M/S.avvai Village Welfare Society v. The Income Tax Officer,Exemptions Ward

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 10.09.2020 CORAM : THE HON'BLE MR.JUSTICE T.S.SIVAGNANAMANDTHE HON'BLE MRS.JUSTICE PUSHPA SATHYANARAYANA Judgment Reserved OnJudgment Pronounced On28.08.202010.09.2020 T.C.A.Nos.495 & 496 of 2019 M/s.Avvai Village Welfare Society,260, Public Office Road, Velipalayam,Nagapattinam-611 001.[PAN: ] .. Appellant inboth TCAs. -vs- The Income Tax Officer,Exemptions Ward,44, Williams Road, Cantonment,Thiruchirapalli. .. Respondentin both TCAs. Tax Case Appeals under Section 260A of the Income Tax Act,1961 against the common order dated 08.10.2018, made inI.T.A.No.09/Chny/2017 & I.T.A.No.36/Chny/2017 on the file of theIncome Tax Appellate Tribunal 'B' Bench, Chennai for theassessment year 2012-13. Appeal filed against the Commissioner of Income Tax(Appeals)-II, No.44, Williams Road, Contonment, Thiruchirapalli620 001 in ITA No.99/2015-16 CIT/(A-2)TRY dated 04.11.2016against the Assesstment order passed in PAN/GIR No.AAA73067H forthe assessment year 2012-2013 on the file of the Income TaxOfficer Exemptions Ward, Thiruchirapalli dated 31.03.2015. For Appellant:Mr.S.Sendamarai Kannan(In both TCAs)For Respondent:Mr.J.Narayanasamy,(In both TCAs)Senior Standing Counsel******* https://hcservices.ecourts.gov.in/hcservices/ T.S.Sivagnanam, J. These appeals, under Section 260A of the Income Tax Act,1961 (hereinafter referred to as “the Act”), have been filed bythe assessee, a Society registered under the provisions of theTamil Nadu Societies Registration Act, 1975 challenging thecommon order dated 08.10.2018, made in I.T.A.No.09/Chny/2017 &I.T.A.No.36/Chny/2017 on the file of the Income Tax AppellateTribunal 'B' Bench, Chennai (for brevity “the Tribunal”) for theassessment year 2012-13. 2.The appeals were admitted on 24.07.2019, on thefollowing substantial questions of law:- “T.C.A.No.495 of 2016 :- i. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in confirming the disallowance ofRs.4,47,400/- being 50% of the salary paid by theAppellant Society, out of the budgeted grantsreceived from two foreign NGOs to its Secretaryas excessive and unreasonable in terms of Section13(2)(c) of the Income Tax Act, 1961 withoutapplying their independent mind and providingcoherent and germane reasons for the same? andii. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in confirming the disallowance ofRs.4,47,400/- being 50% of the salary paid by theAppellant Society, out of the budget grantsreceived from two foreign NGOs to its Secretarywithout considering the fact that the saidpayment were made out of funds allocated by'donor agencies' and does not tantamount as'resources' of the Appellant Society underSection 13(2)(c) of the Act? T.C.A.No.496 of 2016 :-“i. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in remanding the file to the Commissionerof Income Tax (Appeals) with regard to the issueas to whether the appellant is eligible to claimexemption under Section 11 of the Act owing tothe purported micro finance activity withoutperusing the submissions and evidences placed onrecord? ii. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in remanding the file to the Commissionerof Income Tax (Appeals) the issue on whether theAppellant is eligible to claim exemption underSection 11 of the Act, with a specific directionto solely consider the decisions relied on by theDepartmental Representative? T.C.A.No.496 of 2016 :-“i. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in remanding the file to the Commissionerof Income Tax (Appeals) with regard to the issueas to whether the appellant is eligible to claimexemption under Section 11 of the Act owing tothe purported micro finance activity withoutperusing the submissions and evidences placed onrecord? ii. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in remanding the file to the Commissionerof Income Tax (Appeals) the issue on whether theAppellant is eligible to claim exemption underSection 11 of the Act, with a specific directionto solely consider the decisions relied on by theDepartmental Representative? iii. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in holding that the Appellant has violatedthe Foreign Contribution Regulation Rules, 2011for defraying more than 50% of the foreigncontribution towards administrative expenses,despite the fact that FCR Act exempts grantsreceived from European Community from the purviewof the FCR Act and even the FCRA Rules, 2011stipulates that the grant has to be spent for thepurpose for which it was given and when theappellant had utilized its foreign grants solelyfor its intended purposes? iv. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in holding that the appellant is inviolation of the Foreign Contribution RegulationRules, 2011 for defraying more than 50% of theforeign contribution towards administrativeexpenses despite the absence of any provision tothat effect? andv. Whether, on the facts and in thecircumstances of the case, the Tribunal was rightin law in placing reliance on the decision of theHon'ble Apex Court in the case of MaddiVenkatraman and Co. (P) Ltd. vs. CIT [reported in229 ITR 534] to the facts and circumstances ofthe Appellant case?” 3.We have elaborately heard Mr.S.Sendamarai Kannan,learned counsel appearing for the appellant/assessee – andMr.J.Narayanasamy, learned Senior Standing Counsel appearing forthe respondent/Revenue. 4.It is submitted by the learned counsel for the assesseethat insofar as the issue in T.C.A.No.495 of 2019 is concerned,the salary paid as per the budgeted grants received from twoforeign NGOs do not come under the mischief of Section 13(2)(c)of the Act, as the basic condition to invoke this provision isthat the salary should have been paid out of the 'resources' ofthe Society, whereas it was paid out of the resources of the twoforeign NGOs. It is submitted that even if it is held that thesalary was out of the 'resources' of the Society, the same is https://hcservices.ecourts.gov.in/hcservices/ not unreasonable and excessive, as when the two foreign NGOshave thought that these two amounts are reasonable for theservices rendered by the Secretary, the Assessing Officer cannotsubstitute his discretion with the discretion of the tworespectable International Organisations. 5.It is further submitted that “Reasonability” should beseen from the perspective of the donor and it cannot bedependent on the geographical location of the AppellantSociety's headquarters or its relief operations (which happensto be a Tier 3 town) or the Head Quarters of the AssessingOfficer. It is submitted that when the Income-tax Departmenthas collected tax on the salary income from the Secretary, itshould not disallow the very same salary from the payer Society,as that would tantamount to double taxation. 5.It is further submitted that “Reasonability” should beseen from the perspective of the donor and it cannot bedependent on the geographical location of the AppellantSociety's headquarters or its relief operations (which happensto be a Tier 3 town) or the Head Quarters of the AssessingOfficer. It is submitted that when the Income-tax Departmenthas collected tax on the salary income from the Secretary, itshould not disallow the very same salary from the payer Society,as that would tantamount to double taxation. 6.It is submitted that the first issue in T.C.A.No.496 of2019 is whether the appellant-Society comes under the last limbof sub-Section 2(15) of the Act as well as the two provisosthereunder. On a perusal of both the original as well as theexpanded objects of the Society, it is seen that the appellant-Society falls under the first limb of sub-Section 2(15) of theAct, viz., 'relief of the poor'. From the bare reading of thissub-Section as well as Circular No.11 of 2008, dated 19.12.2008issued by the Central Board of Direct Taxes (Board), it would beclear that the two provisos under Section 2(15) would beapplicable to the entities which come under the last limb, thatis, 'advancement of any other object of general public utility'.However, the Assessing Officer has ignored this basic test andheld that the appellant-Society comes under the mischief of thetwo provisos under Section 2(15) of the Act and deniedexemption. According to the Assessing Officer, the appellant-Society had done micro finance activities and the gross receiptsfrom such activities were more than Rs.25 lakhs and therefore,the appellant-Society attracts the provisions of Section 13(8)of the Act. 7.It is further submitted that the objects of theappellant-Society and its actual activities given in theassessment order, it ought to have been held that theappellant-Society comes under the first limb of sub-Section 2(15) viz., 'relief of the poor' and not under the last limb ofthis sub-Section viz., 'advancement of any other object ofgeneral public utility' so that the two provisos thereunder andsub-Section 13(8) of the Act have no application. Further, evenif it is held that the appellant-Society comes under the lastlimb of sub-Section 2(15) of the Act, it should be held that theappellant-Society has not carried on any activity in the natureof trade, commerce or business or any activity of rendering anyservice in relation to any trade, commerce or business, as the micro finance activity was done only by Namadhu Deepam and theappellant-Society has acted only as a post office and hence theappellant-Society has not carried out the micro financeactivities. Further, even if it is held that the appellant-Society has carried out micro finance activities, it should beheld that the total “cess or fee or any other consideration”received by the appellant-Society were less than Rs.25,00,000/-. 