ASST. COMMISSIONER OF INCOME TAX, CHENNAI vs. KARUNYA EDUCATIONAL AND REASEARCH TRUST, CHENNAI

PER SS VISWANETHRA RAVI, J.M :

This appeal by the Revenue is against the order dated 08.09.2025

passed by the Learned Commissioner of Income Tax [herein after

“CIT(A)], Chennai-20, for the assessment years 2022-23.

filed an affidavit explaining the reasons to condone the said delay. On

perusal of the same and upon hearing both the parties, we find the reasons stated by the assessee are bonafide which really prevented the assessee in filing the appeal in time. Thus, delay of 1 day condoned.

only issued emanates for our reconsideration is as to whether the ld.CIT(A)

justified in deleting the addition made by the AO on account of payment for

professional or technical services in the facts and circumstances of the

case.

its affairs under the name and style ‘Karunya Educational and Research

Trust’. The assessee e-filed return of income declaring a total income of

Rs. Nil. Under scrutiny, notices u/s. 143(2) and 142(1) of the Income Tax

Act, 1961 [herein after “Act”] were issued along with detailed questionnaire in response to which assessee filed its submissions. Thereafter, the AO issued show cause notice and in response to it the assessee filed details of documents on 23.02.2024. According to the AO, on an examination of the above material and the information available with the Department, it was found that the assessee diverting donation collection and fees collection to a related foreign entity without actual service or business. Further, the AO observed that during the course of search operation and on perusal of the copy of contract seized vide electronic device and information gathered during such proceedings, in connection with the search in the case of Jesus Page - 2 - of 18 Calls and others, it was found that even though there was existed contracts

for software development and maintenance between the assessee and M/s.

True Friends Management Support Service Pvt Ltd (TFMSS) and between

M/s. TFMSS and M/s. PW Data Solutions (PWDS), the entire structure was

designed to move trust funds out of India in the guise of software

development expenses. Accordingly, the AO directed the assessee to show

cause as to why the expenses of Rs.2,20,00,000/- claimed as software

maintenance should not be disallowed. According to the AO, the assessee

explained vide its submissions dated 23.02.2024 as difference between the

old and new software. Considering the submissions of the assessee, the AO

observed that the transfer from the Trust or entity to other Trust or entity

without actual service or business based only on few agreements alone

without any rendering of services is sham transaction and held the said

transaction performed in the guise of expenses based only on paper

agreement but no real work or business as recorded in the agreement is

performed and disallowed the above said amount, added to the total income

of the assessee vide its order dated 23.02.2024 passed u/s. 143(3) of the Act.

The assessee having aggrieved by the order of the AO challenged the said

assessment order before the ld.CIT(A). The ld.CIT(A) after considering the

order of this Tribunal in assessee’s own case vide consolidated order dated

07.07.2025 for AYs 2017-18 to 2021-22, held the software charges paid for

development of ‘EduServe’ and ‘PeopleServe’ software by PWDS as genuine

Page - 3 - of 18 in the hands of M/s. Jesus Calls, the software charges paid by the assessee

to M/s. TFMSS under similar facts is also genuine. Having held so directed

the AO to delete disallowance made therein. Having not satisfied with the

order of the ld.CIT(A), the Revenue is before us.

professional/technical services expenses paid to M/s. TFMSS without

analysing the merits of the issue. She argued that the ld.CIT(A) failed to

consider the impugned expenses claimed by the assessee was a coloured

transaction involving TFMSS and PWDS to transfer funds from its Trust to a

foreign entity. The ld.DR further submits that the ld.CIT(A) failed to consider

the findings that during search, the software ‘EduServe’ and ‘PeopleServe’

were created in house as ‘My Karunya’ by the team of software developers in

Karunya University, who were then shifted to M/s. TFMSS and this team took

care of the development and maintenance of the softwares ‘EduServe’ and

‘PeopleServe’ and argued vehemently that M/s. PWDS had no role in either

development or maintenance of these softwares. She submits that the

ld.CIT(A) failed to consider the digital forensic report also revealed that the

source code of the ‘My Karunya’ application was used without any significant

structural changes and merely renamed ‘EduServe’ and old software ‘My

Karunya’ was used as the base for the new software ‘EduServe’ with only

Page - 4 - of 18 minimal modifications. Further she submits that the ld.CIT(A) failed to

consider that the impugned payments were made by the assessee to M/s.

TFMSS, who in turn paid the same to M/s. PWDS, UK, towards software

development and maintenance charges without any actual services rendered

by them and vehemently argued that the said transactions are sham,

supported only by paper documentation without any real business activity.

