Shanti Sri Social and Educational Foundation Vs ITO (Exemption) (ITAT Kolkata)
Appellant is a trust engaged in running a School. Out of the total Salary to teachers claimed 50% has been disallowed as excessive. Cit(A) reduced the disallowance to 25%. ITAT held that once 75% of the salary has been accepted on want of documentation, why not 100% . Entire expenditure under this head has been allowed.
The appeal before the Income Tax Appellate Tribunal (ITAT), Kolkata, arose from disallowance of salary expenditure claimed by a trust engaged in running a school.
The assessee, a registered society established on 20.09.2011, filed its return declaring income of ₹1,84,334 and claimed exemption under Section 10(23C)(iiiad) of the Income Tax Act, 1961. It reported gross receipts of ₹42,39,890 and salary expenditure of ₹37,81,800.
During scrutiny, the Assessing Officer (AO) observed that the salary expenditure was significantly high compared to the gross receipts and other institutions. The AO also noted that the assessee did not furnish complete details such as names, addresses, qualifications, and salary records of employees. On this basis, the AO disallowed 50% of the salary expenditure and assessed the income at ₹20,75,230.
On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] considered additional documents submitted by the assessee, including salary registers and qualification details of teachers. However, due to absence of complete particulars such as addresses and PAN details, the CIT(A) partly accepted the claim and restricted the disallowance to 25% of the total salary expenditure.
Before the ITAT, the assessee argued that sufficient details had been furnished and that many employees did not possess PAN due to income being below the taxable threshold. It was also contended that once 75% of the salary expenditure had been accepted by the authorities, the remaining disallowance was unjustified.
The Department, on the other hand, supported the orders of the lower authorities, stating that the expenditure was excessive and documentation was incomplete.
The ITAT examined the matter and noted that both the AO and CIT(A) had accepted 75% of the salary expenditure. It observed that the Revenue had not established that any part of the salary expenditure was excessive or had been returned to the assessee. The Tribunal also noted that the existence of employer-employee relationships was not in dispute and that relevant details such as qualifications and employee information had been furnished.
The Tribunal held that once a substantial portion (75%) of the salary expenditure had been accepted, there was no justification for sustaining the balance disallowance merely due to lack of complete documentation. Accordingly, it allowed the entire salary expenditure and deleted the disallowance.
In conclusion, the ITAT allowed the appeal of the assessee and directed that the disallowance of salary expenditure be deleted.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