8.It is submitted that the second issue in T.C.A.No.496of 2019 is whether the appellant-Society has spent more than 50%of its grants for 'administrative expenses' violating theprovisions of Foreign Contributions Regulation Act (for brevity“FCR Act”) and even if it has violated any provisions of FCRAct, whether this violation has any bearing on the disallowanceof the salary paid to the appellant-Society. The appellant-Society had received two grants from two foreign NGOs during theprevious year relevant to the impugned assessment year. In theassessment order, at para 5.2, the Assessing Officer has heldthat in respect of the grant received from the EC, theappellant-Society has spent more than 50% toward its'administrative expenses' and therefore, the appellant-Societyhas violated the provisions of FCR Rules/Charter forAssociations. The CIT(A) agrees with the contention of theappellant-Society that the violation of another enactment doesnot have any implication in Income Tax law. 9.The Department had come on appeal before the Tribunalrelying on the decision of the Supreme Court in the case ofMaddi Venkatraman & Co. (P) Ltd. vs. CIT [(1998) 229 ITR 534].The appellant-Society filed a written submission, wherein it wassubmitted that FCR Rules do not say that more than 50% of thegrant received should not be spent on 'administrative expenses'.It was also submitted that the decision of the Supreme Court inthe case of Maddi Venkatraman & Co. (P) Ltd. (supra), does notapply to the facts of the appellant-Society. However, at paras6, 6.1. and 6.2., of the impugned order, the Tribunal has upheldthat order of the Assessing Officer that the appellant-Societyhad violated the FCR Rules. 10.A Miscellaneous Petition under Section 254(2) of theAct was filed before the Tribunal praying for rectification ofthis mistake. However, the Tribunal has refused to rectify thismistake. It is submitted that the entire grant was spent inaccordance with the donors' commands and that this act of theappellant-Society is in consonance with Section 8(1)(a) of FCRAct. The Tribunal/Assessing Officer has no jurisdiction todeclare that the appellant-Society has violated FCR Act when therelevant authority under that Act has not given any finding tothat effect. It is submitted that the grants received from ECdoes not come under the term 'foreign source' as defined inSection 2(h) of FCRA, in view of Notification No.S.O.1014(E) dated 13.11.2020 issued by the Ministry of Home Affairs. TheCIT(A) has rightly held that infringement of FCR Act, if any,would not have any effect on the computation of exempted incomeof the appellant-Society, as there is no equivalent provisionsin Section 11 to 13 as that of Explanation-I under Section 37(1)of the Act. The Tribunal has committed a grave error inagreeing with the Assessing Officer that the appellant-Societyhas violated the FCR Rules/Charter for Association, when thereis no such restriction in the said Rules/Charter. It issubmitted that all the funds received from the EuropeanCommunity were for 'administrative expenses' and they were spentaccordingly and therefore, Section 8(1)(b) of FCR Act does notapply. 11.The assessee, a Society formed during 1978, wasgranted registration under Section 12A(a) of the Act by theCommissioner of Income Tax, Tamil Nadu-V, Madras, by order dated15.03.1989. The assessee filed their return of income for theassessment year under consideration, viz., 2012-2013 on31.03.2013 showing 'Nil' total income, after claiming exemptionunder Section 11 of the Act. The return was processed underSection 143(1) of the Act. Subsequently, the case was selectedfor scrutiny and notice dated 23.09.2013, was issued underSection 143(2) of the Act. In response to such notice, Thiru.M.Krishnakumar, Secretary of the assessee-Society along with itsAuthorized Representative appeared before the Assessing Officerand had produced the documents called for. The assessee's casewas selected for scrutiny under CASS to examine the cashdeposits and profit and gains from business or profession incase of Trusts. The assessee represented that the majorreceipts received are by way of contribution grants receivedfrom FCRA such as Child Development Project, AVVAI GTZ Project,Care BOC, CCF Pondy, grants received from Non-FCRA Project suchas Nabard and also from interest from banks. The assesseeproduced relevant materials to show its activities and alsocertain information with regard to the activities done by themin the financial year 2011-12. The Assessing Officer completedthe assessment under Section 143(3) of the Act by order dated31.03.2015, denied the claim for exemption under Section 11 ofthe Act. 12.Aggrieved by such order, the assessee preferred appealbefore the Commissioner of Income Tax (Appeals)-2,Tiruchirappalli, contending that the objects of the Trust havebeen carried out without any deviation at any point of time andthat the Assessing Officer erroneously came to a conclusion thatthe assessee is indulging in commercial activity. Further, itwas contended that the Assessing Officer is erred in coming tothe conclusion that the administrative expenses incurred by themis in excess of the ceiling prescribed by the Foreign Contribution Regulation Rules, 2011 (for brevity “the FCRRules”). Further, the Assessing officer erred in making anaddition of Rs.9,95,000/- being the salary paid to the ProjectCo-ordinator and that the Assessing Officer erred in relying onmedia reports to depict the assessee-Society in bad light. 