She prayed to set aside the order of the ld.CIT(A) and restore the order of AO

by allowing the grounds raised therein.

two notices u/s. 142(1) of the Act and show cause notice dated 06.02.2024

and drew our attention to the para nos. 2 to 4.4. of the assessment order. He

submits that the assessee filed a detailed summary on difference between

the old software ‘My Karunya’ and new software ‘EduServe’ and drew our

attention to the page nos. 3 & 4 of the assessment order. The AO did not

find the explanation with reference to the tabular form in page no. 3 & 4 of the

assessment order as acceptable , held the transactions between assessee,

M/s. TFMSS an M/s. PWDS as paper agreement without bringing any

evidence contrary to the evidence brought on record by the assessee. The

ld.AR submits that the same submissions as were made before the AO

during the course of scrutiny assessment proceedings were furnished before

Page - 5 - of 18 the ld.CIT(A) and considering the same, the ld.CIT(A) found the facts and

circumstances in the year under consideration are similar to AYs 2017-18 to

2021-22. The ld.CIT(A) considered the submissions of the assessee and

discussed issue in detail and found the observation of the AO with reference

to treating the transactions between assessee and M/s. TFMSS are genuine.

He submits in order to come to such conclusion the ld.CIT(A) followed the

order of this Tribunal in assessee’s own case and placed on record the order

dated 07.07.2025 in ITA Nos. 799 to 803/Chny/2025 for AYs 2017-18 to

2021-22 and drew our attention to para no. 12 of the said order. He submits

that the Tribunal considered each of every material evidence placed in paper

book therein and held that the lower authorities failed to lead appropriate

evidence to sustain the disallowance therein on account of software charges

and drew our attention to Para no. 21 of the ITAT’s order. Further, the ld.AR

prayed to dismiss the grounds raised by the Revenue and supported the

order of the ld.CIT(A).

own case deleted the addition made by the AO. On perusal of the facts and

circumstances recorded by the ITAT from Para no. 3.1 to 6.3, we find the

same as similar to the facts and circumstances on hand for assessment year

2022-23. Therefore, for better understanding the relevant part from Para no.

Page - 6 - of 18 12 as relied on by the ld.AR from Page no. 6 to 15 is reproduced herein

below:

“12. We have heard the rival submissions perused the materials available on record and gone through the orders of the authorities along with judicial precedents relied on. During the course of hearing the ld. AR submitted a paperbook containing 80 pages and copy of other material furnished during the hearing. The Ground 1 is general in nature and does not require adjudication. Grounds 2 and 9 are legal in nature. These legal grounds are discussed after deciding the other grounds on merits. In grounds 3 to 8 of the grounds of appeal, the assessee challenged the merits regarding disallowance of charges paid for software development and maintenance. The issues to be decided in these grounds of appeal of the assessee for A.Y 2017-18 are regarding whether the entity True Friend Management Support Services Ltd (TFMSS) had provided substantive services for software development and maintenance to the assessee, payments made were for genuine services received, payments were made at FMV and the transaction was done at arm’s length. The other issue to be seen is whether any of the payments made towards software charges by the assessee and Jesus Calls to TFMSS had flown to the accounts of the Managing Trustee of the assessee and Jesus Calls Mr.Paul Dhinakaran, his family members or his entities through PWDS, UK. 13.1 We find that the AO has observed that the assessee created a mechanism to intentionally divert Trust funds to a related foreign entity in the guise of software development charges without actual services. The AO meant the ‘related foreign entity’ to be PW Data Solutions (PWDS), UK incorporated by Mr.Timothy Jackson. Mr.Timothy Jackson is reportedly worked as Professor of Management in Karunya Institute of Technology (KITS) run by the assessee from 1995 to 2003. He immigrated to UK in 2003 and permanently settled there. He is known to Mr.Paul Dhinakaran, Managing Trustee of the assessee. This is the only connection between the assessee and Mr.Timothy Jackson as pointed out by the AO. During the searches and post search investigation by the DDIT(Inv.) and AO, no evidence was gathered and brought on record to show that Mr.Timothy Jackson was economically benefited by the assessee or Jesus Calls or Mr.Paul Dhinakaran since he left KITS in 2003. The list of Trustees of the assessee Trust, Jesus Calls and shareholders and Directors of TFMSS was submitted to ld.CIT(A) as reproduced on page 10 of the impugned order. We have gone through the same and found that the name of Mr.Timothy Jackson did not figure in the entire list. Merely having an acquaintance with a person who had worked with the organisation nearly 2 decades ago do not make the persons ‘related’ within the meaning of the Act. The provisions of the Act are clear as regards who is a ‘relative’ and a ‘related person’. Mr.Timothy Jackson and Mr.Paul Dhinakaran, assessee, Jesus Calls and TFMSS do not fall within the definition of ‘related party’ or ‘relative’ under the Act. The

