Mere payment of remuneration to trustees not attract section 13(1)(d) unless excessive or unreasonable

Mere payment of remuneration to trustees not attract section 13(1)(d) of Income Tax Act unless it is excessive or unreasonable as compared to services rendered

ABCAUS Case Law Citation:
ABCAUS 2558 (2018) (10) ITAT

Important Case Laws Cited/relied upon by the parties:
CIT vs. Kamla Town Trust, 279 ITR 089 (All)

The appellant assessee was a a charitable trust registered under section 12A of the Income Tax Act, 1961 (the Act).

The trust had filed an appeal alleging that the CIT(A) erred in confirming the order of the Assessing Officer in not allowing exemption u/s 11 & 12 of the Act on the ground that the assessee violated inter alia the provisions of section 13(1)(d) of the Act on account of payment of remuneration to the Secretary and President of the assessee society.

The Tribunal opined that a bare perusal of provisions of section 13(1)(d) of the Act show that to attract these provisions, it is not enough that remuneration has been paid to trustees but it has to be also shown that the remuneration paid is excessive or unreasonable as compared to the services rendered by those persons.

It was observed that nowhere the Assessing Officer had even alleged that the remuneration paid to trustees were excessive or unreasonable. The AO proceeded on the assumption that section 13(1)(d) of the Act is attracted merely on making of payment of remuneration to the trustees whereas the legal position is not such.

The Tribunal found that there was no material brought by the revenue to show that the remuneration paid to the four persons in question were excessive or unreasonable having regard to the services rendered by them.

In view of the above, the Tribunal opined that the allegation of the Assessing Officer that there was violation of provisions of section 13(1)(d) was unsustainable.

Accordingly, the Tribunal set aside the orders of lower authorities with direction to the Assessing Officer to allow exemption u/s 11 & 12 of the Act to the assessee as per law.

Download Full Judgment Click Here >>