13.The CIT(A) by order dated 04.11.2016, partly allowedthe appeal. Against the said order, both the assessee andRevenue filed appeals before the Tribunal. The appeal filed bythe assessee was partly allowed and the appeal filed by theRevenue was partly allowed for statistical purposes. As againstthat portion of the order passed by the Tribunal, which wentagainst the assessee, the assessee is before us by way of theseappeals. 14.With regard to the micro credit programme done by theassessee, by forming a company under Section 25 of the CompaniesAct, 1956, the Tribunal held that the CIT(A) has not given anyfindings as to whether the assessee is eligible to claimexemption under Section 11 of the Act, since the assessee wascarrying on micro-finance activity. For such reason, theTribunal remanded the matter to the file of the CIT(A) foradjudication and pass a detailed speaking order keeping in mindthe decisions of the Tribunal as relied on by the learnedDepartmental Representative. 15.The next ground was regarding the issue of expenses,which the Assessing Officer found to be more than 50%. TheAssessing Officer pointed out that under GIZ Adapt CapProgramme, the administrative expenses claimed by the assesseeworks out to 95.40% of the total expenses of Rs.35,05,692/- and,the claim is in clear violation of Foreign ContributionRegulation Rules wherein, it has been stated that not more than50% of the foreign contribution shall be defrayed to meetadministrative expenses of the Association. The CIT(A) heldthat violation of FCR Rules, cannot have any implication underthe Income Tax Law. 16.The Revenue in its appeal before the Tribunal reliedon the decision of the Hon'ble Supreme Court in the case ofMaddi Venkatraman & Co. (P) Ltd. (supra), and submitted that theCIT(A) was wrong in holding that the violation committed by theassessee by spending 50% towards administrative expenses doesnot have any implication with Income Tax Law. The Tribunal,after taking note of the said decision, pointed out that theHon'ble Supreme Court has held that it is against the publicpolicy to allow the benefit of deduction under one statue of anyexpenditure incurred in violation of the provisions of anotherstatute and therefore, allowed the appeal filed by the Revenueto the said extend. 17.The next issue, which was considered by the Tribunal,was with regard to the rent paid by the assessee-Society to itsAccountant, Shri Ashok. The Assessing Officer held thatthere was no necessity to pay rent because, the Society hasalready its own building and, the programmes of the Society arebeing held in coastal areas and, the need to have a separaterented building to maintain an office does not arise.Notwithstanding the same, the Assessing Officer held that thepayment to the Accountant cannot be accepted as towards rent, asclaimed by the assessee. The said addition was sustained by theCIT(A). 17.The next issue, which was considered by the Tribunal,was with regard to the rent paid by the assessee-Society to itsAccountant, Shri Ashok. The Assessing Officer held thatthere was no necessity to pay rent because, the Society hasalready its own building and, the programmes of the Society arebeing held in coastal areas and, the need to have a separaterented building to maintain an office does not arise.Notwithstanding the same, the Assessing Officer held that thepayment to the Accountant cannot be accepted as towards rent, asclaimed by the assessee. The said addition was sustained by theCIT(A). 18.The Tribunal faulted the CIT(A) for sustaining theaddition by observing that without even calling for any detailsfrom the assessee, the CIT(A) could not have sustained theaddition. Further, it was held that provision made for rentalwas duly agreed by the concerned agency and out of the foreignfund, the expenditure was met and the rent was not paid from theassessee's fund. Accordingly, the assessee's appeal was allowedto that extent and the addition made and sustained by the CIT(A)was deleted. 