TaxTMI 
TaxTMI 
2018 (8) TMI 748
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....ot reasonable. 3) On the facts and circumstances of the case and in law the Ld. CIT (Appeals) has erred in deleting the addition of surplus by ignoring the facts mentioned and certified by Auditor in part-II [Application or use of income or property for the benefit of persons referred to section 13(3)] of his audit report [Form 10B] dated 24.07.2013 that salary was paid to Specified Persons 4) Any other of law as deemed fit in the facts and circumstances of the case may also be framed before the Hon'ble Tribunal in the interest of justice." 2. The assessee is a trust duly registered U/s 12AA of the Act vide order dated 13.02.2004. The assessee filed its return of income on 17.07.2014 declaring total income of Rs. Nil after claiming exemption/deduction U/s 11 of the IT Act. During the scrutiny assessment the AO noted that the assessee has made payments of Rs. 58, 49, 909/- towards salaries to founder of trust, treasure of trust and the person specified U/s 13(3) of the IT Act. The details of the payments of salary to these persons are as under:- S. No. Name of person Amount. 1. Dr. Pankaj Garg 15, 00, 000/- 2. Smt. Vidushi Garg 22,....
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....ng the appellate proceeding the appellant has filed written submission as under and also argued the case on the same basis. "(i) From the reading of the assessment order, it is seen that the Id. AO did not appreciate the spirit of the provisions of section 13(1)(c) (ii) of the Act in right perspective. In fact, these provisions do not come into play in the present case. For the purpose, the Id. AO was required to bring the material on record to arrive at the findings that that such salary and interest payments made to the specified persons were in 'excess' and have to give categorical and specific finding that the property or income of the Trust was used directly or indirectly for the benefit of the specified person by way of making such excess payment of the salary and interest to the specified persons. Obviously such specific and direct findings are missing in the present case. The learned AO had made such observations on presumptions, surmises, and conjectures and without any basis. Thus these findings being unfounded are not legally maintainable. On reading of the assessment order, it is seen that the Id. AO had failed to bring any material on record to demonst....
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....and is for the services rendered by them, these provisions could not be invoked. For the purpose, following judicial citations (including the judicial citations of the honorable territorial ITAT Benches) are relied upon. The head-notes of these judgments are submitted in the chart 'Annexure-B' for your kind perusal and record. (a) ALIT vs Mahima Shiksha Samiti 93 DTR 33 (JPOTrib) (b)ITO vs. Yazur Shikha Samiti 1093 & 1094/JP/2016 (c) CIT vs Idicula Trust Society (2014) 104 DTR 0009 (P&H) (d)CIT vs Pariwar Sewa Sansthan (2002)254 ITR 268 (Del-HC) (e)ITO vs Noble Medical Foundation & Research Centre (2015) 44 CCH 418 (Pune) (Trib) (vi) Before parting with, it would also be relevant to point out that the Id. AO had incorrectly invoked the provisions of section 164(2) of the Act to tax the surplus at maximum marginal rate. These provisions come into play only where the share ratio of the beneficiaries is Unknown' that too in respect of the income held in violation of sec. 13. In the present case, all such conditions are missing so the provision of section 164(2) would not come into play. A detailed note having relevant j....
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....n 1. Dr. Pankaj Garg Founder Advisor BHMS 2. Smt. Vidhushi Garg Chairperson M.Sc (Microbiology) 3. Ms Hema Chaudhar Chief Executive Officer MBA, B Tech (EC) 4. Mr. Deepak Choudhary Pro-president MBA, B.com 5. Deepti Rustagi Registrar MBA, B.Com 6. Meghna Singhal Controller of Examination MBA, BA The assessee is a university and therefore, the appointment of these key posts can be made as per rules and qualification prescribed under the relevant statute or UGC guidelines as case may be. However, prima facie it appears that the positions held by these six persons in a university do not possess the requisite qualification and therefore, the payment made to these persons have to be examined in the context of Section 13(1)(c)(ii) of the Act and in the light of their qualification and actual service rendered by these persons. Section 13(1) stipulates that the benefit of Section 11 will not be available in respect of the income or part thereof if such income is used or applied directly or indirectly for the benefit of persons specified U/s 13(3) of the Act. Further subsection 13(2)(c) provides that if t....
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....pplied or used directly or indirectly for the benefit of any person referred to Section 13(3) of the Act. So far as the salaries or allowances paid to any person referred in Section 13(3) the same has to be considered in the context of service rendered by such persons and if the amount so paid is found in excess what may be reasonably paid for such services then, only to the extent of excess amount it will be deemed as applied or used for the benefit of such persons. Hence, the disallowance U/s 13(1) r.w.s. 13(2) and 13(3) of the Act is only in respect of the income which is applied for the benefit of the persons specified U/s 13(3) of the Act and not entire income of the assessee trust. Sub-section (2) of Section 13 prescribs the manner in case of payment of salary or allowance or otherwise to the specified persons for the services rendered and testing the same as per the para meter of reasonably paid for such services. It is apparent that the payment made to these persons clearly attracts the provisions of Sections 13(1) and 13(2) of the Act however, only to the extent of the payment which is found to be excess of what may be reasonably paid for such service. In case no services ....