DCIT, CHENNAI V. Prait Foundation Private Limited, CHENNAI

ITA 1342/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4813 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2016
• Court: TRIBUNAL
• Department Lawyers: K N DHANDAPANI
• Assessee Lawyers: S DEEPA
• Keywords: Charitable institution; Reassessment proceedings
• Section: 143(3); 12AA; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ! ' ! # . $% , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS. 1341 TO 1344/MDS/2016 ( / ASSESSMENT YEARS: 2005-06 TO 2008-09) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(2), CHENNAI VS M/S. PRAJIT FOUNDATION PRIVATE LIMITED, NO.33, SHAFEE MOHAMMED ROAD, RUTLAND TOWERS, IV FLOOR, GREAMS ROAD, CHENNAI 600 006. PAN: AACCP8238Q ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI K.N. DHANDAPANI, JCIT /RESPONDENT BY : MS. S. DEEPA, CA /DATE OF HEARING : 03.02.2017 ! /DATE OF PRONOUNCEMENT : 25.04.2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE APPEAL BY THE REVENUE ARE DIRECTED AGAINST TH E COMMON ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, CHENNAI DATED 26.02.2016 IN ITA NO . 51/2013- 14, 146/2014-15, 147/2013-14 & 148/2013-14/CIT(A)-3 PASSED U/S.250(6) R.W.S., 143(3) & 147 OF THE ACT FOR THE ASSESSMENT YEARS 2005-06, 2006-07, 2007-08, & 2008-09 RESPECTI VELY. 2 ITA NO.1341 TO 1344/ MDS/2016 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEALS, HOWEVER THE CRUXES OF THE ISSUES ARE STATED HEREIN BELOW FOR ADJUDICATION:- I. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION FOR THE FOLLOWING ASSESSMENT YEARS:- SL.NO. ASSESSMENT YEAR ADDITIONS (RS.) 1. 2005-06 3,29,74,250 2. 2006-07 11,94,01,134 3. 2007-08 20,26,94,754 4. 2008-09 1,00,00,000 TOTAL 36,50,70,134 - AS AGAINST THE ADDITIONS MADE BY THE LD.AO TOWARD S UNDISCLOSED INCOME ON SCRUTINY ASSESSMENT U/S 143(3 ) R.W.S 147 PURSUANT TO SURVEY U/S.133A OF THE ACT DETAILED HEREIN BELOW:- SL.NO. ASSESSMENT YEAR ADDITIONS (RS.) 1. 2005-06 3,29,74,250 2. 2006-07 11,94,01,134 3. 2007-08 20,26,94,754 4. 2008-09 12,98,65,271 TOTAL 48,27,44,657 3 ITA NO.1341 TO 1344/ MDS/2016 II. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITIO N MADE BY THE LD.AO U/S.41 OF THE ACT, TO THE TUNE OF RS.16,52,82,392/- FOR THE AY 2008-09 WITHOUT CONSID ERING THE FACTS THAT IT WAS ONLY CESSATION OF TRADING LIA BILITY SINCE THE OBLIGATION TO REPAY THE LOAN HAD CEASED TO EXIS T. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE ACTIVITY OF LETTING OUT BUILDINGS FOR SPIRITUAL DISCOURSES AND MEDITATION. THE ASSESSEE COMPANY HAD FILED ITS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2005-06 AND 2006-07 DECLARING NIL INCOME AND FOR TH E ASSESSMENT YEAR 2007-08 DECLARING RS.4,55,918/- AS ITS INCOME. HOWEVER ALL THESE RETURNS WERE FILED BEYOND THE TIM E LIMIT PRESCRIBED U/S.139(1) & 139(4) OF THE ACT, HENCE TH EY WERE TREATED AS NON-EST AND WAS NOT ACTED UPON BY THE RE VENUE. FOR THE ASSESSMENT YEAR 2008-09 THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 26.09.2008 ADMITTING INCOME OF RS.79,79,6 58/- AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 08.09.2010 WHEREIN THE LD.AO MADE ADDITION OF RS.3,98,65,271/-. SUBSEQUENTLY A SURVEY WAS CONDUC TED IN THE 4 ITA NO.1341 TO 1344/ MDS/2016 ASSESSEES PREMISES ON 29.03.2012 AND 30.03.2012. CONSEQUENT TO THE FINDINGS IN THE COURSE OF SURVEY THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE LD.AO REOPENED THE ASSESSMENT FOR THE ASSESSMENT YEARS 2005-06 TO 2008-09. DURING THE COURSE OF SURVEY IT WAS REVEALED FROM TH E COMPUTER INSTALLED AT THE ASSESSEES PREMISES THAT THE ASSES SEE HAD RECEIVED DONATIONS FROM VARIOUS DEVOTEES AGAINST WH ICH RECEIPTS WERE DRAWN OUT AND NOT FROM OTHER CHARITABLE TRUST AS CLAIMED BY THE ASSESSEE. ON FURTHER EXAMINATION IT WAS FOUND T HAT THE RECEIPTS WERE ACTUALLY PREPARED AND SIGNED BY TWO E MPLOYEES OF THE ASSESSEE COMPANY FROM THE YEAR 2006 ONWARDS. WH EN QUERIED, SHRI N.K.V. KRISHNA WHO OWNS 50% OF THE SH ARES OF THE COMPANY ADMITTED VIDE STATEMENT RECORDED AT THE TIM E OF REASSESSMENT PROCEEDINGS ON 27/11/2012 THAT THE AMO UNT OF RS. 48,27,44,657/- IS THE UNDISCLOSED INCOME OF THE AS SESSEE COMPANY AS DETAILED HEREIN BELOW:- SL.NO. ASSESSMENT YEAR ADDITIONS (RS.) 1. 2005-06 3,29,74,250 2. 2006-07 11,94,01,134 3. 2007-08 20,26,94,754 4. 2008-09 12,98,65,271 TOTAL 48,27,44,657 5 ITA NO.1341 TO 1344/ MDS/2016 HOWEVER ON 28/11/2012 SHRI N.K.V. KRISHNA RETRACT ED THE ADMISSION MADE BY HIM ON 27/11/2012 ABOUT THE UNDIS CLOSED INCOME MENTIONED HEREIN ABOVE. IT WAS EXPLAINED BY SHRI N.K.V. KRISHNA THAT THE AFORESAID AMOUNT WERE RECEIVED FRO M M/S. ANUGRAHA TRUST AND FROM M/S. NACHIPUR EDUCATIO NAL TRUST BOTH REGISTERED U/S.12A(A) OF THE ACT, WHO HAD CANV ASSED DONATION FROM VARIOUS INDIVIDUAL DEVOTEES. BUT THE LD.AO REJECTED THE ARGUMENTS ADVANCED BY THE ASSESSEES REPRESENTATIVES BASED ON THE GENUINENESS & CREDITWO RTHINESS OF THE DONORS AND MADE ADDITION FOR ALL THE ASSESSMENT YEARS DETAILED HEREIN ABOVE. ON APPEAL THE LD.CIT(A) DELE TED THE ADDITION FOR THE AY 2005-06 RS.3,29,74,250/-, FOR A Y 2006-07 RS.11,94,01,134/-, FOR AY 2007-08 RS.20,26,94,750/- AND FOR THE AY 2008-09 RS.1,00,00,000/- BY RELYING ON THE DECIS ION OF THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NOS.2063,2064, 2065,2066 & 2067/MDS/2014 FOR THE AYS 2004-05 TO 2008-09 IN T HE CASE OF DDIT(EXEMPTIONS), CHENNAI VS. M/S. NACHIPUR EDUCATI ONAL TRUST AND IN THE