19.It was argued by Mr.S.Sendamarai Kannan, learnedcounsel for the assessee that the assessee-Society would fallwithin the first limb of sub-Section 2(15) of the Act. On areading of the assessment order, it is seen that the AssessingOfficer has examined the facts and given his conclusion, whichwe quote below:- “3.4. On verification of the details filedby the assessee-Society, it is seen thatproviding micro credit and credit linkage tovarious SHGs is one of the main activities of thesociety. During the financial year 2011-12, theassessee trust had dealt with Rashtriya MahilaKosh in which the beneficiaries are identified bythe trust; the loans are distributed andcollected through another company calledM/s.Mamadhu Deepam Micro Finance and Services. In connection with acting as a BusinessCorrespondent of HDFC Bank, the assessee receivedService Charges from HDFC Rs.6,02,265/- and BajajRs.60,750/- totalling Rs.6,63,015/-. Thus, the assessee's gross receipts duringthe previous year 2011-12 relevant for theassessment year 2012-2013 exceeded Rs.25 Lakhs,the prescribed threshold limit for invoking theprovisions of Section 2(15) of the Act. trust initiates in Credit linking the SHG withthe local banks, facilitates micro credit loan tothe needy SHGs through HDFC Bank, Indian Bank,etc. 3.6. On perusal of the account statements,it is seen that the assessee-trust receivesincome in the form of interest and servicecharges on the micro credit facility rendered tothe various SHGs. It is seen that the interestreceived from SHGs is much higher compared to theinterest that is paid back to the financialinstitutions. Thus, the assessee's gross receipts duringthe previous year 2011-12 relevant for theassessment year 2012-2013 exceeded Rs.25 Lakhs,the prescribed threshold limit for invoking theprovisions of Section 2(15) of the Act. trust initiates in Credit linking the SHG withthe local banks, facilitates micro credit loan tothe needy SHGs through HDFC Bank, Indian Bank,etc. 3.6. On perusal of the account statements,it is seen that the assessee-trust receivesincome in the form of interest and servicecharges on the micro credit facility rendered tothe various SHGs. It is seen that the interestreceived from SHGs is much higher compared to theinterest that is paid back to the financialinstitutions. 3.7. ...............3.8. On perusal of the income andexpenditure statement, more particularly underthe head “Micro Credit Programme”, it is seenthat the assessee has created one more Section 25Company in the name of Namadhu Deepam MicroFinancial Services, through which the loansreceived are distributed and collected. Theassessee Avvai Village Welfare Society inaddition to the amount, receives services chargesamounting to Rs.6,63,015/-. Further, it isobserved that the Secretary of the societyShri.M.Krishnakumar is seen receiving a salaryfrom Namadhu Deepam Micro Financial Servicesamounting to Rs.1,25,000/-. In the said company,Namadhu Deepam Micro Financial Services, thesecretary of the association Shri. M.Krishnakumaris holding 7.24% of the shares. For the mereservice of facilitating loan to its members, theassessee is receiving service charges amountingto Rs.6,63,015/-. This clearly proves that theassessee is doing only commercial activity, i.e.,acting as business correspondent of HDFC Bankwhich is not the original object of the Society.3.9.Theassessee-Societyprovidesservices to the SHGs in the name of 'charity' bycollecting service charges and higher interestfrom them for managing its own expenses. Thoughthe assessee claims that it is offering servicesto the poor, there are no services provided tothem 'free of cost'. Hence, there is no elementof 'charity' and the activities of the society isto be considered as 'commercial' since theactivity of the trust has resulted in certainprofit. Thus, the activity of Micro Financing isanactivityinthenatureoftrade/commerce/business, it cannot be consideredas charitable. The proviso to Section 2(15) further clarifies that, even in the incomegenerated is ploughed back into its own microfinance activity or for any other activitystipulated in its objects, it cannot beconsidered charitable. Here in this case, thesurplus is applied to earn more income byploughing it back into micro finance activity.In other words, the surplus earned from MicroFinance activity cannot be exempt, no matter howthe surplus has been applied.” The above findings have been recorded upon verificationof the details filed by the assessee, accounts statement, incomeand expenditure statement, more particularly under the head“Micro Credit Programme” etc. 20.With regard to the administrative expenses of theassessee-Society, the Assessing Officer on perusal of thematerials placed before him, has recorded the following factualfindings:-“4.5. ......... even on merits also, theexpenditure on the activity undertaken by theSociety out of Foreign Contribution received fromGIZ is not allowable since the expenditureclaimed is not substantiated by any concreteevidence except self-made vouchers. ..........4.6. In the pilot initiatives, as statedabove, the assessee-Society was required to carryout certain specific activities like desilting ofirrigation canal etc. But the assessee was notable to substantiate with any evidence in theform of Vouchers/Bills for the Pilot Initiatives.........” 