Page - 7 - of 18 issue regarding the other limb of AO’s observation is dealt with in the later paragraphs. 13.2 The other finding of the AO is that the entities TFMSS, PWDS, UK being related entities of Jesus Calls group are controlled directly or indirectly by Mr.Paul Dhinakaran. As already held supra, Mr.Paul Dhinakaran, assessee and Jesus Calls are not related parties under the provisions of Act. The other conclusion of Mr.Paul Dhinakaran controlling all the entities is based on some whatsapp chats extracted from his seized mobile. This itself do not lead to the inference drawn by theAO that too when he is not a ‘related person’. Even assuming that Mr.Paul Dhinakaran was actually controlling all the entities, still it would not make any difference in the absence of any law prohibiting it. Controlling multiple entities by one person, even though a related party is not in violation of any law and there is nothing wrong in doing so. In case of any inter entity transactions, it is the duty of the AO to ensure that the transactions are done at arm’s length and the consideration exchanged is as per the fair market value (FMV) of similar products and services. If he finds the amount paid is excessive or unreasonable, he may restrict it to the FMV. Instead of following the due process of law, the AO made casual remarks which are not relevant to the issue under consideration. 13.3 The AO further observed that TFMSS was incorporated solely for separating software development, which was earlier done in-house. During the hearing, the ld. AR took us through page 55 of the paperbook which is a summary of income, expenditure and profit of TFMSS from AY 2017-18 to 2021-22. He pointed out that during AY 2017-18, receipts of TFMSS from other activities such as organising tours, providing matrimony services, running a family TV channel etc., were Rs.872.05 lakhs whereas receipts from software development and maintenance were a mere Rs.51 lakhs, which is 5.52% of total receipts. Similar is the picture in other years with some variations in proportion of receipts from different activities. Hence, we find that the observation of the AO is factually incorrect. 13.4 Another observation of the AO was that Mr.Timothy Jackson or his team from PWDS did not provide training or guidance to the software team of TFMSS. During the hearing, ld. AR filed sample copy of mails addressed by Smt.Grace, Project Manager of TFMSS to Mr.Timothy Jackson of PWDS and his response mails. In the mail dated 28.07.2017 she confirmed the training for 4 days from 31.07.2017 to 03.08.2017 in Coimbatore and sought his guidance regarding the arrangements. In the mail dated 21.12.2019 addressed to Smt. Grace, Mr. Timothy Jackson confirmed arranging 1 day workshop on Azure databases on 09.01.2020 at Microsoft Bangalore Campus. The Ld. AR submitted that there are a large number of such emails exchanged between Smt.Grace and Mr.Timothy Jackson of PWDS regarding various aspects of software development and maintenance and included some mail copies randomly at page 22 to 53 to demonstrate involvement, supervision and guidance by Mr.Timothy Jackson of PWDS and his team. All these mails were reportedly extracted from the seized laptop used by Smt.Grace before her termination from TFMSS. Even though the

Page - 8 - of 18 entire data was before the AO, neither he nor the ld.CIT(A) took cognisance of existence of any such mails. Therefore, we find that the observation made by the AO is found to be contrary to the facts on record. 13.5 Further, the AO also observed that TFMSS was used as a transit entity to move Trust funds outside India for the benefit of Mr.Paul Dhinakaran and his family members. It is seen that in the entire assessment order, not even one instance of flow of Trust money to Mr.Paul Dhinakaran and his family members through TFMSS was brought on record except raising some doubts and suspicions. Hence, we are of the view that the said observation also found to be factually incorrect. 13.6 The AO alleged that software charges were paid by the assessee to TFMSS merely on agreements without any services and the transaction was sham and done to economically benefit Trustee’s individual or family interest. It is a fact that all software and online activities of the assessee and Jesus Calls have been functional since 2017 till the date of search. It is common knowledge that no software of any organisation can run normally without regular maintenance. It is an undisputed fact that the software team of TFMSS has been providing maintenance services on regular basis besides uploading the software in Microsoft Azure Cloud. Therefore, all this would not be possible without any services being received. Even though the AO’s observation is prima facie contrary to the facts on record, the ld.CIT(A) appreciated the fact of receiving services from TFMSS and allowed a part of the service charges incurred by the assessee. 14.1 While substantively confirming the disallowance made in the assessment order, ld. CIT(A) relied on the statements of Smt.Grace, Ex-Project Manager and Mr.Jebamalai, software developer of TFMSS. When the assessee objected to use their statements as evidence considering that no opportunity of cross-examination was allowed, ld.CIT(A) held that even if statement of Smt. Grace is not taken into account, statement of Mr.Jebamalai still holds good as an independent statement on account of findings during the search. It is to be seen that there is no selective exception to use the statements when both of them are on the same footing. It is also an admitted fact that assessee wanted to cross-examine both of them, the ld. CIT(A) gave a direction to the AO to provide cross- examination of both the witnesses. The AO furnished a remand report expressing his inability to provide the same and requested the ld. CIT(A) to decide the issue on merits. However, ld. CIT(A) picked up some responses selectively from the statements of Smt.Grace [page 34 to 39 of order of CIT(A)]and Mr. Jebamalai [page 39 to 48 of order of CIT(A)]to hold that except maintenance of earlier software there was no development of software besides change of name. Under these circumstances, we hold that there is no discretion available to the ld. CIT(A) under the law to consider even one or some parts of the statements and use it as evidence to draw adverse inferences against the assessee and such inferences are to be ignored for all purposes.

