Case Law Details
Manav Mangal Society Vs DCIT (ITAT Chandigarh)
Conclusion: Since the specified persons possessed the requisite qualifications and rendered the services, therefore, it cannot be held that payment of salary to the specified persons was unreasonable particularly when no comparable case was cited by AO. Therefore, the exemption could not be denied under section 13(1)(c).
Held: Assessee was registered as Society under the Society Registration Act and under section 12AA. Assessee filed the return of income declaring Nil income. Later on, the case was picked up for scrutiny under CASS. During the course of assessment proceedings, AO noted that assessee was providing some payments to its members against the services provided by them, which was not reasonable and was undue benefits for the members. He, therefore, denied the exemption under section 13(1)(c). Assessee submitted that salary paid had already been allowed vide order passed under section 143(3) therefore on account of consistency of the facts and circumstances being the same there could not be any deviation on account of principle of consistency. It was further stated that AO made the addition in respect of disallowance of salary though he proceeded with the fact that the salary was not commensurate with duties being performed and that up to the A.Y. 2012-13 the salary was allowed by the successive AO by way of orders under section 143(3). It was stated that even if there was violation of Section 13 then the relevant portion only was liable for addition not the entire surplus could be brought to tax. It was held that no material was brought on record to substantiate that how and in what manner, the salary paid to the specified persons considering their qualifications and the duty assigned to them was not reasonable since no comparable case was brought on record by the AO. In the present case, AO did not doubt the services rendered and qualifications of the specified persons, he disallowed the salary by observing that it was not reasonable, however, nothing was brought on record to suggest how and in what manner, it was not reasonable or was excessive. The specified persons possessed the requisite qualifications and rendered the services, therefore, it could not be held that payment of salary to the specified persons was unreasonable particularly when no comparable case was cited by AO.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
Cross appeals by the Assessee and the Department for the A.Y. 2010-11 and 2011-12 are directed against the common order dated 15/11/2019 while the departmental appeals for the A.Y. 2013-14 to 2016-17 in ITA Nos. 27 to 30/Chd/2020 are directed against the common order dated 09/10/2019 of the Ld. CIT(A)-1, Chandigarh.
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