20.With regard to the administrative expenses of theassessee-Society, the Assessing Officer on perusal of thematerials placed before him, has recorded the following factualfindings:-“4.5. ......... even on merits also, theexpenditure on the activity undertaken by theSociety out of Foreign Contribution received fromGIZ is not allowable since the expenditureclaimed is not substantiated by any concreteevidence except self-made vouchers. ..........4.6. In the pilot initiatives, as statedabove, the assessee-Society was required to carryout certain specific activities like desilting ofirrigation canal etc. But the assessee was notable to substantiate with any evidence in theform of Vouchers/Bills for the Pilot Initiatives.........” 21.Further, with regard to the other factual aspects, thefollowing are the findings recorded by the Assessing Officer:-“5.2. As far as the GIZ Adapt Cap programme is concerned, the AdministrativeExpenses claimed by the assessee works out to95.40% of the total expenses of Rs.35,05,692/-.This is a clear violation of Foreign ContributionRegulation Rules, 2011, wherein it is definedthat no more than 50% of the foreign contributionshall be defrayed to meet administrative expensesof the Association.” 22.The total salary received by the CEO/Secretary of thesociety for the five years amount to Rs.32,79,400/-. During theprevious year 2011-12 relevant for the assessment year 2012-13,the Secretary of the Society, Shri. M.Krishnakumar received asalary of Rs.9,95,000/-. As can be seen, the Society has paid https://hcservices.ecourts.gov.in/hcservices/ 10% of the amount earmarked for Charitable Purposes to theSecretary of the Society as 'salary'. If salary received by theSecretary alone is 10%, the question 'where is charity' remainsto be answered. As per Section 5 of the FCR Rules, whatconstitutes 'Administrative Expenses' is defined. As per theCharter for Associations who have been granted Registration orprior permission under FCRA, it is clearly stated that “not more50% of the foreign contribution shall be defrayed to meetadministrative expenses of the Association”. In this case, thepoint is 10% of the amount earmarked for Charitable Purposes isgiven to Shri.M.Krishnakumar as salary, who is the Secretary ofthe Association. Therefore, the assessee-Society has paid itsSecretary salary in excess of what may be reasonably paid forsuch services as defined in Section 13(2)(c) of the Act. Inview of this, the assessee-Society is denied exemption underSection 11 and the sum Rs.9,95,000/- is brought to tax. 23.The returns of income filed by Shri Krishnakumar,Secretary of the assessee-Society and his spouse, Mrs. K.Akalyaare scanned and placed. It is observed that the trustees havebeen unduly benefitted viz., the business of Mrs. K.Akalya istailoring, the receipts of which are very meagre but perusal ofthe balance sheet shows assets disproportionate to the incomeearned. Similarly the income of Shri Krishnakumar is alsomainly salary receipts from the society, but the value of theproperties acquired by him on which the rental income isadmitted is also not explained. 24.1. By engaging in Micro Finance Activity, which isconsidered as commercial activity, as defined in Section 2(15),the provisions of Section 13(8) becomes operative and exemptionunder Section 11 is denied. 24.2. Denial of exemption under Section 11 due to theactivities not in accordance with the objects.24.3. Applicability of Section 13(2)(c) read with Section13(3)(c) of the Act in view of undue benefit enjoyed by theinterested person, hence charged at MMR. 25.The next issue was with regard to the salary paid tothe Secretary of the assessee-Society. The Assessing Officerdenied exemption for the entire amount of Rs.9,95,000/-. TheCIT(A) granted partial relief to the assessee by reducing theamount to Rs.4,47,500/-. 24.1. By engaging in Micro Finance Activity, which isconsidered as commercial activity, as defined in Section 2(15),the provisions of Section 13(8) becomes operative and exemptionunder Section 11 is denied. 24.2. Denial of exemption under Section 11 due to theactivities not in accordance with the objects.24.3. Applicability of Section 13(2)(c) read with Section13(3)(c) of the Act in view of undue benefit enjoyed by theinterested person, hence charged at MMR. 25.The next issue was with regard to the salary paid tothe Secretary of the assessee-Society. The Assessing Officerdenied exemption for the entire amount of Rs.9,95,000/-. TheCIT(A) granted partial relief to the assessee by reducing theamount to Rs.4,47,500/-. 