M/S. SADHU SINGH HAMDARD TRUST,JALANDHAR vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, JALANDHAR
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per Bench:
The captioned bunch of appeals have been remanded back to the
Tribunal by the Hon’ble Punjab & Haryana High Court in ITA No. 75 of
2004 vide judgment dated 26.07.2012 with the direction to re-adjudicate the
claim of the assessee for exemption of income u/s 11 of the Act with
reference to the provisions of section 13(3) of the Act in the light of the
observations that the Tribunal had reversed the findings primarily on the
ground that there were no excessive payments. However, the Tribunal
while reversing these findings had not recorded any definite and clear
finding relating to violation of the provisions of section 13(3) of the Act.
Thus, the Hon’ble jurisdictional High Court has remanded the matter to the
Tribunal to re-adjudicate the issue relating to exemption claimed u/s 11 with
reference to provisions of section 11(1)(a) of the Act and also to examine
the question of admissibility of deduction in respect of payments made to
4 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
certain persons in terms of section 13(3)(c) r.w.s. 13(3) of the Act. The
relevant para of the judgment are reproduced hereunder:
“14. On the basis of submissions made by learned counsel for the parties, broadly, the following issues arise for consideration in these appeals:-
(a) Whether the object of the assessee trust is encompassed under the expression 'charitable purpose' falling within the ambit of Section 2(15) of the Act?
(b) Whether in the facts and circumstances, the Tribunal was right in reversing the findings of the Assessing Officer and the CIT(A) relating to compliance of provisions of Section 11(1 )(a) and 11 (4A) of the Act and regarding violation of the provisions of Section 13(1) (c) and 13(3) of the Act?
According to these provisions, wherever, any part of income or any property of the trust or the institution is applied directly or indirectly for the benefit of any person referred to in sub-section (3) of Section 13, the provisions of Section 11 shall not operate granting benefit of exemption to the trust. The Assessing Officer had recorded that certain payments were made to Bibi Parkash Kaur (trustee), S. Barjinder Singh and also to Smt. Sadjit Kaur wife of S. Barjinder Singh which were made to persons as defined in Section 13(3) of the Act and as such were inadmissible. These findings were affirmed by the CIT(A) on appeal. However, the Tribunal had reversed these findings primarily on the ground that there is no finding that these were excessive. However, the Tribunal while reversing these findings had not recorded any definite and clear finding relating to violation of the provisions of Section 13(3) of the Act. The matter, thus, requires to be remanded to the Tribunal to re-adjudicate the claim of the assessee for exemption of income under Section 11 of the Act with reference to provisions of Section 13(3) of the Act in the light of the observations made hereinbefore.
The substantial questions of law are answered accordingly. In view of the above, the case is remanded to the Tribunal to re- adjudicate the issue relating to exemption claimed under Section 11 with reference to provisions of Section 11(1)(a) of the Act and also to examine the question of admissibility of deduction in respect of
5 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
payments made to certain persons in terms of Section 13(1)(c) read with Section 13(3) of the Act.”
At the outset, the ld. counsel for the assessee contended that the
Hon’ble jurisdictional High Court vide para 23 of this judgment has
answered, the first question of law in favour of assessee and against the
Revenue which reads as under:
“23. In the Trust Deed dated 17.8.1977 which was supplemented on 22.11.1977, 2.5.1978, 17.5.1978 and 6.9.1980, it was mentioned that the properties of the owner were inclusive of all assets of Ajit Newspaper including goodwill and these assets were bequeathed by him to the said trust. The assessee-trust was running a newspaper to promote Punjab, Punjabi and Punjabiat and, thus, the running of newspaper was incidental to the main objective of the trust and would fall as an advancement of any other object of general public utility. For that purpose, the trust was made available by the Founder. Further, the trust was allowed registration as Public Charitable Trust by the Commissioner of Income Tax, Jalandhar on 12.11.1979 under Section12A(a) of the Act. Still further, the Commissioner of Income Tax had initiated proceedings under Section 263 of the Act but had dropped the same accepting the claim of exemption made by the assessee. The provisions of Section 11 of the Act were, thus, attracted and the Tribunal had rightly held that the assessee was entitled to exemption there under.
The Hon’ble Jurisdictional High Court has restored back the second
substantial question of law to the file of the Tribunal for re-adjudication vide
paras 32 and 33 as above. The counsel has argued that in the present
case, from the perusal of the judgment of Hon’ble High Court, the
6 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
substantial question of law on the second issue marked no.(b) which were
before the Hon’ble High Court are not arising from the assessment order as
there was no finding of the Assessing Officer on this issue nor the ld.
CIT(A) has adjudicated on this issue. He contended that admittedly, in the
present case, there was no whisper of violation of section 11(1)(a) or
section 11(4A) or section 13(1)(c) r.w.s. 13(3) of the Act. He argued that
even in Assessment Year 2008-09, under identical circumstances, the
Revenue has accepted this proposition. He has also filed a copy of the ld.
