2017 (2) TMI 725 - AT - Income Tax

Addition u/s 69C - assessee had actually admitted undisclosed income at the time of search and has also made surrender to that extent on the based on the seized documents - CIT(A) deleted addition - assessee trust got registration under section 12A - receipt of corpus donations - Held that - As from notes of accounts forming part of balance sheet as on 31.03.2009 mentions that the assessee trust receive voluntarily contributions and corpus donations represents acquisitions of assets i.e. land building etc. on behalf of the trust by the trustee s. Page 199 of the (APB) further manifest that the assessee trust also received corpus fund from Shri Devi Chand, Vinod Goel, Vijay Goel, Krisnhan Goel, Raj Bala, Rajni Goel, Seema Goel, with specific directions as per notes to accounts (Supra), In the notes to accounts it has also been mentioned that the corpus donations which are represented by acquisitions of assets such as land building etc. by the trust then it cannot be held that voluntarily contributions received by the assessee with specific directions does not form part of corpus donations. Hence, first allegation of the AO is not sustainable. As find from the copy of the assessment order (for AY 2009-10 placed at pages 235 to 257 of APB) it is clear that the assessing officer has not made any addition pertaining to voluntary contributions to the assessee trust and thus it is presumed that the same AO has accepted fact of voluntary contributions by the said company to the assessee trust and this amount was given by the donor to the assessee trust with specific directions that the same should be used for construction of building therefore it formed part of corpus donations and thus source of impugned amounts is clearly discernable from the above noted facts and documents. When the donor M/s Goel International Pvt. Ltd. is surrendering huge amounts including the amounts which were voluntarily contributed and donated to the assessee trust for the purpose of construction of building then the amount which has been surrendered in the case of M/s Goel International Pvt. Ltd. and all due taxes and interest etc. has been paid by the said company then the source of expenditure incurred by the assessee trust on construction of building has to be held as explained and the same amount which was surrendered and taxed in the hands of M/s Goel International Pvt. Ltd. cannot be taxed again in the hands of assessee trust under section 69C of the Act, and obviously it would amount to double taxation on the same amount which is not permissible as per well accepted principle of the tax jurisprudence. So far as allegation of the AO that the assessee never took the plea that the amount of peak has been incurred on expenditure made on behalf of M/s Galaxy Global Educational Trust by M/s Goel International Private Limited is concerned we are of the view that this plea was not relevant to be taken by the assessee trust because when it is explaining the source of expenditure incurred in the construction of building that the amount was received from M/s Goel International Pvt. Ltd. with specific directions as corpus fund then plea of then the plea of amount of peak may be relevant for M/s Goel International Pvt. Ltd. but not in the case of present assessee therefore this allegation of the AO does not have lags to stand on the justified basis. When the assessee has explained source of the funds incurred as expenditure on construction of building that the corpus funds was received from M/s Goel International Pvt. Ltd. which was also search then the amounts which were recorded in the seized material pertaining to M/s Goel International Pvt. Ltd. and the same amount which was recorded in the seized material found from the assessee trust premises does not attract provisions of section 69C of the Act as when the same amount has been surrendered and taxed in the hands of donor then the source of the funds which were used for expenditure as to held as explained in the hands of donee assessee trust and provisions of section 69C of the Act cannot be invoked for making addition on account explained expenditure - Decided in favour of assessee

Issues Involved:
1. Deletion of addition under Section 69C of the Income Tax Act, 1961 for AY 2009-10.
2. Deletion of addition under Section 69C of the Income Tax Act, 1961 for AY 2010-11.
3. Alleged violation of provisions of Section 11(1)(d) of the Income Tax Act.
4. Explanation of source of funds used for construction.
5. Corpus donations and their applicability.
6. Double taxation concerns.
7. Credibility and timing of corpus donation claims.
8. Discrepancies in balance sheets before and after the search.

Detailed Analysis:

1. Deletion of Addition under Section 69C for AY 2009-10:
The Revenue questioned the deletion of ?2,87,91,723/- added under Section 69C, arguing that the assessee admitted undisclosed income during a search and surrendered based on seized documents. The Tribunal noted that the CIT(A) found the expenditure towards construction was funded by corpus donations from Goel International Pvt. Ltd., which were used for the trust's objectives. The Tribunal upheld the CIT(A)'s decision, noting that the funds were applied for charitable purposes and the source of funds was explained satisfactorily.

2. Deletion of Addition under Section 69C for AY 2010-11:
Similar to the previous year, the Revenue contested the deletion of ?3,21,88,455/- added under Section 69C. The Tribunal reiterated that the donations were made specifically for the construction of the building and were part of the corpus fund. The CIT(A) had correctly dismissed the addition as the funds were used for the trust's charitable objectives, and the source was adequately explained.

3. Alleged Violation of Section 11(1)(d):
The AO alleged that the trust violated Section 11(1)(d) by not properly accounting for voluntary contributions. The Tribunal found that the contributions were made with specific directions to form part of the corpus and were used for charitable purposes. The CIT(A) observed that the donations were received from credible sources and used as per the trust's objectives, thus no violation occurred.

4. Explanation of Source of Funds:
The AO contended that the trust failed to explain the source of funds used for construction. The Tribunal noted that the trust provided confirmation letters from donors, explaining the source of funds. The Tribunal highlighted that the AO did not make any addition in the case of Goel International Pvt. Ltd., which indicated acceptance of the donations as voluntary contributions to the trust.

5. Corpus Donations and Their Applicability:
The Tribunal emphasized that corpus donations with specific directions are exempt under Section 11(1)(d). The trust received donations with explicit instructions for building construction, which were part of the corpus fund. The Tribunal upheld the CIT(A)'s finding that these donations were used for the trust's objectives and were exempt from tax.

6. Double Taxation Concerns:
The Tribunal addressed the issue of potential double taxation, noting that the donations were taxed in the hands of the donor (Goel International Pvt. Ltd.) and could not be taxed again in the hands of the trust. The Tribunal held that taxing the same amount twice would be against the principles of tax jurisprudence.

7. Credibility and Timing of Corpus Donation Claims:
The Revenue argued that the trust's claim of corpus donations was an afterthought, made two years after the search. The Tribunal found that the trust provided credible evidence of donations and their use for charitable purposes. The CIT(A) correctly dismissed the AO's allegations, as the donations were documented and explained satisfactorily.

8. Discrepancies in Balance Sheets:
The AO pointed to discrepancies in the balance sheets before and after the search. The Tribunal noted that the trust explained the changes, and the funds used for construction were part of the corpus donations. The Tribunal concluded that the AO's reliance on balance sheet discrepancies was unfounded, as the source of funds was adequately explained.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the additions under Section 69C for both AY 2009-10 and AY 2010-11. The Tribunal found that the trust adequately explained the source of funds, which were used for charitable purposes. The Tribunal dismissed the Revenue's appeals, noting that the AO's additions were unjustified and lacked a valid basis. The Tribunal emphasized that the funds were part of the corpus donations and were exempt under Section 11(1)(d). The order was pronounced in February 2017, dismissing the Revenue's appeals.

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