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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER PER BENCH :
These three appeals by the assessee relate to the assessment years 2011-12, 2007-08 and 2008-09. Since common issue is raised in all these appeals, we, therefore, are proceeding to dispose them off by this consolidated order for the sake of convenience.
2 M/s. Shree Medical Foundation
A.Y. 2011-12 :
The only issue in this appeal is against confirmation of
disallowance of certain amounts paid to the persons specified in
section 13(3) of the Income-tax Act, 1961 (hereinafter also called
`the Act’).
Briefly stated, the facts of the case are that, the assessee is a
trust registered under Bombay Public Trust Act, which was granted
registration under the Income-tax Act vide order dated 17-01-1981.
Main object of the assessee trust is to give medical relief to the
patients requiring medical attention and rehabilitation. During the
year under consideration, the assessee declared gross receipts
amounting to Rs.4.11 crore, which included receipts from the
hospital to the tune of Rs.3.90 crore. On perusal of details of
payments, the Assessing Officer (AO) observed that the assessee
paid an honorarium of Rs.30 lakh to Dr. Shirish Prayag;
Rs.34,99,854/- to Dr. Aarti Prayag; and Rs.1,80,000/- to Mrs.
Usha Prayag. On being called upon to justify such payments, the
assessee stated that Dr. Shirish Prayag is Chief Medical Officer of
Prayag Hospital (Shree Medical Foundation) who is a qualified
MBBS and MD, practising since 1986. He set up a Medical ICU,
i.e. Shree Medical Foundation which is a first critical care unit in
3 M/s. Shree Medical Foundation
Pune city. Dr. Shirish Prayag was stated to have received number
of academic awards and honours, who also served as President and
Chairman of National and International Critical Care Associations.
As regards the payments made to Dr. Aarti Shirish Prayag
amounting to Rs.34,99,854/-, it was stated that she is a Chief
Consultant in Department of Pathology and Microbiology having
qualified MBBS and DCP from B.J. Medical College, Pune and
practising as Senior Pathologist for last 32 years. Assessee
submitted that she was paid @ Rs.50,000/- per month plus 25% of
IPD and OPD collections of Pathology laboratory. As regards the
payments made to Smt. Usha Prayag, it was stated that she was
looking after the entire administration of the hospital for which she
was paid a sum of Rs.15,000/- per month. The AO, after
considering the assessee’s justification of payments, came to
disallow a sum of Rs.12 lakhs from payments made to Dr. Shirish
Prayag; Rs.25,59,854/- from payments made to Dr. Aarti Prayag
and Rs.1,25,000/- from payments made to Smt. Usha Prayag. The
ld. CIT(A) sustained the additions, against which the assessee has
come up in appeal before the Tribunal.
We have heard both the sides and gone through the relevant
material on record. It is noticed that all the three persons to whom
4 M/s. Shree Medical Foundation
the assessee paid salary etc. are admittedly covered under sub-
section (3) of section 13. Controversy as to the characterization of
the amounts paid to the above three persons as the same being
salary or honorarium, was not pressed by the ld. AR in appeal
before the Tribunal. Section 11 provides exemption in respect of
income from property held for charitable and religious purposes.
Section 13 provides that section 11 shall not be applied in certain
cases, meaning thereby, that the exemption otherwise eligible will
not be allowed if the conditions as set out in section 13 namely, the
payments made to the persons specified u/s.13(3) are in
contravention of the provisions contained in other parts of section
Section 13(2) provides that exemption u/s.11 shall not be
allowed in respect of any income or property applied for the
benefit of persons referred to in sub-section 3). Certain situations
have been contemplated, which are set out through clauses (a) to
(h) of sub-section (2), in which the benefit of exemption will not be
allowed. Clause (c) of section 13(2), which is material for our
purpose, provides for not allowing exemption : `if any amount is
paid by way of salary, allowance or otherwise during the previous
year to any person referred to in sub-section (3) out of the
resources of the trust or institution for services rendered by that
5 M/s. Shree Medical Foundation
person to such trust or institution and the amount so paid is in
excess of what may be reasonably paid for such services’.
On going through the above provision, it becomes apparent
that if any amount is paid by way of any salary, allowance or
otherwise etc. to a person specified u/s.13(3), then no exemption
will be allowed in respect of “the amount so paid is in excess or
what may be reasonably paid for the services”. It, therefore,
transpires that exemption is to be denied for any payment made by
way of salary etc. paid to the persons referred in section 13(3) to
the extent it is excessive or unreasonable. Under these
circumstances, a question arises as to whether the payment made
by the assessee to the above referred three persons can be
construed as unreasonable?
Turning to the facts of the instant case, we find that the
assessee gave elaborate submissions justifying the reasonableness
of the amount paid to the persons specified u/s.13(3). We have set
out in detail the experience of Dr. Shirish Prayag and Dr. Aarti
Prayag. The AO has considered a part of the amount paid to Dr.