CIT(A), Jalandhar order dated 26.02.2016 for AY 2008-09. In support, he
has filed a brief synopsis which is reproduced as under:
“Findings of Assessing Officer/CIT(Appeals)
The assessing officer denied exemption claimed by the assessee under section 11/12of the Act on the following two counts:
(a) The object of the Trust does not fall within the charitable ambit of ‘advancement of general public utility’ in terms of section 2(15) of the Act; and
(b) The assessee has violated provisions of section 13 of the Act by providing benefit to persons specified in sub-section (3). 2. On appeal, the CIT(A)upheld the order of the assessing officer and confirmed the denial of exemption claimed under section 11/12 of the Act.
Findings of the Tribunal - 1stRound
7 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
On further appeal preferred by the assessee, the Hon’ble Tribunal, vide consolidated order dated 29.09.2003, reversed the order of the CIT(A) and held that the assessee was eligible to claim exemption under section 11/12 of the Act by observing as under:
(a) The assessee trust was formed with the main objective of promoting Punjab, Punjabi and Punjabiat and thus the publication and printing of newspaper was only a mode of propagating the concept of Punjab, Punjabi and Punjabiat, which can be considered as advancement of object of general public utility in terms of section 2(15) of the Act.
(b) Regarding alleged violation of provisions of section 13(3) of the Act, the Hon’ble Tribunal observed that since there was no allegation that the payment made to specified persons were unreasonable or excessive, the provisions of section 13(3)(c) of the Act had no application at the very threshold.
The relevant finding of the Tribunal is re-produced hereunder for ready reference:
“…………… …………….
9.3 Now, we will deal with the provisions of section 13 of the Act. Section 13(3)(c) of the Act reads as under:
‘if 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 person to such Trust or institution and the amount so paid isexcess of what may be reasonably paid for such services. ’
In the instant case, it is true that a sum of Rs. 12,000.00 i.e. Rs. 1,000.00 per month has been paid to Bibi Parkash Kaur, wife of Late S. Sadhu Singh Hamdard, author of the Trust and monthly salary of Rs. 25,300.00 had been paid to S. Barjinder Singh Managing Editor of the newspaper and a rent of Rs. 40,000.00 per annum was paid to Smt. Sarbjit Kaur w/o S. Barjinder Singh on account of godown rent. However neither the A.O nor the C1T(A) stated that the payments made to theaforesaid persons for renderins their services
8 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
ware excessive. Both the authoritieshad stated that the payments had been made in violation of the provisions ofsection 13(3) of the Act. However, no finding has been siven in what manner theprovisions of section 13(3) were attracted to the facts of the present case.However, it is not the case of the department that the payments made by theassessee-trust by wav of salary etc. were excessive in any manner. As such. theprovisions of section 13(3)(c) are not applicable to the facts of present case. ” (Emphasis supplied)
25.Adverting to second issue. we may examine the relevant provisions of the Act which are material. Sec. 11(l)(a) of the Act excludes income derived from property held under trust for charitable purposes from the computation of taxable income. Sec. ll(l)(a) of the Act provides that the income derived from the property held in trust wholly for charitable or religious purpose will be exempt to the extent it is applied to such purposes…….. ………………..
According to these provisions, wherever, any part of income or any property of the trust or the institution is applied directly or indirectly for the benefit of any person referred to in sub-s. (3) of s. 13, the provisions of s. 11 shall not operate granting benefit of exemption to the trust. The AO had recorded that certain payments, were made to Bibi Parkash Kaur (trustee), S. Barjinder Singh and also to Smt. Sadjit Kaur, wife of S. Barjinder Singh which were made to persons as defined in s. 13(3) of the Act and as such were inadmissible. These findings were affirmed by the C1T(A) on appeal. However, the Tribunal had reversed these findings primarily on the groundthat there is no Binding that these were excessive. However, the Tribunal whilereversing these findings had not recorded any definite and dear finding relating toviolation of the provisions of s. 13(3) of the Act. The matter,thus, requires to beremanded to the Tribunal to readjudicate the claim of the assessee for exemption ofincome under s. 11 of the Act with reference to provisions of s. 13(3) of the Act inthe light of the observations made hereinbefore.
The substantial questions of law are answered accordingly. In view of the above, the case is remanded to the Tribunal to readjudicate the issue relating to exemptionclaimed under s. 11 with reference to provisions of s. ll(l)(a) of the Act and also toexamine the question of admissibility of deduction in respect of payment made tocertain persons in terms of s. 13(l)(c) r/w s. 13(3) of the Act. ” (emphasis supplied)
9 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
In so far as question of law formulated at point (a) above, the Hon’ble High Court, decided the matter in favor of assessee and matter has reached finality since the Revenue has accepted the same and no SLP has been filed in the Hon’ble Supreme Court. As far as law formulated at point (b) is concerned, the Hon’ble High Court has remanded the matter to the Tribunal to examine and re-adjudicate on the limited issue/aspectie “Exemption of income us/ 1 l(l)(a) with reference to payments made by the assessee trust to persons specified in terms of section 13(l)(c) read with section 13(3) of the Act. ”
Accepted stand by Department
Admittedly the issue of payments made to relatives of the author/settlor of the trust u/s 13(3) of the Act has always been accepted by the assessing officer as the assessee trust has always been allowed exemption under section 11/12 of the Act from assessment years 1978-79 to 1992-93.