CASE DDIT(EXEMPTIONS), CHENNAI VS. M/S. ANUGRAHA TRUST IN ITA NO.2173/MDS/2012 FOR THE AY 2004-05, I TA NOS.2068,2069,2070&2071/MDS/2014 FOR THE AYS 2005-0 6 TO 6 ITA NO.1341 TO 1344/ MDS/2016 2008-09. THE RELEVANT PORTION OF THE ORDER OF THE L D.CIT(A) IS REPRODUCED HEREIN BELOW FOR REFERENCE:- PAGE 55 TO 59 : IT WAS FURTHER ARGUED BY THE AR OF THE APPELLANT THAT THE DONATIONS RECEIVED UNDER DISCUSSION BY THE APPELLANT COMPANY ARE IN FACT HAVE BEEN RECEIVED FROM THE ABO VE MENTIONED TWO TRUSTS BUT NOT DIRECTLY FROM THE DEVO TEES. IT IS ALSO SAID THAT ALL THE TRANSACTIONS PERTAIN TO M/S. NACH IPUR EDUCATIONAL TRUST AND M/S. ANUGRAHA TRUST ARE REFLE CTED IN THEIR RESPECTIVE BALANCE SHEETS FOR THE RELEVANT AYRS. TH ESE TRUSTS ARE ASSESSED TO TAX AND IN FACT ASSESSMENTS FOR ALL THE SE AYRS WERE COMPLETED BY THE CONCERNED AO. THE AO OF THESE TRUS TS HAVE ALSO MADE AN ADDITION WHICH WAS ALLOWED BY THE FIRST APP ELLATE AUTHORITY AND CONFIRMED BY THE HON'BLE ITAT. IN SUPPORT OF THE ABOVE CLAIM OF THE AR OF THE APPE LLANT, HE HAS FILED A COPIES OF CIT(A)'S ORDERS IN THE CASE OF M/ S. ANUGRAHA AND M/S. NACHIPUR TRUST AND ALSO A COPY OF CONSOLID ATED ORDER OF HON'BLE ITAT 'C' BENCH CHENNAI VIDE ITA NOS. 2063, 2064, 2065, 2066 & 2067/MDS/2014, FOR A.YRS 2004-05 TO 20 08-09 IN THE CASE OF DDLT (EXEMPTIONS) CHENNAI VS. M/S. NACH IPUR EDUCATIONAL TRUST, ITA NO. 2173/MDS/2012 FOR A.Y. 2 004-05, ITA NO. 2068, 2069, 2070& 2071/MDS/2014 FOR A.YRS . 2005-06 TO 2008-09 IN THE CASE OF DDIT(EXEMPTIONS) CHENNAI VS. M/S. ANUGRAHA. THE RELEVANT PART OF HON'BLE INCOME TAX A PPELLATE TRIBUNAL, C BENCH CHENNAI, COMBINED ORDER IN THE AB OVE MENTIONED TWO CASES, IS REPRODUCED AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. ADMITTEDLY, BOTH THE ASSESSEE-TRUSTS ARE REGISTERED UNDER SECTION 12AA OF THE ACT. BOTH THE ASSESSEES CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT. HOWEV ER, THE ASSESSING OFFICER DENIED THE SAME ON THE GROUND THA T THERE WAS VIOLATION OF SECTION 13(1)(D) OF THE ACT. IN OTHER WORDS, THE TRUST FUNDS WERE DIVERTED FOR INTERESTED PERSON AS PROVID ED UNDER SECTION 13(1)(D) OF THE ACT. WE HAVE GONE THROUGH THE ORDE RS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. THE FUNDS OF THE TRUSTS 7 ITA NO.1341 TO 1344/ MDS/2016 WERE ADVANCED TO TWO COMPANIES, NAMELY, M/S PRAJIT FOUNDATION PVT. LTD. AND M/S GOLDEN SHELTERS PVT. LTD. FOR CONSTRUC TION OF MEDITATION HALL AT VARADALAPALAM MANDAL, CHITOOR DISTRICT, AND HRA PRADESH. ONE SHRI N.K.V. KRISHNA AND HIS WIFE SMT. K. PREETHI OW N THE ENTIRE SHARES IN M/S PRAJIT FOUNDATION PVT. LTD. AND M/S GOLDEN S HELTERS PVT. LTD. SHRI N.K.V. KRISHNA IS NONE OTHER THAN THE SON OF S HRI V. VIJAYKUMAR, WHO WAS