs. & Master of Art Rs. 240000/ Rs. 200000/ Rs. 120000/ Rs. 120000/ Rs. 120000/ Smt. Shanti Devi 65 yrs. & High School Rs. 240000/ Rs. 200000/ Rs. 120000/ Rs. 120000/ Rs. 120000/ Sh. Ashish Jaiswal 40 yrs. & Bachelor of Commerce Rs. 260000/ Rs. 270000/- Rs. 120000/ Rs. 120000/ Rs. 120000/ Sh. Anupam Chouksey 26 yrs. & Bachelor in Engineering & Master in Engineering Rs. 260000/ Rs. 270000/ Rs. 120000/ ....
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....03.2004 2003-2004 1794167/- 10685763.00 14.03.2006 2007-2008 2494900/- 42084208.00 21.12.2009 There is no change in the facts of the appellant's case from earlier years, when similar honorarium paid to the same office bearers has been accepted by the A.O. Though the principle of res-judicata is not applicable in case of income tax proceedings, however, at the same time a fundamental aspect of a fact permeating through different years which has been found, acknowledged and sustained cannot be allowed to be changed in subsequent year without any adverse evidence on record. AO has also failed to specify the reasonable honorarium payable to the office bearers on the basis of services rendered by them whereas the appellant has shown that for similar services payment at much higher amount is being made to other faculties and administrators involved. In view of facts above, AO is not found justified in considering the amount of honorarium paid to the office bearers of the appellant, society excessive and undue on the basis of which exemption claimed u/s 11 has been denied to it. Similar is the position regarding disallowance of 50% of honorarium in computing ....
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....of agreement on clearance of the amount and at the attainment of the objective for which loan was granted i.e. acquiring the land/property for the extension of the institution run by the society." The grant of loans in question were approved by the General body meeting at the time of approval of the financial accounts of the relevant year i.e. F.Y. 2006- 07. The copies of relevant documents of the loans are enclosed as Annexure-5 to this submission. The same were also submitted as required before the assessing officer during assessment proceedings. These advances were made in pursuance of enforceable agreements & there was no violation whatsoever of section 13 of the I.T. Act. Full facts with supporting documents as required by the I.T.O. were furnished before the ITO. However the ITO rejected the same without judiciously considering the explanations, and in a summary manner & without any material contradicting our submission summarily held that this is an after-thought and a cooked up story. It is further submitted that the members concerned have already repaid the interest and part of principal sum during current financial year 2009- 10 and the relevant copies of loan accounts....
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....hout adequate security as vide motorized declaration dated 02.02.2007 Shri Lokendre Singh Dhakre has deposited title deeds relating to his properties measuring 17 hectares at District-Guna in respect of loan of Rs. 28,00,000/- in terms of agreement. Similarly in respect of loan of Rs. 30,00,000/- title deeds have again been deposited vide declaration dated 03.03.2004. In its resolution the appellant's society has authorized its office bearers to purchase/sell property for furtherance of its objects of running of educational institutions. The said loans/advances have been given in respect of said activities. Also the entire amount has not been advanced interest free since as for its books of accounts for subsequent year i.e. 2009-10 interest on loan has been paid at Rs. 2,79,850/- in case of Shri Shivendra Singh and Rs. 9,79,200/- in case of Shri N.S. Dhakre. Further, AO in his remand report dated 02.03.2011 has also not made any adverse comment regarding such loans but has treated them to be disallowable. 5.3 Further, provisions of section 11(5) are not found applicable in case of other loans/advances to H.K. Educational society, Rishi Raj Memorial Society and Samta Lok Sansthan....
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....missions and the material on record and do not find any justification to interfere with the order of the ld. CIT(A) in deleting the additions. The AO has nowhere doubted the payment of honorarium to the office bearers of the society for bona fide services rendered by them. The honorariums have been paid in earlier year also and have been accepted by the Revenue department in the proceedings u/s. 143(3) of the IT Act. All the amounts have been made for wholly and exclusively for the purpose and benefit of assessee society. All the persons have rendered actual services to the assessee and even in the statement of Shri Narendra Singh, he has explained the details of the services rendered by him against the payment. There is only marginal increase in the case of some of the officer bearers, which have been duly approved by the resolution of the society. The details are noted above. The ld. CIT(A) also found that the total number of students in the educational institution run by the assessee have increased. Therefore, the increase in the honorarium was justified as compared to the earlier years. The ld. CIT(A), thus, rightly found that there were no violation of provisions of exempti....
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..../- on account of donation as non-business expenses. The amount of Rs.11,37,483/- has been added in respect of write off of ITM loan/advance pertaining to the year 1997-98, which matter has ultimately been decided by the Civil Court with no recovery to the assessee-society. AO has treated the same as business expenses being in the nature of capital expenditure and accordingly disallowed the same. The assessee submitted before the ld. CIT(A) that bad debts in the books of account are required to be deducted while computing its normal income. As regards the donations made, it was submitted that the same was made to the trust having the similar objects and donations were given through banking channel and is allowable deduction. The ld. CIT(A) considering the explanation of the assessee deleted both the additions. His findings in paras 6.2 to 6.4 of the appellate order are reproduced as under : "6.2 Appellant submissions have been considered carefully. As mentioned in preceding paras the appellant is found entitled for exemption u/s 11. A.O. has added the capital expenditure mainly on the ground that the appellant is carrying on business activity and the said expenditure has been ....
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.... 9. The ld. DR relied upon the order of the AO and submitted that bad debt written off is not as per law and that the assessee should not have given donations to other societies. On the other hand, the ld. Counsel for the assessee reiterated the submissions made before the authorities below and referred to PB-41 to show that bad debt was written off in the books of account and referred to Board Circular No. 1132 and decision of Delhi High Court in the case of DIT(Exemption) vs. Acme International Society, 326 ITR 146 and DIT (Exemption) vs. Alarippu, 244 ITR 358. 10. We have considered the rival submissions and do not find any merit in both the grounds of appeal of the Revenue. The ld. CIT(A) granted exemption to the assessee u/s. 11 of the IT Act, which is confirmed by us also in the preceding paras. Since the assessee is doing educational activities and was considered as charitable institution, therefore, all the expenditure, revenue or capital, incurred in furtherance of its objectives, are application of income to the objects of the assessee-society. Therefore, the same expenditures are allowable deduction. The amount on account of bad debt was spent by the assessee as per....