Page - 9 - of 18 14.2 We have also considered the statements of Smt.Grace and Mr.Jebamalaias reproduced in the assessment order and order of ld. CIT(A) on merits. It is an admitted fact that services of Smt.Grace were terminated from TFMSS during June 2020 and since then she was apparently hostile to TFMSS and to Mr.Timothy Jackson. In some of the responses, she was clearly evasive, indifferent and stated only half truths. For example, her response to Q. No. 47 [page 37 of order of CIT(A)] reflects her approach. The question and answer are reproduced below: “Q.No. 47: Did any employee from PWDS, London, UK travel to India to train your team in TFMSS Pvt. Ltd? Ans. 47: No. As far as I know, there is only one employee in PWDS who is Mr. Timothy Jackson. Time to time, he visits India for meetings. So, he drops by to TFMSS at Karunya campus to say “Hello”. While confirming that Mr.Timothy Jackson of PWDS, UK visited TFMSS several times, she claimed such visits were only to say ‘hello’. No one from UK would visit Coimbatore spending so much time and money to just say ‘hello’ to her. She maintained silence regarding the training given by PWDS, even though she exchanged Emails with Mr.Timothy Jackson regarding the trainings provided (para 13.4 supra). For example, in her Email dated 28.07.2017 she categorically confirmed the training for 4 days from 31.07.2017 to 03.08.2017 at Coimbatore and sought his guidance regarding the arrangements. In the Email dated 21.12.2019 addressed to Smt.Grace, Mr.Timothy Jackson confirmed arranging 1 day workshop on Azure databases on 09.01.2020 at Microsoft Bangalore Campus. In another Email dated 14.01.2019 addressed to Smt.Grace, Mr.Timothy Jackson gave his tour programme to visit KITS for 3 days from 21.01.2019 to 24.01.2019 to have several meetings with Chancellor, Registrar of KIT, JCI and TFMSS to co- ordinate the overall activities regarding software development and maintenance. We also note that he had scheduled a review meeting with Smt.Grace on 21.01.2019 at 11 AM. It is further observed that these are only a few select Emails out of a pile of such Emails extracted from the laptop used by Smt.Grace before her termination from TFMSS. 14.3 Our attention was drawn to some such Emails extracted on random basis and placed in the paperbook at page no. 22 to 53 for our perusal. Our attention was specifically drawn to the Emails containing references to skype video calls they had besides a number of telephonic conversations. Smt.Grace was totally silent on the day-to-day Emails exchanged, video and audio calls she had with Mr.Timothy Jackson seeking his guidance and supervision regarding software development and maintenance. We find that unless Mr.Timothy Jackson and his team were fully involved in all aspects of the project like owning, creating a detailed structure, design, technology, platform, language and source codes for the software Eduserve and Peopleserve, he would not make such intense efforts to train, guide, supervise and review the work of Project Manager and her team on regular basis. This obviously was Page - 10 - of 18 done by Mr.Timothy Jackson of PWDS, UK as he had financial interest in providing software services through TFMSS as per the agreements referred in the assessment and appellate orders. It is clear from the above that Smt.Grace suppressed some vital information and gave misleading responses in her statement and as such, her statement does not hold good as evidence against the assessee and hard to be relied upon. 14.4 From the statement of Mr.Jebamalai, we find unusual way of recording it. It is seen that major part of his statement contained queries seeking comments on the statement of his immediate boss,Smt.Grace. We note that he confirmed whatever she had deposed. It is further noted (page 17 of the assessment order) that Mr.Jebamalai having 13 years work experience was a software developer drawing a salary of Rs.33,000/- per month (about Rs. 4 lakhs per annum) whereas reportedly most of the students of KIT get placed while in final year of their course at an average pay of Rs.5.00 lakhs per annum in the campus recruitments conducted by various companies, proves that he is in the lower category in the hierarchy of an entity providing software services. He was not supposed to do any act beyond the scope of his duties. 14.5 As discussed above, we are of the considered view that the statements of Smt.Grace and her immediate sub-ordinate Mr.Jebamalai do not hold good as valid evidence against assessee not only on the settled principles of law but also on merits. 15.1 We have gone through the statement recorded from Smt.Yamini Prabha, Senior software developer in TFMSS who is next to Project Manager Smt.Grace. It is seen that after exit of Smt.Grace, she was given charge of her role. We note that the relevant responses from her statement were reproduced in para 8.6.14 on pages 30 & 31 of the assessment order. However, we find that both assessment orders as well as appellate order are silent as regard to the relevance or otherwise of her statement and why the same was not taken cognizance in the proceedings. In our opinion, if the AO and ld.CIT(A) considered it as not reliable, having brought the statement on record they should have discussed the reasons for rejecting it as admissible evidence. As discussed supra and argued by ld. AR, her statement is categorical in confirming the active involvement, knowledge, guidance and supervision of Mr.Timothy Jackson and his team from PWDS in the software development and maintenance services provided to TFMSS regarding Eduserve and Peopleserve. There is no contra material on record to controvert whatever was deposed by her. Hence, statement of Smt.Yamini Prabha, Sr.Software Developer is accepted as valid evidence reinforcing the assessee’s claim of receiving genuine services from TFMSS and PWDS regarding Eduserve and Peopleserve. 15.2 It is an admitted fact that the assessee had used software named as Campus Management System (CMS) developed by Dimensions Innovations Lab, Kerala since the early years of 2000 until 2012. The software malfunctioned in 2012 and MyKarunya & Peopleserve were developed by e-governance team of KITS in 2013 for the assessee and Jesus Calls. Smt.Grace, ex-Project Manager of TFMSS was on record stating [Q.No.36 on page 36 of