Shirish Prayag as reasonable and treated the entire amount paid to
Dr. Aarti Prayag and Smt. Usha Prayag as unreasonable. When we
consider the totality of the facts and circumstances of the case, it
6 M/s. Shree Medical Foundation
emerges that such payments are neither unreasonable nor
excessive. Here is a case in which Dr. Shirish Prayag is a qualified
MBBS, MD practising since 1986. His academic achievements
have been set out in the assessment order. When we consider the
amount of Rs.30 lakhs paid to him, namely, Rs.2,50,000/- per
month as salary, the same cannot be termed as excessive in the
backdrop of the hospital receipts of Rs.3.90 crore. The AO has
compared his remuneration with certain other part time doctors
visiting the assessee-trust on call, which is not a good comparison.
It is further relevant to note that the assessee was continuously
paying remuneration to Dr. Shirish Prayag. A chart of has been
placed on record, which shows that for the A.Y. 2007-08, assessee
paid a sum of Rs.18 lakhs to Dr. Shirish Prayag, that got allowed
by the AO. For the A.Y. 2008-09, he was again paid a sum of
Rs.18 lakhs which was also allowed by the AO. For the A.Y.
2010-11, he was paid a sum of Rs.24 lakhs. The AO in his
assessment made u/s.143(3), has allowed deduction of Rs.24 lakhs
paid to Dr. Shirish Prayag vide his order dated 28-12-2012, a copy
of which is available on page 92 onwards of the paper book. In
this shade of the matter, a reasonable increase of Rs.50,000/- per
month during the year under consideration, in our considered
7 M/s. Shree Medical Foundation
opinion, cannot be termed as unreasonable or excessive. We,
therefore, order to delete the addition to this extent.
Next is payment made to Dr. Aarti Prayag. We have noticed
above that she is a qualified MBBS and DCP from B.J. Medical
College, Pune and working as Senior Pathologist for last 32 years.
The remuneration paid to her during the year has been Rs.50,000/-
per month plus 25% of IPD and OPD collection of Pathology Lab.
It is pertinent to note that the assessee paid a sum of Rs.25,91,597/-
to Dr.Aarti Prayag during the previous year relevant to the A.Y.
2010-11. The AO vide his aforesaid assessment order has allowed
full deduction. When we consider the quantum of amount paid by
the assessee during the year vis-à-vis the amount paid and allowed
in the immediately preceding assessment year, the payment during
the year cannot be termed as unreasonable or excessive. Taking a
holistic view of the matter, we hold that the payment of Rs.34.99
lakhs made by the assessee to Dr. Aarti Prayag is reasonable and
does not call for any disallowance.
Last payment to Smt. Usha Prayag is amounting to
Rs.1,80,000/-, namely, Rs.15,000/- per month. She was looking
after the administration of the hospital since the inception of the
trust and was handling safe-keeping of cash, supervision of
8 M/s. Shree Medical Foundation
banking transactions and also supervision of shift duties of staff
nurses etc. She was also responsible for co-ordination between
doctor-trustees and other trustees since beginning of the trust and
her duties have been set out in the assessment order itself. When
we consider the overall supervision of the hospital by Smt. Usha
Prayag and payment of Rs.15,000/- per month, the same appears to
be quite reasonable and not excessive or reasonable in any manner.
We, therefore, order to delete this addition.
A.Yrs. 2007-08 and 2008-09 :
The only disallowance made for the A.Y. 2007-08 is in
respect of payment made to Dr. Aarti Prayag. Assessee paid a sum
of Rs.16,91,847/- to Dr. Aarti Prayag. The AO disallowed a sum
of Rs.10,19,847/- which disallowance was reduced by the ld.
CIT(A) to Rs.7,91,847/-. For the A.Y. 2008-09, Dr. Aarti Prayag
was paid a sum of Rs.17.91 lakhs, out of which the AO disallowed
a sum of Rs.8,95,250/-, which disallowance came to be sustained
in the first appeal.
Having gone through the relevant facts and the position
discussed above in relation to the A.Y. 2011-12 for which we have
held that no disallowance is called for, we hold that the payments
9 M/s. Shree Medical Foundation
made to Dr. Aarti Prayag for the years under consideration are reasonable and not excessive on consideration of her qualification and experience. We, therefore, order to delete these additions.
In the result, all the appeals are allowed.
Order pronounced in the Open Court on 22nd January, 2019.
Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 22nd January, 2019 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. आयकर आयु�(अपील) / The CIT (Appeals)-10, Pune 4. The Pr.CCIT, Pune िवभागीय �ितिनिध, आयकर अपीलीय 5. अिधकरण, पुणे “बी” / DR ‘B’, ITAT, Pune; 6. गाड� फाईल / Guard file. // True copy // आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
M/s. Shree Medical Foundation
Date 1. Draft dictated on 21-01-2019 Sr.PS 2. Draft placed before author 21-01-2019 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *