By K. B. Bhujle
Advocate
44. CIT vs. Sri Balaji Society; [2019] 101 taxmann.com 52
(Bom) Date of order: 11th December, 2018 A. Ys. 2008-09 and 2009-10 Sections 12AA and 13 of ITA, 1961
Charitable or religious trust – Denial of exemption –
Section 13(2)(c) – In order to invoke provisions of section 13(2)(c), it is
essential to prove that amount paid to person referred to in sub-section (3) of
section 13 is in excess of what may be reasonably paid for services rendered
The assessee was a charitable trust and enjoyed the registration u/s.
12AA. During relevant years, the assessee had incurred expenditure, some of
which was paid to one SBC towards advertisements in various magazines and
souvenirs. The Assessing Officer noticed that said SBC was a partnership firm
consisting of three partners who happened to be trustees of the assessee-trust.
The Assessing Officer opined that the firm i.e., SBC was a firm covered u/s.
13(3)(e) vis-a-vis trust. The Assessing Officer thereafter carried out the
analysis of the expenditure in connection with the advertisements with a
special focus on the payments made to the SBC. He thus denied the benefit u/s.
11 relying upon the provisions of section 13(2)(c).
The Commissioner (Appeals) allowed the appeal. He examined the material
on record at length and came to the conclusion that the Assessing Officer had
incorrectly invoked the said provision in making the disallowance. He was of
the opinion that the payments made by assessee were not in excess of what may
be reasonably paid for the services in question. The Tribunal confirmed order
passed by the Commissioner (Appeals).
On appeal by the Revenue, the Bombay High Court upheld the decision of
the Tribunal and held as under:
“i) Clause (c) of sub-section (2)
of section 13 can be invoked, if any amount is paid by way of salary, allowance
or otherwise to any person referred to in sub-section (3) out of resources of
the trust for services rendered to the trust and the amount so paid is in
excess of what may be reasonably paid for such services. Thus, essential
requirement for invoking the said provision is that the amount paid was in
excess of what may be reasonably paid for the services.
ii) In the present case, the
Commissioner (Appeals) and the Tribunal had elaborately examined the accounts
of the assessee, the payments made to the SBC, the payments made to other
agencies for similar work, comparative rates of payments and came to the
conclusion that no excess payment was made to the related person.
iii) Essentially, this is a pure
question of fact. No question of law arises.”