Page - 11 - of 18 order of CIT(A)] that MyKarunya was very similar to CMS. She also deposed that the same software ‘MyKarunya’ was renamed as Eduserve and no development work was done until her exit in June 2020. The lower authorities relied upon her version and got a digital forensic report in conformity with her view. We find that the same CMS software was being used over last 2 decades with some maintenance and without any further development which is highly improbable and hence the stand of lower authorities cannot be accepted as correct. It is common knowledge that software is never static, constantly changing fast and becomes obsolete in every few years unless it was further developed or modified to keep pace with the changing needs of the market. Hence, no organisation can be successful unless its software was developed abreast with its growing requirements. There are many huge organisations, which were highly successful at one time and suddenly disappeared from the market just because they did not update or modify and improve their software, failed to anticipate and failed to meet the growing requirements. It is seen that the assessee is highly successful and grew multifold in the last 2 decades. Its requirements have changed commensurately over the years with the expectations of stakeholders and the software also had to be changed in terms of technology, structure, language, features etc. In our opinion, this fact prima facie shows that the software was updated regularly over the last 2 decades, which was possible only by regular development, updating, adaptation to new technology and maintenance. 16. We have noticed that AO and ld.CIT(A) ignored the huge, seized data regardingEmails exchanged between Smt.Grace and Mr.Timothy Jackson. The Emails categorically establish the ownership, guidance, supervision and constant review of the software work being done in TFMSS, by Mr.Timothy Jackson of PWDS, UK. Similarly, they ignored the statement of Smt.Yamini Prabha, Sr. Software Developer in which she categorically confirmed the role of Mr.Timothy Jackson and his team in PWDS, UK in providing continuous guidance and monitoring development of Eduserve software. No valid reason has been given in both the orders as regards why they had to ignore such relevant and crucial evidence. In this factual matrix we observed that the revenue had relied on the unreliable statements, invalid and irrelevant evidence and conducted the proceedings. It is pertinent to note that in the ‘Digital Forensic Report’ (DFR) furnished by an expert, there was absolutely no reference or mention to the huge seized Email dataand comments there on even though it was a part of data seized during searches. 17.1 Coming to the ‘Digital Forensic Report’ (DFR), we find that the AO relied upon it and referred in para 8.6.17 on page 32 of the assessment order. Whereas the ld. CIT(A) substantially relied on it and reproduced the same in his appellate order at page 49 to 65. It is noted that the purported report was prepared by an organisation by name FDI Labs and submitted to DDIT(Inv.), Unit – 3(4), Chennai on 26.07.2021. The letter does not state any reference regarding the authority who ordered/directed such study and under whose authority. We have gone through the correspondence the assessee

Page - 12 - of 18 had with AO seeking copy of the DFR and taken note that the DFR was never shared with the assessee. Even after receipt of the order of ld. CIT(A), the copy of DFR was not shared despite of specific requests by the assessee. 17.2 We have gone through the DFR relied upon by the ld. CIT(A) vis-a-vis the arguments of ld. AR in this regard. The DFR does not contain particulars of data, if any provided to FDI Labs for examination and analysis and hence the purported DFR is a self- serving document prepared at the instruction of revenue. The DFR also does not contain any information regarding the data which was examined by them and the interviews & interrogations mentioned in the report and considered while giving the report. Even though there were repeated references to interviews and interrogations in the report, nowhere it was mentioned who were the persons interviewed/interrogated, and by whom? Against any of the inferences drawn in the report, no basis was mentioned. 17.3 The objective of carrying out the study is given on page 54 of the order of ld.CIT(A). It is to identify and prove tax evasion done by Jesus Calls Trust and its group entities, identify and prove distribution of entities, to prove all entities are run by one single entity, to prove data breach and leakage, to prove governance risk and to prove international tax evasion. Therefore, we are unable to understand how a forensic examiner can prove tax evasion and other objectives. Infact the DFR job supposed to find relevant facts from the data provided to him which may point out needle of suspicion and provide such facts to the investigating officer to enable to investigate further in proving the tax evasion. We note that the income of the assessee and Jesus Calls is exempt u/s.11 of the Act over last decades, having obtained registration u/s.12AA of the Act. Therefore, when the income of the primary entities is already exempt from tax and there is no reason for apprehending tax evasion. 17.4 We find some of the inferences to be imaginary and irrelevant. One such inference is taken as an example. Clause III on page 55 of order of CIT(A) contained the following: “Key management is driven by Timothy Jackson former Karunya University senior professor who are identified as reliable sponsored to get immigrated to foreign countries. Interviews and interrogations as part of interviews shows senior professors who worked in India were immigrated to Australia, US, UK and many other countries. Mr.Timothy Jackson is one among who worked as senior professors in India migrated to London for the mission of setting up PWDS business centre and heading the same now.” In clause I on the same page, it is mentioned ‘PWDS established & active from 2015’. It is alleged that Mr.Timothy Jackson was migrated to London for setting up PWDS in 2015. It is a fact on record [para 5 on page 9 of order of CIT(A)] that Mr.Timothy Jackson worked in KITS from 1995 to 2003. He left KITS in 2003 and settled in UK and did double Masters in Ed Tech and Data Research there. The forensic expert meant that he was migrated to

Page - 13 - of 18 London in 2003 and waited there for fulfilling the mission to set up PWDS in 2015 i.e 12 years later. In our considered opinion it is a prima facie absurd, irrelevant and baseless inference. Similar allegation was made about some other unnamed senior professors who worked with KITS. If they were immigrated to foreign countries by Mr.Paul Dhinakaran to suit his business interest, he must be paying them salary or remuneration over these years. During extensive searches conducted by the Department, the authorised officers with the help of computer experts scrutinised all kinds of available data pertaining to several years. No finding was given in any order regarding any payments made to the ex-faculty members who were supposed to have been immigrated to foreign countries at the instance of Mr.Paul Dhinakaran. 17.5 We have also observed another inference drawn in the DFR under clause XII on page 57 of the order of ld. CIT(A), it is mentioned as – “One entity Jesus Calls has been disintegrated into PW Data Solutions (PWDS), True Friend Management Support Service (TFMSS), Karunya Institute of Technology and Sciences (KITS) for the purpose of expense distribution for the benefit of tax enjoyment.” The comments made therein DFR are not only factually incorrect but also absurd. The forensic examiner passed the comments without any sense of responsibility though both Jesus Calls and KITS have been enjoying tax exemption in respect of their income over the last several decades. Already they have been enjoying tax benefit and wouldn’t enjoy any other tax benefit by disintegrating and setting up new entities. TFMSS was registered as a company independently. It has been offering considerable income in its returns (page 55 of paperbook), PWDS was established in UK and not in India. KITS was established in 1986 independently as an educational Trust and not set up by splitting or disintegrating Jesus Calls which is a religious Trust. There is no basis given regarding the other entities. 17.6 All the other observations made in the DFR are found to be imaginary, arbitrary, irrelevant and baseless opinions going to the extent of wild allegations. Such observations include the ones made on source code of MyKarunya vis-à-vis Eduserve and all other issues dealt with in the report. Having gone through the DFR carefully, we find that the report suffers from grave deficiencies and cannot be considered as valid evidence against the assessee. It does not come to the rescue of lower authorities to lend any support to the disallowance made in their orders. 17.7 Coming to the ‘Digital Forensic Analysis Report’ (DFAR) submitted by the assessee as additional evidence, it is seen that the report is prima facie fact based and for every conclusion drawn, the forensic expert has given details of data examined and the circumstances under which the conclusion was drawn. It contained the number of modifications carried out in each module and table in each year and the name of developers who made the changes and number of additions & modifications done yearwise. We find that the

