2025 (5) TMI 1311

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....s erred in law and facts in deleting addition of Rs. 5,95,71,306/- without appreciating the provisions of 1 section 13(1)(c), which clearly states that exemption u/s 11 and 12 cannot not be allowed to the assessee if there is any violation under the said provisions of section 13(1)(c). 2. The Ld. CIT(A) has erred in law and facts on relying on the decision of Hon'ble Gujrat High Court in the case of CIT vs. Bholaram Education Society reported in 101 taxmann.com 508, wherein the Hon'ble High Court have held that rent paid to trustees for using land and building was not excessive consideration the fair market value of the property, exemption cannot be denied. Whereas in the instant case, assessee paid salary/rumination to Mrs....

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....able income. In the ROI, the assessee claimed exemption under Section 11 of the Act for eligible amount and refund of credit of tax deducted/collected at source aggregating to Rs. 1,97,370/-. The return was selected for limited scrutiny assessment and statutory notices were issued and served upon the assessee. 4. Thereafter, assessment order was passed by the Assessing Officer wherein, the Assessing Officer denied the exemption claimed by the assessee under Section 11 of the Act and made the additions totaling to Rs. 6,22,62,017/- by invoking the provisions of Section 13(1)(c)(ii) read with Section 13(2)(c) by stating that the remuneration paid to Mrs. Renuka Gupta, a specified person, was unreasonable and excessive in the facts of the p....

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....nd reasonableness of the salary payment. Hence, the action of Assessing Officer to deny the exemption u/s 11 of the Act by invoking provisions of Section 13(1)(c)(ii) read with Section 13(2)(c) is incorrect. 10. We have heard the rival submissions and have perused the relevant material on record. We find that the assessee has relied upon the decision of Hon'ble Apex Court in the case of CIT (Exemptions) vs Bholaram Educational Society [2019] 101 taxmann.com 193 (SC), wherein it was held that where rent paid by assessee-trust to a trustee for using land and building was not found to be excessive, the exemption could not be denied to assessee under Section 11 by invoking provisions of Section 13(1)(c). 11. In the decision of Hon&#39....

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....is paid by way of salary, allowance or otherwise.. in excess of what may be reasonably paid for such services" Thus, if the amount paid for services is such as is reasonably payable for such service, the same cannot be construed as applied for the benefit of a prohibited person notwithstanding that it is paid to such a person. Consequently, such payment would not fall within the exception of clause (c) of sub-Section (1) of Section 13 of the Act. 23. The observations made by this Court in Director of Income Tax (Exemption) v. Charanjiv Charitable Trust (supra) must be read in the context of the facts of that case. 24. In view of the above the questions of laws as noted in paragraph no.3 of the order is answered in favour o....