ONE of the grounds in this appeal is in respect of the finding of the CIT(Appeals) that salary paid to Mrs. Sudha Tewari was excessive. It is mentioned that there was no material on record to come to such a finding and, therefore, the finding was a matter of inference only.
The assessee has furnished the bio-data of Mrs. Sudha Tewari. It is mentioned that she obtained Honours degree in Psychology from I.P. College and thereafter obtained post-graduation degree of MBA from Faculty of Management Studies, Delhi University, in the year 1972. She joined the assessee-society as an employee in the year 1981. She was made a member of the society and thereafter a member of the Governing Body in ex-officio capacity. She is a visiting lecturer for Indira Gandhi Open University, School of Management Studies and IIM, Ahemdabad. She also is a member of the Committee on National Commission on Population, Technical Expert Committee in the Ministry of Health, National Committee on Population and Health, CII, National Inspection & Monitoring Committee in Department of Family Welfare and Chairperson of CII Working Group on Population. She also visited Sudan as a member of Indian delegation as an economist. She is responsible for overall affairs of the assessee-society under the control of the Governing Body. She has contributed significantly to the functioning of the society with the result that it now has presence in 11 States and it is ranked as a national NGO. Its donations and grants have reached up to about Rs. 20 crore. The society was given award for best planning by FICCI. Its Agra project was visited by the Princess of Wales in 1997. The assessee-society has completed 25 years of its existence under her leadership.
It was further submitted that the salary paid to her was considered to be reasonable for and up to assessment year 1997-98. In the order for assessment year 1997-98, the Tribunal mentioned that admittedly the assessee was a charitable institution, duly registered u/s 12AA of the Act. In such a situation, the assessee is entitled to exemption under sections 11 and 12 unless the facts are otherwise so as to bring them within the ambit of section 13. The burden to prove that the case of the assessee is hit by the provision contained in section 13 lies on the revenue. It was further mentioned that the argument of the assessee was that the salary paid to her in previous years relevant to assessment years 1995-96 and 1996-97 was found to be reasonable by the Tribunal in order dated 29.9.2000. The appeal of the revenue on this ground was dismissed by the High Court on the ground that no substantial question of law arose from the order. Thus, the salary of Rs. 43,000/- per month with effect from 1.1.1996 was found to be reasonable considering her qualification, experience and services rendered to the assessee-society. Therefore, it was agitated that since the issue of reasonableness of the salary had become final, it cannot be agitated now. This argument was not accepted by the Tribunal. It was mentioned that a decision of the Tribunal is final when the facts are similar. However, where there is a change in facts, the matter has to be considered and decided again. It was further mentioned that there was an increase in salary from Rs. 43,000/-p.m. to Rs. 49,100/-p.m. with effect from 1.1.1997. In assessment year 1994-95, the AO had considered the increase in salary between 20% to 30% to be reasonable. Similar finding was given by the Tribunal in the order for assessment years 1995-96 and 1996-97. As against the aforesaid, the increase in salary in this year is 15%. The revenue has not brought any material on record that this increase is unreasonable except merely stating in the assessment as well as in the appellate order that the salary paid to her was excessive and it was not commensurate with the qualification, experience and services rendered. Since this finding was not based on any material fact or evidence, the same cannot be accepted. Thus, it was held that the salary paid to her appeared to be reasonable and, therefore, there was no violation of the provision contained in section 13(2)(c).
Incidentally, it may be mentioned that the grants-in-aid and contributions received by the assessee-society were also held to be income derived from property held under trust.
The case of the counsel was that looking to the qualifications of Mrs, Sudha Tewari and increase in the volume of activities and income of the assessee-society, the salary paid to her could not be said to be excessive. It was also his case that she is not a person specified under sections 13(1)(c). This matter admittedly has been decided against the assessee by the Tribunal in the order for assessment year 1998-99.
In reply, the DR referred to the discussion on page 5 of the assessment order, where it is mentioned that the total salary paid to Mrs. Sudha Tewari amounted to Rs.14,06,500/ – as compared to Rs.11,17,600/ – in assessment year 1998-99 and Rs.7,04,200/ – in assessment year 1997-98. She was paid an amount of Rs.2.80 lakh as ex-gratia. Such a payment was not made to any other employee or executive. The house rent allowance paid to her was also not comparable with such allowances paid to other executives. The payment does not correspond to the growth of the organization in the years under consideration.
The Tribunal observed,
The expenditure is by way of salary, allowance or otherwise, the same is paid to a prohibited person, who is in-charge of the functioning of the institution and, therefore, the test is rather restricted one and what is to be seen is whether the payment is in excess of what may be reasonably paid for her services. Therefore, the provisions occur in two different contexts and employ two different languages.
The intent is to ensure that the funds of the trust is not spent on prohibited persons, which have otherwise to be used for the benefit of public at large. The only case cited by the assessee, which appears to be relevant, is the decision in the case of Surat City Gymkhana in which it was laid down that it is for the revenue to prove that the payment was not reasonable in the context of the services rendered by the prohibited person. The AO found that there was an internal comparison available within the facts of the case of various years. The salary paid to her amounted to Rs.11,17,600/ – in assessment year 1998-99. As against this amount, she was paid an amount of Rs.14,06,500/ – in assessment year 1999-00. There was an increase of 25.85% as against increase in revenue by 19.46% and surplus by 14.23%. It may be interesting to examine similar figures for assessment year 1998-99. In that year, the increase in salary was 58.70% against increase in revenue by 21.26% and increase in surplus by 49.51%. The aforesaid increase of 58.70% was held to be excessive by the Tribunal in that year and it was mentioned that there was nothing on record to show that Mrs. Sudha Tewari rendered extraordinary service for which substantial increment was allowed to her in salary. It was further mentioned that nothing has been placed on behalf of the assessee in support of its claim. While the later part of the finding may not be in consonance with the decision of Hon’ble Gujarat High Court in the case of Surat City Gymkhana (supra), it is a matter of fact on record that the increase in salary was disproportionate to the increase in the revenue and surplus. Such is also the case for this year.
Her salary has been further increased disproportionately vis-a-vis the increase in the revenue and the surplus. This increase is over and above the increase for assessment year 1998-99, in which her salary was found to be excessive under the aforesaid provision. Therefore, it becomes clear that the AO had brought facts on record to establish that increase in salary in this year was excessive and, thus, the salary paid to her was also excessive compared to what could be reasonably paid for the services.
So the Tribunal held that the salary paid to her was excessive. Accordingly, the assessee’s appeal dismissed.
