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Facts
The Revenue appealed against the CIT(A)'s order deleting the disallowance of Rs. 21,50,000/- made by the AO out of salary paid to Shri Naseer Hussain, who was a relative of the trustee and the Addition Director of the assessee trust. The AO held that the salary was excessive and unreasonable, violating Section 13(1)(c) and 13(2)(c) of the Act.
Held
The Tribunal held that this was a repetitive issue where the CIT(A) had consistently found the remuneration paid to Mr. Nasser Hussain not to be excessive in preceding years. Considering the facts, Mr. Hussain's extensive experience, increased roles and responsibilities, and the consistent findings of the CIT(A), the Tribunal found no infirmity in the CIT(A)'s order.
Key Issues
Whether the salary paid to a specified person (son of trustee) was excessive and unreasonable, warranting disallowance and denial of exemption u/s 11 of the Income-tax Act, especially when similar issues were decided in favor of the assessee in preceding years.
Sections Cited
250, 13(3), 13(1)(c), 13(2)(c), 11, 2(15), 12A, 13(1)(e)(ii)
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Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI BIJAYANANDA PRUSETH
O R D E R PER BIJYANANDA PRUSETH, AM:
This appeal filed by the revenue emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the learned Commissioner of Income-Tax, National Faceless Appeal Centre [in short, ‘CIT(A)] dated 26.06.2025 for the assessment year (AY) 2020-21.
The grounds of appeal raised by the assessee are as under:
“I hereby direct the Income Tax Officer (E)-1(3), Mumbai to file an appeal before the Income Tax Appellate Tribunal, Mumbai against the order of the Lld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in the ITBA DIN & Order No. ITBA/NFAC/S/250/2025- 26/1077847931(1) dated 26.06.2025 in the case of M/s. Indian Rugby 2020-21 Indian Rugby Football Union
Footbal having PAN: AAATI1523Q for A.Y. 2020-21 on the following grounds:-
1. "On facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.21,50,000/- made by the Assessing Officer out of salary of Rs. 46,50,000/- paid to Shri Naseer Hussain, a specified person u/s 13(3) of the Act, without appreciating that the increase in salary was excessive, unreasonable and without any basis, thereby violating the provisions of section 13(1)(c) r.w.s. 13(2)(c) of the Act.
2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of salary paid to Shri Naseer Hussain, ignoring that Shri Naseer Hussain was initially a player and captain of the Rugby team and was subsequently made the coach of the team and Chief Executive Officer of the assessee trust without any transparent or competitive process, but merely on account of his relationship to the trustee, which clearly amounts to conferring undue benefit upon a specified person u/s 13(3), thereby attracting the provisions of section 13(1)(c) r.w.s. 13(2)(c) of the Income-tax Act, 1961.
3. "On facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the salary of Shri Naseer Hussain had increased at very unreasonable rate per annum by more than 4.8 times from FY 2011-12 (from Rs. 80,000/- p.m. to Rs. 3,87,500/- p.m.) without any commensurate justification or comparable increase in salaries of other coaches/players of the organization". 4. "On the facts and circumstances of the case and in law, the Ld CIT(A) has failed to appreciate that the salary paid to Shri Naseer Hussain amounting to Rs. 46,50,000/-was highly excessive and exorbitant in comparison to total salary paid to all other employees/ professionals/ Officers/Coaches which taken together amounted to Rs. 66,75,200/-only during the year thereby clearly indicating that excessive salary paid to Shri Naseer Hussain was actually an act of diversion of Trust funds for the benefit of a related person.