However, for the intervening assessment year(s) under consideration i.e., AY 1993-94 to 1995-96, the exemption has been denied inter-alia on the two alleged ground that the assessee-trust was running a newspaper to promote Punjab, Punjabi and Punjabiat and, thus, the running of newspaper was not incidental to the main objective of the trust and would not fall as an advancement of any other object of general public utility purposes and there was violation of provisions of section 13(3) of the Act as payments were made to relatives of the author/settler of the trust.
That assessment year 1996-97 onwards, the exemption has been denied inter-alia on one alleged ground that the assessee-trust was running a newspaper to promote Punjab, Punjabi and Punjabiat and, thus, the running of newspaper was not incidental to the main objective of the trust and would not fall as an advancement of any other object of general public utility purposes.
[Refer Page 253-266 of the paper book being assessment orders for AY 2009-10 to 2012- 13]
10 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
Revisionary proceedings were initiated under section 263 of the Act for the assessment year 1978-79 proposing to deny exemption claimed by the assessee, which was subsequently dropped after detailed examination of the charitable objects and activities of the assessee-trust. [Refer Page 327-331 of the paper book being Show Cause Notice &Page 332 being order u/s 263]
IAC in proceedings under section 144(B) for the assessment year 1981-82 reversed the view of the assessing officer and directed to grant exemption to the assessee trust. [Refer Page 333-338 of the paper book]
In the re-assessment proceedings for assessment year 1992-93, the aforesaid two issues viz., (i) the assessee-trust was running a newspaper to promote Punjab, Punjabi and Punjabiat and, thus, the running of newspaper was not incidental to the main objective of the trust and would not fall as an advancement of any other object of general public utility purposes and (ii) there was violation of provisions of section 13(3) of the Act as payments were made to relatives of the author/settlor of the trust was specifically examined by the assessing officer and accepted as such. [Refer submissions filed during the course of re-assessment proceedings at pages 249- 252 of the paper book and re-assessment order passed at pages 247-248 of the paper book]
It may also be pertinent to mention here that there has been no material change in the facts of the year under consideration. Thus, when the aforesaid issue has already been specifically examined by the assessing officer and the assessee has been held to be eligible to claim exemption under section 11/12 of the Act, the abrupt change in the stand of the assessing officer in the assessment year under consideration, in the absence of any change in facts, is without any basis and unsubstantiated.
In this regard, it is respectfully submitted that in income tax proceedings, though the principle of res judicata does not strictly apply, yet rule of consistency does apply, i.e. if no fresh facts come to light on investigation, the assessing officer is not entitled to
11 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
reopen the same question on mere ground of suspicion or change of opinion. Thus, a finding arrived at in a subsequent year ignoring the conclusion arrived at earlier would be vitiated in law.
In this regard, attention is invited to the decision of the Supreme Court in the case of Radhasoami Satsang vs. CIT: 193 ITR 321, wherein it has been held that where a fundamental aspect permeating through the different assessment years is accepted one way or the other, a different view in the matter is not warranted, unless there be any material change in facts. The relevant observations at page 329 of the judgment are reproduced as under:
“We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what isdecided in one year may not apply in the following year but where afundamental aspect permeating throush the different assessment years hasbeen found as a fact one wav or the other and parties have allowed that positionto be sustained by not challensing the order. it would not be at all appropriateto allow the position to be chansed in a subsequent year,”(emphasis supplied)
In the case of DIT (Exemptions) vs. Guru Nanak Vidya Bhandar Trust: 272 ITR 379, the Hon’ble Delhi High Court held that the department is expected to be consistentwith its own stand which has been taken in earlier years, when there is no change in theobjects of the trust during the year and such objects when found permissible forexemption in the past, notwithstanding the fact that it has manifold objects some of whichare vulnerable.
Further in the case of CIT vs. Shri Agastyar Trust: 149 ITR 609, the Madras Court held that it is well established that a decision on the question whether certain trust is a charitable trust or not, which has nothing to do with the fluctuations in the income year- after- year, will operate as res judicata and the same question cannot be re-agitatedsubsequently.
12 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
In the following decisions, too, the Courts have held that though the doctrine of res judicata does not strictly apply to the income-tax proceedings but in order to maintain consistency, the Revenue cannot be permitted to rake up settled issues.
