The assessee, a charitable trust registered under section 12A and engaged in imparting education through various educational institutions, paid salary to its chairperson. The Assessing Officer held that the remuneration was excessive and not commensurate with her qualifications and duties and, treating her as a related person, disallowed 30 per cent of the payment under section 40A(2)(a). The Commissioner (Appeals) deleted the addition holding that the salary was reasonable and also noting consistency with the earlier assessment year. The Tribunal, after considering additional evidence regarding the chairperson’s qualifications and contribution to the institution, upheld the order of the Commissioner (Appeals) and held that reasonable remuneration paid for services rendered to a person specified under section 13(3) would not attract the provisions of section 13(1)(c). On appeal, the High Court held that section 13(1)(c) denies exemption only where income of the trust is applied directly or indirectly for the benefit of specified persons. Under section 13(2)(c), payment of salary or allowance to such persons would be deemed to be for their benefit only where it is in excess of what may reasonably be paid for the services rendered. If the remuneration is reasonable, it cannot be regarded as diversion of income for the benefit of the specified person. Since the Tribunal had recorded a finding of fact that the salary paid to the chairperson was reasonable having regard to her qualifications and services, there was no violation of section 13(1)(c) and the trust was entitled to exemption. The finding of the Tribunal was not perverse. (AYs. 2009-10 to 2011-12)