Page - 14 - of 18 report is apparently reliable. The report is categorical that the source codes used for MyKarunya and Eduserve are entirely different, technology and platform used by Eduserve are much advanced with additional features. This was in addition to the extensive changes made in the software to make it suitable to upload it in Cloud through Microsoft Azure Cloud services. It is also categorical regarding the extensive improvements and additional features to the extent of 30 to 40% per year carried out in the software. Even though, the DFAR disproves the DFR and the decision of AO and ld.CIT(A), the same is not taken into consideration keeping the request of ld. DR to refer it to the AO. We have already held that the DFR used by the lower authorities is not tenable in the eyes of law and hence does not support the disallowance made in the orders. Moreover, the DFR cannot be taken into consideration as the same was not mandatorily furnished with the assessee at any stage of the proceedings necessitating the assessee to obtain and furnish additional evidence in the form of DFAR. Having failed to furnish the DFR at two stages by the lower authorities, we are not inclined to give a second innings and fresh lease of life by referring DFAR to AO. As decided supra, the DFR is considered as invalid evidence and rejected. Consequently, there is no need for the assessee to separately rely on DFAR and its consideration or otherwise is only academic. Even if the DFAR was considered or not considered, it would not make any difference to the issue under consideration and remanding it to the AO will not serve any useful purpose. Therefore, we refrain from remanding back to the AO as prayed by the ld.DR. 18. We have gone through the ‘whatsapp chats’ reproduced in the order of ld. CIT(A), conclusions drawn based on such chats with special reference to 4 chats (page 95 & 96 of the order of CIT(A)), written submissions and the arguments of the ld. AR as mentioned in para 9.9 supra. After careful examination of the chats, we find that the conclusions drawn by the ld. CIT(A) are factually incorrect and do not flow from the facts considered by him, as pointed out by the ld. AR. We agree with the submissions and arguments of ld. AR. These chats do not advance the decision of lower authorities. 19. We have examined bank statements of Ms.Stella Ramola Dhinakaran maintained with Chase Bank, observations & conclusions of CIT(A) (pages 95, 102 & 105 of the appellate order), written submissions and arguments of ld. AR mentioned in para 9.10 supra. We find that the observations of ld.CIT(A) with reference to the facts mentioned by him are incorrect and the conclusions drawn on such observations are also incorrect and did not flow from the facts considered. As such, the very entries referred in bank statements counter the assumption of lower authorities that the account of Ms.Stella Ramola Dhinakaran was used as a vehicle to receive money from the assessee for further transfer to Mr.Paul Dhinakaran, his family members and entities. We find that no credits were received into the account from PWDS nor any payments or remittances or transfers were made to the accounts of Mr.Paul Dhinakaran, his family members or entities from such account. On the contrary, we find credits were being received frequently into the account from her father Mr.Paul Dhinakaran and sister

