Itxa/782/2016 Of The Commissiosner Of Income Tax (Exemptions) v. Sri Balaji Society

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 762 OF 2016WITH INCOME TAX APPEAL NO. 782 OF 2016 The Commissioner of Income Tax, (Exemption), Pune v/s. Sri. Balaji Society .. Appellant .. Respondent Mr. Suresh Kumar for the appellant Mr. Jehangir Mistry a/w Mr. Subhash Jadhav, Mr. Rupesh Geete andMr. Shradha Achliya I/b Parinam Law Associates for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 11[th] DECEMBER, 2018. 1.These appeals involve the same assessee and identical questionsof facts and law. In fact, they arise out of a common impugnedjudgment of Income Tax Appellate Tribunal ("the Tribunal" for short)dated 18.2.2015. These appeals are filed by the Revenue. 2.Following questions have been presented for our consideration :- “(i)Whether the Tribunal was correct in law by holding thatthe provision of section 13(1)(c) and 13(2)(c) of the I.T. Actwere not attracted in this case despite the fact that payments were made on account of advertisement to prohibited persons? (ii)Whether the Tribunal was right in holding that theassessee was allowed to claim exemption u/s 11 of the act despitethe fact that the payments were made to prohibited persons asdefined u/s 13(1)(c) and 13(2)(c) of the I.T. Act? 3.The respondent assessee is a charitable trust and enjoys theregistration under Section 12AA of the Income Tax Act, 1961 ("the Act"for short). During the Assessment Years 2008-09 and 2009-10, theAssessing Officer noticed that the assessee had incurred expenditure,some of which was paid to one M/s. Sri Balaji Creativites (“SBC” forshort) towards advertisements in various magazines and souvenirs.The Assessing Officer noticed that said SBC was a partnership firmconsisting of three partners who happened to be trustees of therespondent assessee trust. The Assessing Officer was of the opinionthat the firm i.e. SBC was a firm covered under Section 13(3)(e) of theAct visa-a-vis Trust. The Assessing Officer thereafter carried out theanalysis of the expenditure in connection with the advertisements witha special focus on the payments made to the said SBC. He denied thebenefit under Section 11 of the Act relying upon the provisions ofSection 13(2)(c) of the Act. 4.The assessee carried the matter in appeals. The CIT(A) examinedthe material on record at length and came to the conclusion that theAssessing Officer had incorrectly invoked the said provision in makingthe dis-allowance. He was of the opinion that the payments were notmade in excess of what may be reasonably paid for the services inquestion. The Revenue challenged the decision of the CIT(A) before theTribunal. Tribunal by the impugned judgment dismissed the Revenue'sappeal upon which the present appeals have been filed. 5.We have heard learned Counsel for the parties and perused thematerial on record. Clause (c) of sub-section 2 of Section 13 of the Actcan be invoked, if any amount is paid by way of salary, allowance orotherwise to any person referred to in sub-section 3 out of resources ofthe Trust for services rendered to the Trust and the amount so paid is inexcess of what may be reasonably paid for such services. Thus,essential requirement for invoking the said provision is that the amountpaid was in excess of what may be reasonably paid for the services. Inthe present case, the CIT(A) and the Tribunal have elaboratelyexamined the accounts of the assessee, the payments made to theSBC, the payments made to other agencies for similar work, comparative rates of payments and came to the conclusion that noexcess payment was made to the related person. Essentially, this is apure question of fact. Two authorities concurrently held in favour ofthe assessee. No question of law arises. 6.The tax appeals are dismissed. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)