THE TRUSTEE OF BOTH THE TRUSTS. HOWEVER, T HE SAID SHRI V. VIJAYKUMAR RELINQUISHED HIS TRUSTEESHIP ON AND FROM 08.06.1991. THEREFORE, FOR THE ASSESSMENT YEARS UNDER CONSIDERA TION, THE SAID SHRI V. VIJAYKUMAR HAS NO RELATIONSHIP WITH THE TRU STS. THE QUESTION ARISES FOR CONSIDERATION IS WHEN SHRI V.VIJAYKUMAR IS NO LONGER A TRUSTEE OF THE ASSESSEE-TRUSTS, CAN THE FUNDS BE AD VANCED TO THE COMPANIES IN WHICH THE SON OF SHRI V. VIJAYKUMAR AN D HIS DAUGHTER- IN-LAW ARE HOLDING SHARES WOULD AMOUNT TO DIVERSION OF FUNDS TO INTERESTED PERSON? THIS TRIBUNAL IS OF THE CONSIDE RED OPINION THAT THE MOMENT SHRI V. VIJAYKUMAR RELINQUISHED HIS TRUSTEES HIP, IT CANNOT BE SAID THAT SHRI V. VIJAYKUMARS SON AND DAUGHTER-IN- LAW ARE INTERESTED PERSONS IN THE TRUSTS. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO VIOLATION OF SECTION 13(1) (D) OF THE ACT. NOW COMING TO CORPUS DONATION, THE ASSESSEES CLAIM THAT ALL THE DETAILS WERE FURNISHED BEFORE THE LOWER AUTHORITIES . FROM THE MATERIAL AVAILABLE ON RECORD, IT APPEARS THAT ALL T HE DETAILS WERE NOT FURNISHED. THOUGH CERTAIN DETAILS WERE FURNISHED, IT IS A FACT THAT COMPLETE DETAILS WERE NOT FURNISHED BEFORE THE LOWE R AUTHORITIES. THEREFORE, PART OF THE SO-CALLED CORPUS DONATION HA S TO BE TREATED AS INCOME OF THE ASSESSEE-TRUSTS. HOWEVER, IT IS NOT IN DISPUTE THAT THE ENTIRE CORPUS DONATION AND OTHER DONATIONS WERE USE D FOR THE CONSTRUCTION OF MEDITATION HALL AT VARADALAPALAM MA NDAL. THEREFORE, EVEN IF THE CLAIM OF THE ASSESSEES WITH REGARD TO R ECEIPT OF CORPUS DONATION IS DISBELIEVED, THEN THE SO-CALLED DONATIO N HAS TO BE TREATED AS INCOME OF THE ASSESSEE AND IT IS TO BE ALLOWED A S APPLICATION FOR CREATING INFRASTRUCTURE. SINCE ADMITTEDLY THE DONA TIONS WERE USED FOR CONSTRUCTION OF MEDITATION HALL, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT THE ENTIRE INCOME HAS TO BE HELD AS AP PLICATION OF INCOME. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY AL LOWED THE CLAIM OF THE ASSESSEE. NOW COMING TO CONSTRUCTION OF MEDITATION HALL BY TW O COMPANIES, THE CONTENTION OF THE LD. D.R. APPEARS TO BE THAT THE M EDITATION HALL FORMS PART OF THE ASSET OF THE TWO COMPANIES. THER EFORE, IT CANNOT BE CREATED AS INFRASTRUCTURE OF THE ASSESSEE TRUSTS . THE FACT THAT THE MEDITATION HALL WAS HANDED OVER TO THE ASSESSEE-TRU STS IS NOT IN DISPUTE. THE PROPERTY TAX ASSESSMENT BY LOCAL BODY ALSO STANDS IN 8 ITA NO.1341 TO 1344/ MDS/2016 THE NAME OF TWO ASSESSEE-TRUSTS. THEREFORE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE TWO COMPANIES CONS TRUCTED THE MEDITATION HALL AND HANDED OVER THE SAME TO THE ASS ESSEE-TRUSTS AND THE PROPERTY TAX ASSESSMENT STANDS IN THE NAME OF A SSESSEE-TRUSTS, THE ASSESSEES ARE THE OWNERS OF THE PROPERTY UNDER THE PROVISIONS OF INCOME-TAX ACT. UNDER THE INDIAN LAW, A LAND CAN B ELONG TO ONE PERSON AND THE BUILDING CAN BE OWNED BY OTHER PERSO N. IN THE CASE BEFORE US, THE LAND IN WHICH THE MEDITATION HALL WA S CONSTRUCTED BELONGS TO A DIFFERENT PERSON, BUT THE BUILDING WAS CONSTRUCTED BY THE TWO COMPANIES ON THE FUNDS ADVANCED BY THE ASSESSEE -TRUSTS. AFTER CONSTRUCTION, THE BUILDING WAS HANDED OVER TO THE A SSESSEE-TRUSTS. THEREFORE, THERE WAS TRANSFER OF PROPERTY WITHIN TH E MEANING OF SECTION 2(47) OF THE ACT. UNDER THE COMMON LAW, RE GISTRATION OF DOCUMENT IS REQUIRED WHEN THE PROPERTY VALUE EXCEED S MORE THAN `100/-. HOWEVER, UNDER SECTION 2(47) OF THE ACT, R EGISTRATION OF THE DOCUMENT IS NOT MANDATORY. WHEN THE PHYSICAL POSS ESSION OF THE BUILDING IS HANDED OVER TO THE ASSESSEE-TRUSTS AND ALLOWED THE ASSESSEE-TRUSTS TO ENJOY THE SAME, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE-TRUSTS BECAME THE OWNERS OF THE MEDITATION HALL. THEREFORE, FOR ALL PRACTICAL PURPOSE, THE AS SESSEE TRUSTS BECOME THE OWNER OF THE MEDITATION HALL CONSTRUCTED BY THE TWO COMPANIES ON THE FUNDS ADVANCED BY THE ASSESSEE-TRUSTS. THE TREATMENT OF THE ASSESSEE IN THE ACCOUNTS OF THE COMPANIES OR TRUSTS CANNOT OVERRIDE THE PROVISIONS OF INCOME-TAX ACT. IN OTHER WORDS, THE PROVISIONS OF INCOME-TAX ACT WOULD PREVAIL OVER THE TREATMENT OF THE ASSESSEE IN THE ACCOUNTS. THEREFORE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THERE IS NO VIOLATION OF ANY OF THE PROVISIONS OF SECTIONS 11, 12 & 13 OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SINCE THE ASSESSEE-TRUSTS APPLIED THEIR FUNDS FOR ESTABLI SHING AN INFRASTRUCTURE IN FURTHERANCE OF THEIR OBJECT, NAME LY, CONSTRUCTION OF MEDITATION HALL, AND THE MEDITATION HALL IN FACT WA S COMPLETED AND THE POSSESSION WAS HANDED OVER TO THE ASSESSEE-TRUS TS, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE A SSESSEES UNDER SECTION 11 OF THE ACT. THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE CIT(APPEALS), ACCORDINGLY, THE SAME A RE CONFIRMED. ON PERUSAL OF ORDER OF THE HON'BLE ITAT CHENNAI C B ENCH ORDER, IT IS FOUND THAT TRIBUNAL HAS UPHELD THE CONTENTION S OF APPELLANT COMPANY. NEEDLESS TO SAY THAT HON'BLE ITAT HAS GIVE N FACT FINDING IN SO FAR AS SOURCE, GENUINENESS AND CREDIT WORTHINESS OF THE TWO TRUSTS NAMELY M/S. ANUGRAHA TRUST AND M/S. NACHIPUR EDUCATIONAL TRUST IT HAS ALSO GIVEN A CATEGORICAL F INDING THAT 9 ITA NO.1341 TO 1344/ MDS/2016 FUNDS HAVE BEEN ADVANCED TO THE APPELLANT COMPANY B Y THE TWO TRUSTS FOR CONSTRUCTION OF MEDITATION HALL, THE MED ITATION HALL HAS BEEN TRANSFERRED TO THE TRUSTS AFTER COMPLETION OF CONSTRUCTION AND SUBSEQUENTLY LEASED OUT THE SAME TO THE APPELLA NT COMPANY. AT THE COST OF REPETITION, THE RELEVANT PART OF THE ORDER IS REPRODUCED HEREUNDER: 'WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND MATERIAL AVAILABLE ON RECORD. THE FUNDS OF THE TRUS TS WERE ADVANCED TO TWO COMPANIES, NAMELY M/S. PRAJIT FOUNDATION PVT . LTD. AND MLS. GOLDEN SHELTERS PVT. LTD. FOR CONSTRUCTION OF MEDIT ATION HALL AT VARADALAPALAM MANDAL, CHITOOR DISTRICT, ANDHRA PRAD ESH IT IS OBSERVED FROM THE ORDER OF CIT (A) AND HON'BL E ITAT THAT THE RECEIPTS STATED TO HAVE BEEN RECEIVED BY THE AP PELLANT COMPANY HAVE BEEN CONSIDERED IN THE RESPECTIVE TRUS TS HANDS IN RESPECTIVE A.YRS AND TAXED IF ANY. THE BALANCE SHEE T OF THE APPELLANT COMPANY AS ON 31.03.2008 IS ALSO SHOWING THAT MEDITATION HALL AND OTHER ASSETS TO THE TUNE OF RS 43,25,35,107. IN VIEW OF THE FINDING OF HON'BLE ITAT, I AM LEFT W ITH NO OPTION EXCEPT TO FOLLOW THE HONBLE ITAT ORDER. BEFORE ME , AR OF THE APPELLANT HAS FILED BALANCE SHEETS OF BOTH THE TRUS TS FOR THE RELEVANT A.YRS. 2005-06 TO 2008-09. I HAVE PERUSED BALANCE SHEET IN RESPECT OF EACH A.Y AND FOUND THAT THE AMO UNTS STATED TO HAVE BEEN RECEIVED FROM THESE TWO TRUSTS WHICH IS G IVEN HEREIN ABOVE HAVE BEEN SHOWN AS INFRASTRUCTURE DEVELOPMENT FUND IN RESPECTIVE BALANCE SHEET FOR ALL THE A.YRS 2005-6 T O 2008-09. SINCE, IDENTITY, CREDITWORTHINESS AND GENUINENESS O F THE TWO TRUSTS HAVE BEEN ACCEPTED BY CONCERNED CIT(A) AND H ONBLE ITAT. I HOLD THAT SAID FUNDS HAVE COME FROM TWO TR USTS NAMELY M/S. NACHIPUR EDUCATIONAL TRUST AND M/S. ANUGRAHA T RUST. HOWEVER KEEPING IN VIEW OF APPELLANTS DISCLOSURE A T THE TIME OF SURVEY, NATURE OF TRANSACTIONS, RELATIONSHIP BETWEE N THE TWO TRUSTS, THE APPELLANT COMPANY, CIT(A)S AND HONBLE ITAT ORDER IN THE CASE OF TWO TRUSTS AND APPELLANT HAD ALREADY ADMITTED AN PAID TAX UNDER THE HEAD OTHER SOURCES AMOUNTING TO RS.747,35,405. I CONFIRM ADDITIONALLY AN AMOUNT OF 10 ITA NO.1341 TO 1344 /MDS/2016 RS.7,00,00,000 FOR WANT OF DETAILS. THESE CONFIRME D ADDITIONS SHOULD BE CONSIDERED FOR A.Y. 2008-09. RESPECTFULL Y FOLLOWING HONBLE ITATS ORDER, I DIRECT THE ASSESSING OFFICE R TO DELETE THE ADDITIONS MADE IN RESPECT OF ALL THE A.YRS I.E 2005 -06 TO 2008-09 AS UNDER: FOR A.Y. 2005-06 AN AMOUNT OF RS.3,29,74,250, FOR A .Y. 2006-07 AN AMOUNT OF RS.11,94,01,134, FOR A.Y. 2007-08 AN A MOUNT OF RS.20,26,94750 AND FOR A.Y.2008-09 AN AMOUNT OF RS.1,00,00,000. 4. BEFORE US, THE LD.DR ARGUED IN SUPPORT OF THE LD .AOS ORDER WHILE AS THE LD.AR RELIED ON THE ORDER OF THE LD.CIT(A) AND PLEADED THAT THE SAME MAY BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD PRODUCED BEFORE U S. THE LD.CIT(A) HAS ARRIVED AT THE ABOVE DECISION IN FAVO UR OF THE ASSESSEE ONLY BASED ON THE FINDINGS OF THE CHENNAI BENCH OF THE TRIBUNAL THAT THE CREDITWORTHINESS, GENUINENESS AND SOURCE OF THE AMOUNT RECEIVED BY M/S. ANUGRAHA TRUST AND M/S . NACHIPUR EDUCATIONAL TRUST AS DONATION WHICH WAS FURTHER ADV ANCED TO THE APPELLANT COMPANY FOR CONSTRUCTION OF MEDITATION HA LL IS BONAFIDE AND THE LAND ALONG WITH THE BUILDING/MEDITATION HAL L IS OWNED BY THE TRUSTS AND NOT BY THE ASSESSEE COMPANY. THEREF ORE WE DO 11 ITA NO.1341 TO 1344 /MDS/2016 NOT FIND ANY REASON TO INTERFERE WITH HIS ORDERS. ACCORDINGLY GROUND NO.I IS DISPOSED OFF IN FAVOUR OF THE ASSESS EE. 6. GROUND NO.II: ADDITION OF RS.16,52,82,392/- TOWARD S REMISSION OF LIABILITY:- DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WAS OP INED BY THE LD.AO THAT THE ASSESSEE HAD TRANSFERRED UNSECUR ED LOAN STANDING IN THE NAME OF SHRI N.K.V. KRISHNA RS.16,5 2,82,392/- AS ON 01.04.2007 TO RESERVES & SURPLUS. SINCE THERE W AS NO OBLIGATION TO REPAY THE LOAN THE LD.AO TREATED THE SAME AS DONATION RECEIVED DURING THE YEAR. FURTHER THE ASS ESSEE HAD ALSO NOT CLARIFIED TO THE QUERY RAISED BY THE LD.AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HENCE THE LD.AO PRESUMED THAT THE ASSESSEE HAD NO OBJECTION TO THE PROPOSAL FOR MAKING ADDITION OF RS.16,52,82,392/- BY INVOKING THE PROVI SIONS OF SECTION 41 OF THE IT ACT. DURING THE APPELLATE PRO CEEDINGS THE LD.AR HAD SUBMITTED BEFORE THE LD.CIT(A) AS FOLLOWS : 1) THE AMOUNT OF RS.16,52,82,392/- WAS RECEIVED FROM SHRI N.K.V. KRISHNA AS UNSECURED LOAN BY THE ASSESS EE. 2) DURING THE RELEVANT ASSESSMENT YEAR THE SAME WAS TRANSFERRED TO INFRASTRUCTURE DEVELOPMENT FUND. 12 ITA NO.1341 TO 1344 /MDS/2016 3) HOWEVER THE FACT REMAINS THAT THE LOAN AMOUNT IS TO BE REPAID TO SHRI N.K.V. KRISHNA AND ACCORDINGLY THE S AME WAS SHOWN AS DEBTORS IN THE BOOKS OF SHRI N.K.V. KR ISHNA. 4) THEREFORE THERE WAS NO REMISSION OF LIABILITY BY TH E CREDITOR SHRI N.K.V. KRISHNA AND HENCE PROVISIONS OF SECTION 41(1) OF THE ACT CANNOT BE INVOKED. AFTER ANALYZING THE REPLY OF THE LD.AR AND VERIFYIN G THE FACTS OF THE CASE, THE LD.CIT(A) DIRECTED THE LD.AO TO DE LETE THE ADDITION OF RS.16,52,82,392/- MADE BY INVOKING THE PROVISION OF SECTION 41 OF THE ACT BY OBSERVING AS UNDER: PAGE 52 TO 53: ON CONSIDERATION OF STAND OF BOTH TH E SIDES, I FOUND THAT AR OF THE APPELLANT ARGUMENTS HAS FORCE. ADMITTEDLY THE AMOUNT OF RS.16,52,82,392 IS RECEIVED AS UNSECU RED LOAN FROM MR.NKV KRISHNA, WHO IS A DIRECTOR AND SHAREHOL DER OF THE APPELLANT COMPANY. THIS AMOUNT WAS GIVEN TO THE AP PELLANT COMPANY BY WAY OF CHEQUE AND SAME IS REFLECTED IN T HE BALANCE SHEET OF APPELLANT COMPANY AS WELL AS IN THE BALANC E SHEET OF SHRI NKV KRISHNA. I HAVE GONE THROUGH THE RETURN O F INCOME OF SHRI NKV KRISHNA AND FOUND THAT AN AMOUNT OF RS.15, 52,82,392 IS FOUND TO HAVE BEEN SHOWN UNDER THE HEAD INVESTME NT IN HIS BALANCE SHEET AS ON 31.03.2007. HOWEVER, DETAILS F ILED BY THE APPELLANT COMPANY WITH REGARD TO UNSECURED LOAN REC EIVED FROM SHRI NKV KRISHNA AT RS.16,52,82,392, WHICH IS INCLU SIVE OF RS.1,00,000 GIVEN DURING THE F.Y. 2007-08 RELEVANT TO A.Y. 2008- 09. I ALSO AGREE WITH THE AR OF THE APPELLANT THAT UNSECURED LOAN IS NOT A TRADING LIABILITY, THEREFORE, SECTION 41(1 ) IS NOT APPLICABLE IN THE APPELLANTS CASE. IN THIS REGARD , IT IS 13 ITA NO.1341 TO 1344 /MDS/2016 APPROPRIATE TO REPRODUCE PART OF SUB SECTION 1 OF S ECTION 41 WHICH IS AS UNDER: [(1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXP ENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HERE INAFTER REFERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR NEEDLESS TO SAY THAT AMOUNT UNDER DISCUSSION SHOULD HAVE BEEN MADE EITHER DEDUCTION OR ALLOWANCE IN ANY A.Y. WHIC H SUBSEQUENTLY HAS COME TO THE NOTICE OF THE AO AS CE SSATION OF TRADING LIABILITY, THEN, THE SAID AMOUNT CAN BE BRO UGHT TO TAX UNDER SECTION 41. IN THE APPELLANT CASE, IT IS NEI THER A DEDUCTION NOR ALLOWANCE MADE IN ANY A.Y, THEREFORE, I HOLD TH AT A.O HAS WRONGLY INVOKED SECTION 41IN THE APPELLANTS CASE. FURTHER, APPELLANT COMPANY IS SHOWING SHRI NKV KRIS HNA AS CREDITOR IN ITS BOOKS OF ACCOUNT. IT IS ALSO A FACT THAT SHRI NKV KRISHNA IS STILL SHOWING IN HIS BOOKS, AS AN INVEST MENT. IN VIEW OF THE ABOVE DISCUSSION I HOLD THAT THERE IS NO CES SATION OF LIABILITY BY SHRI NKV KRISHNA. FURTHER IT IS NOTIC ED THAT THIS AMOUNT HAS BEEN BROUGHT FORWARD FROM 31.03.2007. T HEREFORE AO IS DIRECTED TO DELETE AN AMOUNT OF RS.16,52,82,3 92. ALL GROUND TAKEN BY THE APPELLANT ARE ALLOWED. 7. SINCE THE LD.CIT(A) AFTER VERIFYING THE FACTS HA S MADE A CATEGORICAL FINDING THAT SHRI N.K.V. KRISHNA HAS CO NTINUED TO TREAT THE ASSESSEE COMPANY AS HIS DEBTOR, WE DO NOT FIND ANY MERITS IN THE ORDER OF THE LD.AO FOR MAKING THE ADDITION I NVOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT. BEFORE US THE LD.DR HAS 14 ITA NO.1341 TO 1344 /MDS/2016 ALSO NOT PROVED THE FACTS OTHERWISE THAN WHAT WAS H ELD BY THE LD.CIT(A). THEREFORE WE DO NOT FIND IT NECESSARY T O INTERFERE WITH THE ORDER OF THE LD.CIT(A). 8. IN THE RESULT, ALL THE APPEALS OF THE REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE COURT ON THE 25 TH APRIL, 2017. SD/- SD/- ( ! ' ! # . $% ) ( . ) ( DUVVURU RL REDDY ) ( A . MOHAN ALANKAMONY ) ' #$ /JUDICIAL MEMBER #$ / ACCOUNTANT MEMBER %' /CHENNAI, &# /DATED 25 TH APRIL, 2017 JR # () *) /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. - ( )/CIT(A) 4. - /CIT 5. )./ 0 /DR 6. /1 /GF