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TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 517
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....ef to the assessee as the assessee society has made payments to specified persons which are covered u/s 13(l)(c)(ii) r.w.s 13(2)(c) r.w.s 13(3) of the Income Tax Act." 3. The facts are that the assessee society is registered u/s 12AA of the Act, and is running a school named 'Delhi Public School' at Chandigarh. During the relevant year, the assessee had made payment of salary/honorarium to three specified persons u/s 13(3) of the Act, namely (i) Anup Soni, (ii) Sh. Mukesh Bansal (iii) Sh. Amit Bansal. The Assessing Officer noted that the amount paid to these three persons, totaling to Rs. 57,60,000/- was beyond the objects of the society and also the payment was unreasonable and excessive. The assessee claimed before the Assessing officer that the specified persons had not benefited from the contract, but they were qualified persons and the salary being paid to them was in accordance with the services provided by them. The Assessing Officer disallowed the amount paid to the specified persons by invoking the provision of section 13(1)(c) of the Act, and also denied the benefit of exemption u/s 11 and 12 of the Act. The Assessing Officer held as follows: "6. I have gone t....
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....sessee submitted that it did not have any proof of the expenses incurred by the members for the society. This buttresses the fact that the assessee has only tried to misinterpret the clauses of the Memorandum in order to justify the diversion of funds to its members and that there is no basis on which it can justify the salary/honorarium paid to the members beyond the scope of the Memorandum. 9. It is also noted that although Sh. Anup Soni, Amit Kumar Bansal and Mukesh Bansal are office bearers of the society, they are not regularly coming to school and they attend the meeting of the society only occasionally. This fact has already been verified earlier by the then inspector of the investigation wing, Sh. Joti Parkash, as well by the then inspector of circle 1 (exemptions), Chandigarh, Sh. Anurag Lakra as can be seen from the assessment order for the A.Y. 2010-11 dated 28.12.2017. The assessee too accepts this fact and has tried justifying it by stating that nowhere in CBSE norms it is written that they have to be present all the time in the school and have to maintain any attendance record of the trustees. The assessee further added that they have to travel a lot to Delhi. In t....
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.... with the DPS Society dates back to 1990 and she has also received State honour for her contribution in the field of education. It is also noted that a principal of a school is the person who has the greatest responsibility of ensuring that the educational standards are maintained as well as of looking after the administration of the institution. A principal's job is very demanding as it requires involvement in day to day functioning of the school. Given the large bag of experience of the principal and the great responsibility attached to the post, it is no way justified that the aforementioned three members of the society are paid Rs, 19,20,000/- each a s against the pay of the principal of the school which is Rs, 11,13,214/- for the year under consideration. 13. The assessee further .goes on to justify the salary by stating that it is only 4% of the receipts during the year under consideration. This argument is also not acceptable as the quantum of payment was not commensurate with the time and effort devoted to the assessee and the payment being made was unreasonable. There is nothing to justify what work was being done by the members. Also, the "memorandum does not allow....
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....of the Act. The assessee is providing special treatment to members and their relatives. The members are the persons managing the society and they have decided for themselves what benefits are to be extracted from the society for themselves and the family members by manipulating the meaning of the clause of the Memorandum. This is blatant misuse and manipulation of the society by its own members and such transactions are covered u/s 13(1)(c)(ii) r.w.s. 13(2)(c) r.w.s 13(3) of the Act. 4. Thus, the AO disallowed the salary/honorarium paid to Trustees, under Section 13(1)(c) of the Income Tax Act, read with Sections 13(3) and 164(2) thereof invoking the provisions of Section 40A(2)(b), holding such payment to be unreasonable. For this, the AO held that what was allowed as per the Memorandum of Association of the assessee Society was reimbursement of travel and other bonafide expenses, if they were incurred for attending meetings on behalf of the assessee or for engaging in other activities for the benefit of the assessee in order to ensure that the assessee's funds were used for the objects of the assessee; that by paying regular salary/honorarium, the funds of the assessee were....
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....so the payments made to the specified persons was reported by the Tax Auditor and thus said payment was not in dispute and no comparable case has been cited by the AO to substantiate that how and in what manner the payment made to the members of the society was excessive while invoking the provisions of Section 13(1)(c) of the Act. 15.5 In the present case also when the assessee society was availing the services of the members of the society and if they have not provided those services to assessee society, it would have engaged the person from outside to whom salary was required to be paid. Therefore, the disallowance made by the AO and sustained by the Ld. CIT(A) was not justified particularly when nothing is brought on record to substantiate that the salary paid to them was excessive. 15.7 In the present case also the-AO himself admitted that the specified persons were having the higher qualification and no comparable case was brought on record to substantiate that the salary / remuneration paid to them was excessive. Therefore, the disallowance made by the AO and sustained by the Ld. CIT(A) was not justified. 15.8 In the present case it is also noticed that the remunera....