- DIT (E) vs. Apparel Export Promotion Council: 244 ITR 734 (Del) - CIT V. Neo Polypack (P) Ltd: 245 ITR 492 (Del.) - CIT V. Dalmia Promoters Developers (P) Ltd: 281 ITR 346 (Del.) - DIT v. Escorts Cardiac Diseases Hospital: 300 ITR 75 (Del.) - CIT vs. P. KhrishnaWarrier: 208 ITR 823 (Ker) - CIT vs. Harishchandra Gupta 132 ITR 799 (Ori) - CIT vs. SewaBharti Haryana Pradesh: 325 ITR 599 (P&H)
In view of the aforesaid, since the facts in the present case of the assessee in the earlierand subsequent assessment years are identical to the assessment year under consideration, thus, on the basis of principle of consistency, the assessee should not have been denied exemption under sections 11/12 of the Act.
Re: Alleged violation of provisions of section 13 of the Act
During the assessment years 1993-94 to 1995-96, the assesseemade payments to trustees/relatives of author of the trust. [Refer Page 239 of the paperbook]
It is submitted that under section 13(1)(c) read with section 13(2)(c) there is no bar on payment of salary etc., to the persons mentioned in section 13(3) of the Act for the services rendered by such persons. The law only provides that if payment is made to persons mentioned in section 13(3) of the Act in respect of services rendered by such persons, the same should not be unreasonable/excessive.
Reliance in this regard is placed on the decision ofJurisdictional High Court in the case of CIT Vs. Idicula Trust Society in ITA No. of 2011. In that case, the questions of law framed in Revenue’s appeal were decided against the Revenue as under:
13 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
“12. In ITA No. 1 of 2011 filed by the revenue is concerned, following substantial questions of law had been formulated by the revenue, for adjudication by this court:
i“Whether, on the facts and in the circumstances of the case, the Ld. IT AT was right in taw in allowing the benefit of exemption to the assessee u/s 11 of the Income Tax Act, 1961 ignoring its own finding that excessive remuneration was paid to specified persons, in violation of section 13(l)(c)(ii) read with section 13(2)(c) of the Income Tax Act, 1961?”
ii “Whether, on the facts and in the circumstances of the case, the Ld. IT AT was right in law in not answering the question of not adjudicating on applicability of section 11 of the Income Tax Act, 1961 in light of its own findings that excessive remuneration was indeed paid to specified persons leading to violation of the provisions of section 13(l)(c)(ii) read with section 13(2)(c) of the Income Tax Act, 1961?" ………………
Resultantly, order of the Tribunal fixing salary of Mr. Joseph John to Rs. 30,000/- per month and of his wife Mrs. Sonia Joseph to Rs. 20,000/- per month being neither correct on facts nor in law would not hold good. When finding of the Tribunal to the effect that excessive remuneration was paid to these two specified persons, being bad on facts and in law, is set aside and order of C1T(A) is restored, allowing benefit of exemption to the assessee under Section 11 of the Act, being legally sustainable. Consequently, questions of law framed in ITA No.1 of 2011 as depicted in para-No.12 of this judgment in this light are answered against the revenue. ” 4. Emphatic reliance in this regard is placed on the decision of Hon’ble Delhi High Court in the case of Pariwar Seva Sansthan: 254 ITR 268.In that case, the Revenue filed appeal against the decision of the Tribunal holding that since payments made to parties specified under section 13(3) was reasonable and not excessive, there was no violation of section 13(l)(c) of the Act. Affirming the decision of the Tribunal as not given rise to any question of law, the Hon’ble Court held as under:
"Heard. This is an appeal under section 260A of the Income-tax Act, 1961 ('the Act). The appeal relates to the assessment years 1995-96 and 1996- 97. The following question has been posed:
14 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
" Whether, on the facts and in the circumstances of the case and in law, the Tribunal was correct in allowing the benefit under section 11 of the Income-tax Act, 1961 without appreciating that the assessee had violated the provisions of section 13(l)(c) and 13 (l)(d) of the Act ?"
