In the instant case, the assessee is a charitable trust registered u/s. 12AA of the Act. The assessee trust paid remuneration of Rs 4,80,000/- to Shri Anantbhai K. Shah who is a full time secretary and trustee of the assessee trust. The Assessing Officer disallowed the deduction claimed for above payment on the ground that the services rendered by Shri Anantbhai K. Shah were a duty of him as a trustee and the remuneration paid to him being violative of provisions of section 13(1)(c) and 13(3)(cc). The Assessing Officer also opined that remuneration of Rs 4,80,000/- paid to said Shri Anantbhai K. Shah cannot be treated as application towards objects of the trust and therefore he disallowed the entire amount of Rs 4,80,000/- and treated the same as taxable income in the hands of the assessee charitable trust.
Authorized Representative of the assessee contended that in view of the provisions of section 13(2)(c), no disallowance of remuneration paid to the trustee which is not more than the fair market value can be made, and therefore, the Revenue was not justified in making arbitrary disallowance. He also pointed out that similar remuneration was paid to the same trustee in earlier years also which was accepted and allowed by the Department.
The Authorized Representative of the assessee submitted that Shri Anantbhai K. Shah was qualified in B.A. (Sp.) degree in Sociology passed in 1962 from Gujarat University which was the only specialized degree in field of sociology. He has vast experience of over 45 years in the field of social working and developing institutions in this field. He has been awarded with the following awards for his achievements and his noble services in the field of helping handicapped people particularly children:
· Rajiv Gandhi Manav Seva Award – 1998
· Felicitated by former Prime Minister of India Late Shri Morarji Desai
· Nagardas Doshi Smarak Nidhi Trust Award – 1997
· Alpalwala Award – 2007
He has been declared as “Man of the Year” – 2006 by “The Week”. The assessee trust is engaged in various activities for relief and rehabilitation of disabled persons such as prevention and early intervention, polio eradication, corrective surgery polio/cataract/cleft lip congenital heart defect, research, training course, workshop for artificial limbs, aids, technology transfer, physio-occupational therapy centre, AT &T Technological park centre etc. The Authorized Representative of the assessee further submitted that Shri Anantbhai K. Shah was full time secretary in the assessee trust. He was engaged full time in the activities of the trust. Therefore, by no stretch of imagination it can be held that annual remuneration of Rs 4,80,000/- paid to said Shri Anantbhai K. Shah was more than the fair market value of his services rendered to the assessee trust.
We find that the revenue could not bring any material before us to controvert the submissions of the Authorized Representative of the assessee. We find that the total receipts of the assessee trust were to the tune of Rs 443.24 lakhs during the year under consideration and the activity undertaken by the assessee trust was to the tune of Rs 469.87 lakhs. Thus, the remuneration of Rs 4,80,000/- which is about 1% of the total value of activities of the trust for looking after which the same was paid, cannot be said to be excessive or unreasonable.
Further, we find that the Departmental Representative could not controvert the submissions of the assessee that the remuneration of Rs 4,80,000/- per year was paid to the said trustee by the trust in earlier years also for rendering similar services which were allowed by the Department since Assessment Year 2003-04. In the above circumstances, in absence of any material brought before us to show that the remuneration of Rs 4,80,000/- paid to Shri Anantbhai K. Shah for actually rendering services as full time secretary of the trust was in excess of the amount which can be reasonably paid for such services, we delete the disallowance of Rs 4,80,000/-. Thus, the grounds of appeal of the assessee are allowed.