26.We have perused the order passed by the CIT(A) and wefind that the CIT(A) has not assigned any reasons as to why only50% of the addition made by the Assessing Officer should besustained. It is not clear as to why the Revenue did not fileany appeal to sustain the entire addition. If according to theCIT(A), the Assessing Officer committed an error in making the https://hcservices.ecourts.gov.in/hcservices/ entire addition and the same requires to be interfered ormodified, then the CIT(A) is expected to assign reasons. Wefind that there is no such reason assigned by the CIT(A) in itsorder dated 04.11.2016 and therefore, the relief granted by theCIT(A) to the assessee is based on personal opinion of the CIT(A) and not supported by any facts or legal precedence.However, since the Revenue is not on appeal, we refrain frommaking any further observations in this regard. 27.The Tribunal decided the correctness of the decisionof the CIT(A) by which, it sustained only 50% of the addition tothe tune of Rs.4,47,500/-. The Tribunal pointed out that theallowance of 50% of salary to the Secretary granted by the CIT(A) was not disputed by the Department in their appeal beforethe Tribunal and therefore, found no reason to interfere withthe order passed by the Tribunal. 28.The endeavour of Mr.S.Sendamarai Kannan, learnedcounsel for the appellant was to substantiate his contentions bystating that the amount, which was paid to the Secretary assalary, was from the foreign funds and not the funds of theSociety. Furthermore, the assessee is a very reputedorganization and foreign contributions, which are remittedthrough banking channels, are from very reputed EuropeanOrganizations and those European Organizations, who givecontributions also specify the manner in which it has to beexpended and that the Secretary, who is the Project Co-ordinator is entitled to 2000 Euros every month and this alonewas paid as salary and looking from the angle of the foreigncontributor, 2000 Euros is not a very huge sum to be portrayed,as being disproportionate. In this regard, the learned counselhas referred to the documents filed in the additional typed setof papers and stated that these documents were filed before theTribunal, but the Tribunal did not consider the same. It is notin dispute that the documents now sought to be pressed intoservice were not placed before the Assessing Officer in the formand manner now it is sought to be presented. 29.We have perused the grounds of appeals filed beforethe CIT(A) and we find that no such contention was advancedbased upon the documents, which are now pressed into service.Much reliance was placed on the Grant Contract with the Europeancontributors and the conditions contained therein and contendedthat the payments made were in accordance with the terms of thecontract and there is no possibility for the assessee todeviate. The documents, which were not placed before the CIT(A)if are to be placed before the Tribunal, then leave of theTribunal should have been sought for. 30.The appeals before us are under Section 260A of the 29.We have perused the grounds of appeals filed beforethe CIT(A) and we find that no such contention was advancedbased upon the documents, which are now pressed into service.Much reliance was placed on the Grant Contract with the Europeancontributors and the conditions contained therein and contendedthat the payments made were in accordance with the terms of thecontract and there is no possibility for the assessee todeviate. The documents, which were not placed before the CIT(A)if are to be placed before the Tribunal, then leave of theTribunal should have been sought for. 30.The appeals before us are under Section 260A of the Act and we are to decide as to whether a substantial question oflaw arises for consideration in these appeals. We are not hereto exercise powers as a third appellate authority. We have setout the relevant facts in the preceding paragraphs todemonstrate that the entire matter, which culminated in theorder of Tribunal, is fully factual. On consideration of thefact situation, the Assessing Officer completed the assessmentdrawing certain conclusions, which were wholly adverse to theassessee-Society. The CIT(A) granted partial relief. Whateverrelief granted by the CIT(A) was affirmed by the Tribunal on re-examination of the facts, added to that one of the additionswith regard to the rent paid for the Accountant was deleted,certain issues have been remanded to the CIT(A) for freshdecision. Thus, we find, there is no question of law, much lesssubstantial question of law arises for consideration in theseappeals. 31.In the result, these appeals are dismissed holdingthat there are no substantial questions of law arising forconsideration. No costs. Sd/- Assistant Registrar//True copy//Sub Assistant Registrar To1. The Income Tax Appellate Tribunal 'B' Bench, Chennai. 2. The Commissioner of Income Tax (Appeals)-II, No.44, Williams Road, Contonment, Thiruchirapalli 620 001. 3. The Income Tax Officer Exemptions Ward, Thiruchirapalli. Pre-delivery Common Judgment made inT.C.A.Nos.495 & 496 of 2019 ks (co)rr ii (07/10/2020)