5. "On facts and circumstances of the case and in law, the Ld. CII(A) has erred in overlooking the ratio of judgement of the Hon'ble Supreme Court in the case of Radhasoami Satsang vs. CIT (193 ITR 321) wherein the Hon'ble apex Court has categorically held that although the doctrine of res judicata is not applicable in income-tax proceedings, consistency can be applied only where facts and circumstances remain identical in subsequent years unlike in the case of assessee, the facts are materially different inasmuch as the salary of Shri Naseer Hussain had increased at very unreasonable rate per annum by more than 4.8 times from FY 2011- 2 2020-21 Indian Rugby Football Union
12 (from Rs.80,000/-p.m. to Rs.3,87,500/-p.m.) without any resolution of the Governing Body" and guidelines issued by concerned ministry of Youth Affairs and Sports. 6. The appellant craves leave to add, amend, alter vary and/or withdraw any of the grounds of appeal.”
Facts of the case, in brief, are that the assessee has filed its return of income on 24.12.2020 of Rs. Nil. The case was selected for limited scrutiny. The main objects of the trust were to establish, promote, arrange, regulate, organize, encourage, support, assist, aid and/or control the game of rugby-football in India.
During the assessment proceedings, the AO found that the trust had given unreasonable high salary to Mr. Nasser Husain, relative of the trustee and now Addition Director of the trust. He was given salary of Rs.46,50,000/- and was also reimbursed expenses of Rs.3,36,313/-. The AO held that the assessee has violated provisions u/s 13 of the Act to attract the denial of exemptions u/s 11 of the Act.
The salary of Mr. Nasser Husain was highly excessive as compared to the salary to any other employees, for which the assessee had no satisfactory explanation. The AO allowed the salary of Rs.25,00,000/- and disallowed the remaining amount of Rs.21,50,000/-. The exemption claimed u/s 11 was also denied. The total income was assessed at Rs.2,18,98,107/-.
Aggrieved by the order of AO, the assessee filed appeal before the CIT(A).
Relying upon the order of CIT(A) in assessee’s own case of AY 2014-15, the CIT(A) held that the salary paid to Mr. Nasser Husain cannot be held to be excessive and 2020-21 Indian Rugby Football Union thus, there was no violation of provision of section 13(1)(c)(ii) rws 13(2)(c) of the Act. Accordingly, the CIT(A) set aside the disallowance made by the AO and allowed benefit/exemption u/s 11 of the Act.
Further aggrieved, the revenue has filed the present appeal before the ITAT. All the grounds are inter-related which basically emanate from the disallowance of Rs.21,50,000/- paid to Mr. Nasser Husain as salary and denial of exemption u/s 11 of the Act. The Ld. Sr. DR of the revenue supported the order of AO. He submitted that the AO has rightly disallowed salary of Rs.21,50,000/- out of total salary of Rs.46,50,000/- paid to Mr. Nasser Husain. He also submitted that the benefit of exemption u/s 11 of the Act was rightly denied to the assessee. The CIT(A) has erred in setting aside the order of the AO.
On the other hand, the Ld. AR of the assessee has supported the order of CIT(A). He has filed factual and legal paper-books and submitted that the assessee is the sole governing body for the sports of rugby in India and is recognized by Ministry of Youth Affairs and Sport, Government of India. The activity of the assessee, in line with its Memorandum of Association and Articles of Association, qualify as “charitable purpose” u/s 2(15) of the Act. The assessee has been granted registration u/s 12A of the Act which was renewed for AY 2022-23 to AY 2026-27. The revenue of the assessee comes from donations, contributions, interest and other incidental income. The assessee has employed its own 2020-21 Indian Rugby Football Union administrative staff as well as coaching staff for various events in India and abroad. Mr. Nasser Husain undertakes operations of its activities including development of rugby in India and also represents the India in various International Organizations. Mr. Nasser Husain has huge experience in the field of sports and related sports industry. He has been instrumental in securing long- term investments. Under his tutelage and leadership, the assessee earned revenue by way of grant and sponsorship of Rs.5 Cr. for AY2020-21 and also received grant of Rs.2Cr. from various sports bodies including International Rugby Board and Asian Ruby Football Union. The Ld. AR also submitted that the identical issue was taken up for scrutiny in AYs 2014-15, 2015-16, 2017-18 and 2018-19 wherein the AO made disallowance of salary paid to Mr. Nasser Husain treating it as excessive and unreasonable. However, the CIT(A) deleted the disallowance for AY 2014-15, 2017-18 and 2018-19. There is no change in the facts and circumstances of the case except the increase in salary paid to Mr. Nasser Husain.