We find that the Commissioner (Appeals) decided in favour of the assessee on all aspects in the revenue’s appeal for the assessment year 1995-96. The Tribunal affirmed conclusion of the Commissioner (Appeals) with the following observations:
"We have considered the rival submissions and the materials on the file. We are of the view that on the facts and in the circumstances of the case and for the detailed reasons given in the impugned appellate order, the Id. CIT(A) was justified in holding that the assessee was entitled to exemption under section 11 of the Act for the assessment year 1995-96. As noted above, the assessee is a registered society under section 12A(a) of the Act. It is providing services in the field of family planning, family welfare, birth control, etc. It was in existence since 1981 and it was allowed exemption under section 11 of the Act in earlier years. The reasons given for refusing exemption under section 11 by the Assessing Officer for the assessment year in question have been given hereinbefore. These reasons were payment of salary, rent, etc., to Mrs. Sudha Tewari, Chief Executive Officer and Project Coordinator, rent of the house to Mr. G.K. Tewari, husband of Mrs. Sudha Tewari, loan to Tyagi Foundation and expenditure incurred on conferences and clinics. The Id. CIT(A) has discussed all the items in his impugned appellate order at length and held that salary,rent, etc., paid to Mrs. Sudlia Tewari was reasonable and for valuable services rendered by her as Chief Executive Officer and Project Coordinator and that the rent of the house paid to Mr. G.K. Tewari was also reasonable considering the location of the house in Green Park, New Delhi. No material has been brought before us to rebut the factual findings of the Id. CIT(A). On consideration of the materials on the file, the past record of the society, the year to year services rendered by Mrs. Sudha Tewari from its inception, we are satisfied that the salary, rent, etc., paid to her was reasonable and was not excessive and the Id. CIT(A) was justified in rejecting these as not valid grounds for rejecting the claim of exemption under section 11 of the Act. …………… ……………”
15 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
For the assessment year 1996-97, the assessee primarily challenged the question as to the reasonableness of salary. That plea was accepted in view of the conclusions for 1995-96. The extracted portion of the order passed by the Tribunal goes to show that the conclusions are essentially factual giving rise to no question of law. Accordingly, we do not entertain this appeal. Dismissed. ”
Further reliance is placed on the following decisions wherein various Benches of the Tribunal have consistently held that so long as payment made in the form of remuneration/ salary/ allowance, etc., to parties covered under section 13(3) are for the services rendered, there is no benefit so as to hold violation of section 13(1)(c) of the Act. It has further been held the onus is on the Revenue to prove that the payment made to the persons specified in section 13(3) of the Act is unreasonable/excessive by placing on record the material to show the market value, the services rendered and how the payment made is excessive and unreasonable:-
- ITO vs. Virendra Singh Memorial Shiksha Samiti: (2009) 18 DTR (Luck) 502 (refer paras 17 and 18)
- Dr. D.Y. Patil Pratisthan: (2014)61 SOT 48 (Pune) (refer paras 35- 37)
- ITO v. Human Resource Development and Management Trust: (2011) 47 SOT 85 (Cuttack) (refer para 23)
On perusal of the aforesaid, it is respectfully submitted that merely because payment is made to persons specified in section 13(3), it cannot be alleged that there is violation of section 13(1)(c) of the Act. The onus is on the assessing officer to show how the remuneration/ payment made is excessive and reasonable.
In the instant case, the assessing officer has not brought on record any material to justify how the remuneration paid is excessive/ unreasonable.
16 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
It will kindly be appreciated that the remuneration paid to Ms.Parkash Kaur and Mr. Barjinder Singh was commensurate with the services rendered by them and there was no violation of provisions of section 13(1 )(c) of the Act as demonstrated hereunder:
- Honorarium paid to Mrs. Parkash Kaur: Mrs. Parkash Kaur, wife of the author of the trust is a qualified librarian and graduate. She was appointed as secretary of the trust at the timeof its formations and in terms of clause (4) of the Trust deed, she was entitled to receive nominal remuneration/honorarium of Rs. 1,000 per month for services rendered to the trust (i.e., for looking after the affairs of the trust). Her husband Mr. Sadhu Singh Hamdard bequeathed all his properties to the trust made by him and allowed her to get meager honorarium of Rs. 1,000 per month. After the death of her husband in 1984, she was also appointed as the printer and publisher of Daily Ajit. However, she continued to draw meager honorarium of Rs. 1,000 per month for services she rendered to the trust.
In the aforesaid facts, it is evident that the remuneration/honorarium paid to Mrs. Kaur was very nominal and could by no stretch of argument be held to be excessive in terms of provisions of section 13 of the Act.
- Salary paid to Mr. S Barjinder Singh: Mr.Barjinder Singh, son of the author of the trust was earlier editor of Tribune group, but was compelled to take the editorship of‘Daily Ajit’ on the demise of his father in 1984, at the insistence of the trustees of the assessee trust. Further, the salary paid to Mr.Barjinder Singh was much lesser than his counterpart at the same position in Tribune. Further, the remuneration paid to Mr. Barjinder Sing was well within the limits notified by the Wage Board for the said period.
In the aforesaid facts, it is evident that the remuneration paid to Mr. Singh was not at all excessive in terms of provisions of section 13 of the Act. [Refer Page 240 of the paperbook being resolution of the Trust appointing him at a salary lower than Tribune Trust.]
17 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
[Refer Page 267A to 267C of the paperbook being limits notified by the Wage Board.]
- Rental payments:it is submitted that rental payments were made for press and godowns(for storage of newsprints since these come in big rolls)that were taken on rent from Mr. Barjinder Singh and his wife Mrs.Sarabjit Kaur keeingin mind the space constraints at the head office of the assessee Trust. The herd office of the trust is in close vicinity of the Jalandhar Railway Station and is surrounded by narrow lanes and small shops, therefore, the scope of expansion of press and storage of newsprints is always in question. It may be appreciated that the rent paid was consistent with the municipal rates prevailing during the said period. The assessing officer has nowhere alleged that the amount of rent paid was in excess of the prevailing market rates. [Refer Page 268 to 270 of the paperbook being year wise rent paid.]
From the above, it is evident that the assessing officer proceeded to draw adverse inference, merely on the ground that payments were made to relative(s) of the author of the trust, without even attempting to first verify if payments made were excessive/unreasonable.
Pertinently, the assessing officer during the course of re- assessment proceedings for assessment year 1992-93, after taking into consideration the aforesaid facts did not draw any adverse inference in respect of similar salary/rental payments made. [Refer Page 268 to 270 of the paperbook being year wise rent paid.]
The Hon’ble ITAT, Amritsar bench in the case of Bright Enterprises Pvt. Ltd. vs. DCIT (2021) 90 ITR (Trib) 0394 (Amritsar)has held that in the absence of any comparable instance of rendering the similar services/supply of goods, it would not be permissible to disallow the expenditure under Section 40A(2).
Burden of proof lies on the Revenue to prove that the salary/rental payments made were excessive/unreasonable and that provisions of section 13 apply: Section 13 starts with a non-obstante clause and hence by virtue of the said provisions, exception to the exemption provided by section 11, is carved out and an assessee is
18 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
denied the benefit of exemption under section 11 of the Act, in a case where there is violation of the provisions of section 13 of the Act. It is also relevant to state here that a person who makes a positive statement is required to establish the same. It is not for the person against whom the averment is made to establish negatively that the state of affairs averred by the other person does not exist. Therefore, the exception has to be stated and established by the Revenue. In other words, burden of proof lies on the Revenue. In support of the aforesaid stand, reliance is placed on the following legal precedents:
a. Surat City Gymkhana Vs Dy.CIT [2002] 254 ITR 733 (Guj) b. CIT Vs Kamala Town Trust [2005] 279 ITR 89 (All)
In case of two possible views, a view favourable to the assessee is to be preferred. The aforesaid proposition is supported by the following legal precedents :
Manish Maheshwari Vs CIT [2007] 289 ITR 341 (SC); and a. Pradip J. Mehta Vs CIT [2008] 300 ITR 231 (SC) b.
In view of the aforesaid, it is respectfully submitted that in the present case, there is no allegation that the payment made to specified persons were unreasonable or excessive, therefore, it is respectfully submitted, that it cannot result in complete denial of exemption under sections 11/12 of the Act.”
Per contra, the ld. DR relied on the order of the ld. CIT(A).
We have heard the rival contentions, perused the material on record,
the judgment of the honourable jurisdictional High Court of Punjab and
Haryana, orders of the lower authorities and the written submissions filed
before us. Admittedly, the running of the newspaper by the appellant was
incidental to the main objective of the trust and would fall as an
19 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. advancement of any other object of general public utility. We find that the
trust was allowed registration as Public Charitable Trust by the
Commissioner of Income Tax, Jalandhar on 12.11.1979 under Section
12A(a) of the Act and further the Commissioner of Income Tax had
dropped the proceedings initiated under Section 263 of the Act, by
accepting the claim of exemption made by the Appellant assessee. Thus,
the matter in first question of law formulated at point (a) above, has been
decided in favor of assessee by the Hon’ble High Court, vide para 23 of the Judgment and accordingly, the 1st issue has reached finality because the
Revenue has accepted the same as no SLP has been filed against the said
judgment of Honourable High Court in the Hon’ble Supreme Court. Thus,
the appellant Trust is encompassed under the expression 'charitable
purpose' falling within the ambit of Section 2(15) of the Act.
From the Judgment of the Honorable Jurisdictional High Court, thus,
it is discernible that the matter is remanded back to the Tribunal for limited
purpose to examine the Exemption of income us/ 11(1)(a) with reference to
payments made by the assessee trust to persons specified in terms of section 13(1)(c) read with section 13(3) of the Act.
20 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors.
In the 1st round of appeal, the Tribunal on alleged violation of
provisions of section 13(3) of the Act, has observed that since there was no
allegation that the payment made to specified persons were unreasonable
or excessive, the provisions of section 13(3)(c) of the Act had no
application at the very threshold. The relevant finding of the Tribunal is re-
produced hereunder:
“In the instant case, it is true that a sum of Rs. 12,000.00 i.e. Rs. 1,000.00 per month has been paid to Bibi Parkash Kaur, wife of Late S. Sadhu Singh Hamdard, author of the Trust and monthly salary of Rs. 25,300.00 had been paid to S. Barjinder Singh Managing Editor of the newspaper and a rent of Rs. 40,000.00 per annum was paid to Smt. Sarbjit Kaur w/o S. Barjinder Singh on account of godown rent. However, neither the AO nor the CIT(A) stated that the payments made to theaforesaid persons for renderins their services ware excessive. Both the authoritieshad stated that the payments had been made in violation of the provisions ofsection 13(3) of the Act. However, no finding has been siven in what manner theprovisions of section 13(3) were attracted to the facts of the present case.However, it is not the case of the department that the payments made by theassessee-trust by wav of salary etc. were excessive in any manner. As such. theprovisions of section 13(3)(c) are not applicable to the facts of present case.”
From the record, it is evident that the assessee trust was formed with
the main objective to promote Punjab, Punjabi and Punjabiat and thus, the
publication and printing of newspaper was only a mode of propagating the
concept of Punjab, Punjabi and Punjabiat, which is considered as an
advancement of general public utility in terms of section 2(15) of the Act. In
21 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. the 1st round of appeal, the Tribunal on alleged violation of provisions of
section 13(3) of the Act, has observed that since there was no
allegation that the payment made to specified persons were
unreasonable or excessive, the provisions of section 13(3)(c) of the
Act had no application at the very threshold. The Ld. DR for the
department has failed to rebut the contentions of the appellant that
neither the AO nor the CIT(A) stated that the payments made to the
aforesaid persons for rendering their services ware excessive. It is
noted that both the authorities had stated that the payments had been
made in violation of the provisions of section 13(3) of the Act.
However, no finding has been given in what manner the provisions of
section 13(3) were attracted to the facts of the present case. In our
view, it is not the case of the department that the payments made by
the assessee-trust by way of salary etc. were excessive in any
manner. Meaning thereby that as such, the provisions of section
13(3)(c) are not applicable to the facts of present case.
The mandate under Section11(1)(a) of the Act provides that the
income derived from the property held in trust wholly for charitable or
religious purpose will be exempt to the extent it is applied to such
22 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. purposes. Thus, as per law any part of income or any property of the trust
or the institution is applied directly or indirectly for the benefit of any person
referred to in subsection (3) of section 13, the provisions of section 11 shall
not operate granting benefit of exemption to the trust. The AO had recorded
that certain payments, were made to Bibi Parkash Kaur (trustee), S.
Barjinder Singh and to Smt. Sadjit Kaur, wife of S. Barjinder Singh which
were made to persons as defined in section 13(3) of the Act and as such
were inadmissible. The findings of the AO, were affirmed by the CIT(A).
However, the Tribunal had reversed these findings primarily on the ground
that there is no finding that these were excessive. Since, the Tribunal while
reversing these findings had not recorded any definite and clear finding
relating to violation of the provisions of s. 13(3) of the Act, and hence, the
Hon’ble Court has remanded the matter to the Tribunal to readjudicate the
claim of the assessee for exemption of income under section 11 with
reference to provisions of s.11(1)(a) of the Act and also to examine the
question of admissibility of deduction in respect of payment made to certain
persons in terms of s. 13(1)(c) r/w s. 13(3) of the Act.
Admittedly, the issue of payments made to relatives of the
author/settlor of the trust u/s 13(3) of the Act has always been accepted by
23 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. the assessing officer as the assessee trust has always been allowed
exemption under section 11 and 12 of the Act from assessment years
1978-79 to 1992-93. However, for the intervening assessment year(s)
under consideration i.e., AY 1993-94 to 1995-96, the exemption has been
denied inter-alia on the two alleged ground that the assessee-trust was
running a newspaper to promote Punjab, Punjabi and Punjabiat and, thus,
the running of newspaper was not incidental to the main objective of the
trust and would not fall as an advancement of any other object of general
public utility purposes and there was violation of provisions of section 13(3)
of the Act as payments were made to relatives of the author/settler of the
trust.
The Ld. Counsel argued that for the assessment year 1996-97
onwards, the exemption has been denied inter-alia on one alleged ground
that the assessee-trust was running a newspaper to promote Punjab,
Punjabi and Punjabiat and, thus, the running of newspaper was not
incidental to the main objective of the trust and would not fall as an
advancement of any other object of general public utility purposes.
However, in assessment orders for AY 2009-10 to 2012- 13 (APB, Pgs.
253-266) department has accepted the claim of the appellant. Further the
24 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. revisionary proceedings were initiated under section 263 of the Act for the
assessment year 1978-79 proposing to deny exemption claimed by the
assessee, which was subsequently dropped after detailed examination of
the charitable objects and activities of the assessee-trust. [APB, Pgs.327-
331 7 is Show Cause Notice and Page 332 is order u/s 263]. Again, the
IAC in proceedings under section 144(B) for the assessment year 1981-82
reversed the view of the assessing officer and directed to grant exemption
to the assessee trust [APB, Pgs. 333-338].