Page - 15 - of 18 Ms.SharonA.Dhinakaran. This fact goes against the presumptions of the lower authorities. 20. After countering the decision of lower authorities in each aspect, ld. AR explained the methodology adopted as regards how the software development work was entrusted to TFMSS and PWDS. The assessee got a study of the software conducted by a reputed company Tata Consultancy Services (TCS) which found grave defects (page 7 of paperbook) warranting a new software incorporating the core features existing in old software MyKarunya. For this purpose, quotations were obtained from TCS, Serosoft and TFMSS. The same were considered by a selection committee consisting of 3 members (minutes at page 1 to 4 of paperbook) who after detailed evaluation recommended TFMSS as service provider. In the process, not only the service provider was shortlisted but FMV of the product was also discovered. Considering all the circumstances, Eduserve development work was given to TFMSS at FMV. As mentioned in paras 9.11 and 9.12 supra, the ld.AR argued that the lower authorities do not have any discretion under the Act to alter the consideration paid for receiving genuine services as long as the transaction was done at arm’s length, the parties are not related and the consideration was as per FMV. After considering all the facts and circumstances, we find that software services received were genuine and the consideration paid for such services was as per FMV.As such, we do not allow interference with the claim made by the assessee in this regard. 21. After carefully considering all the facts available on record and the circumstances, we find that the lower authorities completely ignored and kept aside the relevant and crucial evidence in support of the claim made by the assessee. Such evidence included the sworn statement of Smt.Yamini Prabha, Sr.Software Developer, huge data of emails exchanged between Smt.Grace and Mr.Timothy Jackson regarding software development, taking cognisance of huge difference in the data on software of MyKarunya vis-à-vis Eduserve and the software development work done to make the same to match with the requirement of Microsoft Azure to upload it in the Cloud. On the contrary, they relied upon statements of unreliable witnesses without providing cross-examination, strongly relied upon unreliable and purported DFR, misinterpreted uncorroborated whatsapp chats, misrepresented entries in bank statements etc., to enable them somehow to disallow the claim. Having considered the relevant facts available on record in totality, we find that the lower authorities failed to lead appropriate evidence to sustain the disallowance. Hence, grounds 3 to 8 raised by the assessee challenging the disallowance of software charges for the A.Y. 2017-18 are allowed on merits by setting aside the order of the ld.CIT(A).

information by way of alleged material i.e. copy of contracts seized vide

Page - 16 - of 18 electronic device and information gathered during the course of survey

proceedings, the AO opined that there was existing contracts for software

development between the assessee and M/s. TFMSS and also between M/s.

TFMSS and M/s. PWDS was designed to move Trust funds out of India in the

guise of software development expenses. We find that the assessee has

given reply to show cause notice bringing to the notice of the AO about the

difference between old and new software, which is reproduced in page nos. 3

& 4 of the assessment order in detail, but however, the AO proceeded to hold

all the above said entities are controlled by Shri. Paul Dinakaran, therefore,

the said transactions sham based on paper agreement, but no real work or

business. We find the assessee reiterated the same submissions as were

made before the AO in the first appellate proceedings also, which is evident

from Page nos. 3 & 4 of the impugned order. The ld.CIT(A) examined the

same and held the issue tried by the ITAT for AYs 2017-18 to 2021-22 in

assessee’s own case found similar on same identical facts and held the

transaction between by way of payment of software charges for development

of ‘EduServe’ and ‘PeopleServe’ by the PWDS as genuine in the hands of

M/s. Jesus Calls and the assessee in the earlier years, the software charges

paid by the assessee to M/s. TFMSS under similar facts and circumstances

as genuine, which is evident from Para no. 6.4 in page no. 16 of the

impugned order. We find the facts and circumstances of the present case

are similar and identical to the facts in AYs 2017-18 to 2021-22 and the ld.DR

Page - 17 - of 18 could not distinguish the same as not similar and could not bring any view

contrary to the view taken by the ITAT for AYs 2017-18 to 2021-22.

Therefore, we find no infirmity in the order of the ld.CIT(A) in following the

order dated 07.07.2025 in assessee’s own case for AYs 2017-18 to 2021-22

in treating the software charges paid for development of ‘EduServe’ and

‘PeopleServe’ software by PWDS in the hands of M/s. Jesus Calls and the

charges paid by the assessee to M/s. TFMSS are genuine, by holding that

the professional or technical services expenses which is in the nature of

software charges paid by the assessee to M/s. TFMSS are genuine. Thus,

grounds raised by the Revenue fails and dismissed.

Sd/- Sd/- (इंटूरीरामाराव) (यस यसयस यसिव�ने� िव�ने�रिव रिव) यस यस यस यस िव�ने� िव�ने� रिव रिव (INTURI RAMA RAO) (SS VISWANETHRA RAVI) लेखा लेखासद�यकेसम� लेखा लेखा सद�यकेसम� सद�यकेसम�/Accountant Member सद�यकेसम� �याियक �याियकसद�य �याियक �याियक सद�य सद�य/ Judicial Member सद�य 15th May, 2026. Chennai, Dated: JPV

Copy to: 1. Appellant 2. Respondent 3. CIT - Chennai/Coimbatore/Madurai/Salem. 4. DR 5. GF

PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.05.19 16:23:01 +05'30' Page - 18 - of 18