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TMI Blog2017 (4) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-1-2017 - SHRI R.C.SHARMA, AM AND SHRI RAVISH SOOD, JM For The Revenue : Shri A. Ramachandran For The Assessee : Shri Vijay Mehta ORDER PER R.C.SHARMA (A.M) : This is an appeal filed by the Revenue against the order of CIT(A) for the assessment year 2010-11, in the matter of order passed u/s.143(3) of the I.T. Act wherein following grounds have been taken by the Revenue. 1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in relying on the lease agreement between the assessee and the lessor ignoring the fact that the transaction is not at Arms length and is between interested parties. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to take in account the excessive provision of Para 3 of the lease agreement for a deposit of ₹ 9 crores and monthly lease rentals of ₹ 5 lakhs against a property of ₹ 31 crores which in itself proves that the lease deed is of diverting the funds of the assessee to its interested concern. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A), erred in admitting additional evidence in the form of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of donation under reference (pg.6 of the assessment order). Under the circumstances the conclusion of failure of the appellant in proving identity, source and genuineness for the said amount in terms of section 68 is misplaced and by ignoring the uncontradicted/accepted documents like PAN, ledger account, bank accounts and statement of Shri Nilesh J Thakur. The' onus to prove identity, genuineness and creditworthiness in this case is discharged by the appellant in the context of the documentary evidence - PAN, number, copy of bank account and statement before the LT. Authority - filed and placed before the AO. The judicial pronouncement in the cases of Addl. CIT Vs. Bahri Brothers Pvt. Ltd. (1985) 154 ITR (Pat), Kamal Motors Vs. CIT (2003) Taxmann, and also in the case of CIT Vs. Mehrotra Brothers SLPI 37076/2004 holding that 'assessee had explained satisfactorily the'cash credits and the department had not brought any material to rebut the same' leads to conclusion that the appellant has discharged the onus of explaining the credit of ₹ 6 Cr. appearing as donation and added u/s 68 of the LT. Act in the computation' of income. Hence same could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s - Admittedly, more than 75 per cent of the donations were applied for charitable purposes - Fact that complete list of donors was not filed or that the donors were not produced does not necessarily lead to the inference that the assessee as trying to introduce unaccounted money by way of donation receipts - Sec. 68 has no application to the facts of the case as the assessee has in fact disclosed the donations as 'income. Accordingly, Tribunal rightly held that addition u/s 68 was not correct and exemption u/s 11 could not be denied - No substantial question of law arises. It is also alternatively submitted that- However, Id. AO not allowed the set-off of loss of ₹ 4,45,23,942/- (claimed in ROI of AY:10-11) from additions made. Similarly, brought forward loss of ₹ 1,24,24,231/- of AY:2009-10 was also left to be set-off against the additions made for AY:2010-11. 4.6 This aspect of set-off of loss (excess application) also goes in favour of the appellant as far as computation of quantum is concerned. It has been argued by relying on the decision in the case of CIT Vs. Institute of Banking Personnel Selection (2003) 264 ITR 110 (Bom) where it was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lternative arguments, being linked to exemption, lead to consideration of ground no. 3, 4 and 5 of appeal which are discussed below. The AO has noted in the assessment order in para 5.2 as under: 5.2 Diversion of ₹ 6,68,00,000/- to M/s Kalyani Education Pvt. Ltd.(excluded person) During the course of assessment proceedings' it is seen that the' trust has shown an advance of ₹ 6,68,00,000/- to M/s Kalyani Education. Pvt. Ltd. (PAN:AACCK4122A) claimed to be 'Deposit for leased Assets'. Accordingly, a show-cause u/s 142(1) dd. 15.02.2013 was issued to the assessee. 5.1 After considering the reply of the appellant filed before AO vide letter dtd.23.02.2013, the AO has proceeded to examine the agreement dtd.01.07.2008 under which the said transaction has taken place. After detailed discussion the AO has concluded as follows: In view of the above, undersigned is constrained to conclude: a) That the said agreement is a colorable device, created with a view to divert money into an excluded person, to fund construction of premises form the trust, in a company viz. Kalyani Education Pvt. Ltd. (excluded person), so that on regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted before the AO also that We are enclosing herewith following documents as required by you. 1) ROC Annual Return of Mls Kalyani Education Pvt. Ltd. alongwith Profit and Loss Account and copy of Balance Sheet for the FY:2006-07 to FY:2009-10. 2) Copy of all accounts of the company in the books of trust. 3) Copy of Lease Deed. 4) Copy of relevant title deeds. Total cost of construction and purchase of land for the leased asset is ₹ 27.00 Crore. Other School and college equipments is ₹ 4 Crore. Total cost of the leased asset is ₹ 31.00 Crore. Total land area in Sq. Meter: 34018.38 Total Construct area in Sq. Meters: 10100.24 Valuation of the Land and Building as on the date of lease agreement is ₹ 33,80,22,960/-. Copy of valuation report is enclosed herewith. 5) Basis of computation of Deposit is ₹ 7.00 Crore. In the normal market scenario Security Deposit is 10% of the Market' Value of the leased assets as on the Date of Lease and minimum 1 % is the lease rent per month. In our case market value is ₹ 35.00 Crore as on the date of lease Deed. Minimum deposit will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits for Leased Assets' strictly as per agreement executed in that behalf on 24.12.08 out of commercial expediency only for use of land, building other infrastructure of company for running schools/colleges. Accordingly, school colleges were running smoothly in the leased premises since 2007-08. Accordingly, the observation of AO that, there is no justification to give deposits for leased assets starting from F. Y. 2007-08, where the construction may not even have been started, and a significant amount of ₹ 5.68 Cr. During A. Y. 2010-11 when the construction is expected to be completed by Dec 2013 is contrary to facts not tenable. To substantiate our stand we are enclosing the following documents to establish that schools, colleges etc. were actually running in the premises under question from 2007-08 onwards: a) Telephone bill in the name of trust b) Receipts for building taxes paid from time to time' - c) Electricity bills paid in the name of trust It is further to bring to Your Honours attention that, various institutions were running in the premises since 2007-08 only on the basis of approval of the same by competent auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. However, the AO has reached the conclusion of colourable device and diversion of funds to the benefit of 'specified person' as in section 13(2) of the I.T. Act. 5.5 It is on record that the deposit of ₹ 6,68,00,000/- as above is in pursuance of a 'valid lease agreement for the user of premises and various other facilities and fixed assets in the nature of building, ground etc. by the appellant in the process of carrying out educational activities/charity. It has not been questioned by the AO that leased asset in the form of 'land,' construction and equipments (used by the appellant for its purpose as also noted in the assessment order at pg.12 in the reply of assessee) to the extent of ₹ 7,70,00,000/- were utilised by the appellant during the year. It is proved from the copy of electricity bills and other state govt. records' like rent of the land, tax receipt, electricity bill etc. that the premises and the leased asset as envisaged in the agreement have actually been used by the appellant for its purposes. Thus, the findings of the AO on this issue are based on suspicion by ignoring the actual activities and transaction on thi ..... 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