The increase in salary is on account of increase in role and responsibilities of Mr. Husain as comparison to those in the earlier years. The increase was approved by the Managing Committee of the assessee. He also submitted that the AO grossly erred in comparing salary paid to Mr. Husain with salary paid to Mr. Sandeep Mosamkar without appreciating that the percentage increase in the salary of Mr. Mosamkar, in comparison to AY 2018-19 to 2020-21 was almost 75% whereas in 2020-21 Indian Rugby Football Union case of the assessee it was about 55% for the same period. The Ld. AR also submitted that the AO was not correct invoking the provisions of Section 13(1)(e)(ii) r.w.s 13(2)(c) for deny exemption u/s 11 of the Act. While Mr. Husain is admittedly being a specified person (being the son of the trustee) but the AO failed to consider and examine the activities undertaken by him while determining the reasonableness of payment of salary to Mr. Husain. The salary paid to him is justified because it is commensurate to the services rendered by him. In any case, there is no loss to the revenue because Mr. Husain has discharged his tax liability at the applicable rates on the salary earned by him. Without prejudice, he submitted that the total disallowance could at best be Rs,21,50,000/-, which should have been charged to tax and denial of the entire benefit/exemption u/s 11 in respect of total income was not justified. For this he relied on the decisions in case of CIT Vs. Fr. Muller’s Charitable Institutions, (2014) 44 taxmann.com 275 (Kar.) and CIT(E) Vs. Maharashtra Academy of Engineering and Educational Research, (2024) 161 taxmann.com (Bom).
We have heard both parties and perused the materials available on record.
We have also deliberated on the decisions relied upon by the Ld. AR. We find that this is a repetitive issue wherein the AO has disallowed a part of the salary by treating it as excessive and also denied exemption u/s 11 of the Act. The CIT(A) for AY 2014-15, in his appellate order u/s 250 of the Act, has elaborately discussed 2020-21 Indian Rugby Football Union the subject issue and held that the remuneration paid to Mr. Nasser Husain cannot be held to be excessive and accordingly, the same was not hit by provisions of Section 13(1)(c)(ii) rws 13(2)(c) of the Act. Similarly, in his order u/s 250 of the Act dated 15.07.2025 for AY 2017-18, the CIT(A) has held that the salary paid to Mr. Nasser Husain cannot be held to be excessive. Accordingly, he allowed the appeal of the assessee. In the appeal for AY 2018-19 also, the CIT(A) condoned the delay of 574 days in filing the appeal and allowed the appeal of the assessee.
The revenue has not filed appeal against the orders of CIT(A) before the Tribunal.
In the instant appeal, the CIT(A) has relied on the appellate orders of his predecessors and allowed the appeals. He also considered that the appellant was the CEO of Rugby India during the year under consideration. He has also considered the qualification, achievements and experience of Mr. Nasser Husain in the field of rugby-football. Therefore, the finding of the CIT(A) is based on proper appreciation of the facts and the consistent findings on the subject issue by the First Appellate Authorities for the preceding years. Mr. Nasser Husain has 25 years of experience in the field of sports and 15 years of work experience in the related sports industry. He was National Development Manager from 2008 to 2012, General Manager from 2012 to 2016 and Chief Executive Officer from 2016 to 2023. He has also been instrumental in securing long-term investments in the field of rugby-football in India. We also find that the increase in salary paid to Mr. 2020-21 Indian Rugby Football Union Husain is on account of increase of his roles and responsibilities in comparison to those in the earlier years. In view of these facts and the consistent finding of the CsIT(A) in the preceding years, we do not find any infirmity in the order of CIT(A), which we confirm. Accordingly, the grounds of appeal by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order is pronounced on 30.01.2026.