Facts of the Case

The assessee, Dudhharan Memorial Charitable Trust, filed its return of income for Assessment Year 2017–18 declaring nil income. The case was selected for limited scrutiny under CASS and notices under Sections 143(2) and 142(1) were issued. During assessment, the Assessing Officer observed that the trust had paid remuneration to specified persons, namely ₹72,00,000 to Shri Rajesh Kumar, ₹24,00,000 to Dr. Soni Sinha, ₹7,20,000 to Shri Pawan Kumar, ₹1,20,000 to Smt. Rekha Singh and ₹1,20,000 to Smt. Manorama Sinha. The Assessing Officer held that these payments were excessive and unreasonable, invoked Section 13(1)(c) of the Income-tax Act, and denied exemption under Section 11, resulting in additions to income.

Issues Involved

Whether the payments made by the charitable trust to specified persons were excessive or unreasonable so as to attract Section 13(1)(c), whether exemption under Section 11 was rightly denied by the Assessing Officer, and whether the CIT(A) was justified in deleting the additions by following the Tribunal’s decision in the assessee’s own case for an earlier year.

Petitioner’s Arguments

The Revenue contended that the CIT(A) erred in deleting the additions merely by following the Tribunal’s decision for Assessment Year 2016–17. It was argued that the reasonableness of payments to specified persons must be examined independently for each assessment year and that the payments in the relevant year were excessive, justifying denial of exemption under Section 11.

Respondent’s Arguments

The assessee submitted that the issue was squarely covered by the decision of the Tribunal in its own case for Assessment Year 2016–17 in ITA No. 277/Ranchi/2019, where identical payments to specified persons were examined and held to be reasonable. It was argued that the Assessing Officer did not dispute the rendering of services by the specified persons and failed to determine what would constitute reasonable remuneration. It was further submitted that there was no change in facts or law and that the earlier Tribunal order had attained finality.

Court Order / Findings

The ITAT Ranchi noted that the CIT(A) deleted the additions by following the Tribunal’s decision in the assessee’s own case for the immediately preceding year, where identical issues were decided in favour of the assessee. The Tribunal observed that the Assessing Officer did not doubt the services rendered by the specified persons and also failed to quantify what would be a reasonable payment. It was further noted that the earlier Tribunal order had not been reversed, stayed, or challenged by the Department before any higher forum. In the absence of any change in facts or law, and applying the principle of judicial consistency, the Tribunal found no infirmity in the order of the CIT(A).

Important Clarification

The Tribunal clarified that where payments to specified persons have been examined and held to be reasonable in earlier years and there is no change in facts or law, the Revenue cannot take a contrary view in subsequent years without bringing fresh material on record. Mere doubt as to reasonableness, without quantification or evidence, is insufficient to invoke Section 13(1)(c).

Final Outcome

The appeal filed by the Revenue was dismissed, and the order of the CIT(A) deleting the additions and allowing exemption under Section 11 to Dudhharan Memorial Charitable Trust for Assessment Year 2017–18 was upheld.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769148131_INCOMETAXOFFICEREXEMPTIONWARDRANCHIRANCHIVS.DUKHHARANMEMORIALCHARITABLETRUSTRANCHI.pdf


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