We find that in the re-assessment proceedings for assessment year
1992-93, the aforesaid two issues viz., (i) the assessee-trust was running a
newspaper to promote Punjab, Punjabi and Punjabiat and, thus, the
running of newspaper was incidental to the main objective of the trust and
would fall as an advancement of any other object of general public utility
purposes and that (ii) there was no violation of provisions of section 13(3)
of the Act although similar payments were made to relatives of the
author/settlor of the trust which were specifically examined by the
assessing officer and accepted as such (APB, Pgs. 249- 252 and 247-248).
Admittedly, there has been no material change in the facts of the year
under consideration and therefore, in our view, when the aforesaid issue
25 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. has already been specifically examined by the assessing officer and the
assessee has been held to be eligible to claim exemption under section
11/12 of the Act, the abrupt change in the stand of the assessing officer in
the assessment year under consideration, in the absence of any change in
facts, and without any basis remained unsubstantiated. It is settled law that
in income tax proceedings, though the principle of res judicata does not
strictly apply, yet rule of consistency does apply, where if no fresh facts
come to notice of the AO, then he is not entitled to reopen the same issue
on mere ground of suspicion or change of opinion. Thus, a finding arrived
at in a subsequent year ignoring the conclusion arrived at earlier would be
vitiated in law. In this regard, the Ld. AR has rightly invited our attention to
the decision of the Supreme Court in the case of Radhasoami Satsang vs.
CIT: 193 ITR 321, wherein it has been held that where a fundamental
aspect permeating through the different assessment years is accepted one
way or the other, a different view in the matter is unwarranted, unless there
is any material change in facts. The relevant observations from the
judgment are reproduced as under:
“We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental
26 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. aspect permeating through the different assessment years has been found as a fact one was or the other and parties have allowed that position to be sustained by not challenging the order. it would not be at all appropriate to allow the position to be chansed in a subsequent year,”.
In another case of DIT (Exemptions) vs. Guru Nanak Vidya Bhandar
Trust: 272 ITR 379, the Hon’ble Delhi High Court held that the department
is expected to be consistent with its own stand which has been taken in
earlier years, when there is no change in the objects of the trust during the
year and such objects when found permissible for exemption in the past,
notwithstanding the fact that it has manifold objects some of which are
vulnerable.
It is pertinent to mention that in the present case neither the AO nor
the CIT(A) and even the Ld. DR has even stated that the payments made
to the aforesaid persons for rendering their services were excessive. The
AO/CIT(A) ought to have substantiated the allegation of excessive payment
for rendering services in violation of provision of section 13(3) of the Act
with corroborative documentary evidences even if it has been examined,
the said amount could restricted to a reasonable salary etc for services
based on comparable. The lower authorities had stated that the payments
27 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. had been made in violation of the provisions of section 13(3) of the Act.
However, no finding has been given with supporting material evidence that
in what manner, the provisions of section 13(3) were attracted to the facts
of the present case. In our view, it is not the case of the department that the
payments made by the assessee-trust by way of salary etc. were excessive
in any manner. Had it been so, the department ought to have substantiated
the excess payments if any made by the assessee-trust by way of salary
etc. were excessive in any manner. As such, the provisions of section
terms of section 13(1)(c) r/w s. 13(3)(c) are not applicable to the facts of the
present case.
That under section 13(1)(c) read with section 13(2)(c) there is no bar
on payment of salary etc., to the persons mentioned in section 13(3) of the
Act for the services rendered by such persons. The law only provides that if
payment is made to persons mentioned in section 13(3) of the Act in
respect of services rendered by such persons, the same should not be
unreasonable/excessive.
In our view, so long as payment made in the form of remuneration/
salary/allowance, etc., to parties covered under section 13(3) are for the
28 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. services rendered, there is no benefit so as to hold violation of section
13(1)(c) of the Act. Further we hold that the onus is on the Revenue to
prove that the payments made to the persons specified in section 13(3) of
the Act are unreasonable/excessive by placing on record the corroborative
material evidence that how the payment made are excessive and
unreasonable.
Considering the factual matrix, and judicial precedents, we hold that
the impugned order passed by ld. CIT(A) suffers from infirmity and
perversity to the facts on record. Accordingly, we hold that there was no
excessive payment in violation of section 13(1)(c) r.w.s. 13(3)(c) of the Act.
Further, the facts in the present case of the assessee in the earlier and
subsequent assessment years are identical to the assessment year under
consideration, thus, on the basis of principle of consistency, the Tribunal
was justified in reverting the finding of the AO/CIT(A) and according, the
assessee should have been granted exemption under sections 11(1)(a)
and 11(4A) of the Act. Accordingly, the AO is directed to grant the appellant
assessee exemption under sections 11and 12 of the Act.
29 ITA Nos. 184 to 186/Asr/2001 &Ors. Sadhu Singh Hamdard Trust v.Asstt. CIT& Ors. 19. In the backdrop of the aforesaid discussion the appeals of the
assessee and department are disposed off in the terms indicated as above.
Order pronounced in the open court on 07.12.2023
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT concerned (4) The Sr. DR, I.T.A.T. True Copy By Order
