The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that a person cannot be treated as “de facto trustee” under section 13(3) of the Income Tax Act, 1961 merely because he is supervising the substantial activities of the Trust.
The Assessee, M/s. Inclen Trust International is a trust registered under section 12A of the Income Tax Act, 1961, having charitable aims and objective filed return of income declaring nil income. During scrutiny proceedings, Assessing Officer sought justification of salary of Rs.90,00,000/- paid by the assessee trust to Dr. N.K. Arora, Executive Director. Later, he concluded the proceedings by observing that Dr. N.K. Arora, Executive Director of the trust is covered under section 13(3) of the Act as a Manager on the ground that a trust running for the cause of public good has to be judged from the sacrifices made by the persons running the trust and if the Manager.
After analyzing the provisions of the definition of the “specified person”, Accountant Member O.P Kant and Judicial Member Kuldip Singh observed that Dr. N.K. Arora, Executive Director of the trust does not fall under any head of the specified person. AO has used the word that Dr. N.K. Arora is a de facto trustee and there is no such category in the name of a de facto trustee under section 13(3) of the Act.
Allowing the appeal filed by the assessee, the Tribunal held that “we are of the considered view that when charitable nature of the trust is not in dispute and Dr. N.K. Arora has been working as per directions issued by the Board of Trustees to carry out various research projects as an Executive Director and being paid remuneration by the trustee stated to be commensurate to his functional profile, there is no question of treating him as a specified person under the garb of the self-created principle of “de facto trustee” merely on the ground that he is supervising the substantial activities of the trust.”
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