Revenue cannot deny exemption without adequate inquiry or evidence of excessive payments: ITAT
Dy. CIT(E) vs. Pardada Pardadi Educational Society (ITA No. 5149/DEL/2024)
Facts:
1. The assessee, a charitable society registered under Section 12AA and 80G, claimed exemption under Section 11.
2. The AO denied the exemption, stating that the remuneration paid to Mrs. Renuka Gupta (CEO), a specified person under Section 13(3), was excessive, thus invoking Section 13(1)(c)(ii).
3. The assessee maintained that despite “CEO” not being part of trust bylaws, substance over form was applied. Her functions as manager/administrator fall within the permissible structure under Section 13(3).
ITAT Delhi held as below:
1. The onus is on the AO to prove payments are excessive. No comparative benchmarking or evidence was provided by the AO.
2. When the Specified Person is having relevant qualification for the job and when there is no material brought on record to substantiate that the salary or remuneration paid to the members was excessive, the provisions of Section 13(1)(c) cannot be invoked to deny the exemption under Section 11 of the Act.
3. In that view of the matter, we find no plausible reason to interfere with the well-reasoned findings of the ld. CIT(A) and dismiss the grounds raised by the Revenue.
Conclusion:
1. Trusts must maintain documentary evidence of role descriptions, market benchmarking of compensation, qualifications and services rendered.
2. Revenue cannot deny exemption without adequate inquiry or evidence of excessive payments.
The Copy of the order is as under:
