Remuneration Paid to Trustees can’t be treated as Excessive without Sufficient Proof: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Cuttack bench has held that the remuneration paid to the trustees by a Trust cannot be treated as excessive unless there is sufficient material to prove the same.

The assessee, in the instant case, is a charitable trust registered under Section 12A of the Income Tax Act. For the assessment year 2010-2011 from the ledger account of the assessee, the Assessing Officer observed that a sum of Rs.1,52,00,000/- was receivable from M/s. Adhikhar Micro Finance (P) Ltd., as on 1.4.2009 and during the year , a sum of Rs.50,00,000/- was advanced by the assessee society as interest-free temporary loan on 29.9.2009. The Assessing Officer observed that Mr N. Amin is the President of the assessee society and also Shri Manmath Kumar Bhanjdeo is the trustee of the assessee society. Both have held shares in the company Adhikar Micro Finance Pvt Ltd., Therefore, he held that the assessee has violated the provisions of section 13(1)(c) of the Act.

The Tribunal noted that to attract the provisions of section 13(1)(d) of the Act, it is not enough that remuneration has been paid to trustees but it has to be also shown that the remuneration paid is excessive or unreasonable as compared to the services rendered by those persons.

Rejecting the department’s view, the Tribunal held that no material has been brought on record before us by the department to show that according to the provisions referred to in section 13(1)(c) of the Act, the trustee has substantial interest either singly or jointly in M/s. Adhikar Micro Finance Pvt Ltd and M/s. Adhikar Grameen Products ltd. “Therefore, respectfully following the above decision, the allegation of the department of violation of provisions of section 13(1)(c) is not sustainable,” the Tribunal said.

While concluding, it was added that “The Assessing Officer proceeded on the assumption that section 13(1)(d) of the Act is attracted merely on making of payment of remuneration to the trustees whereas the legal position is not such. In absence of any material brought before us by the revenue to show that the remuneration paid to the four persons in question were excessive or unreasonable having regard to the services rendered by them, in our considered view, the allegation of the Assessing Officer that there was violation of provisions of section 13(1)(d) is also unsustainable.”