Section 13(2)(c) — the law in short
What the courts have decided on section 13(2)(c), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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CIT (E) v IILM Foundation
High CourtHelps taxpayerNo later treatment found
Our trust pays a salary to its chairperson, who is a trustee. Does that cost us the s.11 exemption?
No, provided the salary is no more than what the services are reasonably worth. Section 13(2)(c) is not a bar on paying a specified person at all: it deems a salary to be application for that person's benefit only to the extent it is in excess of what may reasonably be paid for the services, so a payment that is reasonable for the service is not caught by s.13(1)(c) at all. The Delhi High Court answered both questions of law against the revenue and dismissed its appeals. Note what was not in issue: the reasonableness of the Rs 16,20,000 salary had been found below and was not contested before the High Court, which recorded that there was no cavil about it, so the decision is on the legal point and not a finding on the facts of this trust's remuneration.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
