THE COMMISSIONER OF INCOME TAX vs. M/S PRAJIT FOUNDATION PRIVATE LIMITED

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TCA/432/2021HC Madras26 February 2025Bench: Honourable Mr Justice S. S. SUNDAR4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court dismissed the appeal as withdrawn. The dismissal was based on a submission by the learned senior standing counsel for the appellant that the amount involved in the appeal was below the monetary limit prescribed by Circular No. 5/2024 and 09/2024 dated 15.03.2024 and 17.09.2024, respectively. Consequently, the Court did not decide the substantial questions of law raised in the appeal. The operative direction was to dismiss the appeal as withdrawn, leaving the substantial questions of law open. No costs were awarded.

What were the facts?

The Commissioner of Income Tax (appellant) filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT) dated 25.04.2017 in ITA No. 1344/Mds/2016. The appeal concerned the assessment of M/s Prajit Foundation Private Limited (respondent). The ITAT's order had deleted additions made by the Assessing Officer under Section 68 of the Act. The additions related to donations received for construction and a Meditation Hall, and a remission of liability. The appellant contended that the source, means, and genuineness of these amounts were not satisfactorily explained, and that the property was owned by the assessee company, not the trusts that allegedly provided the funds. A significant sum of Rs. 16,52,82,392/- received as donations was also in dispute.

What were the issues?

The Tribunal was asked to decide the following substantial questions of law: 1. Whether Section 68 of the Income Tax Act, 1961, should apply to donations received from Anugraha Trust and Nachiappar Educational Trust for construction and a Meditation Hall, given that their source, means, and genuineness were not satisfactorily explained and proved. 2. Whether the Tribunal was correct in deleting the addition made under Section 68 on the basis that the land and Meditation Hall were owned by two trusts and not the assessee company, when a survey at the assessee's premises allegedly proved ownership by the assessee. 3. Whether an addition under Section 68 could not be disallowed even if the assessee failed to prove the creditworthiness, means to pay, and source of donations received. 4. Whether the Tribunal's finding was proper concerning a sum of Rs. 16,52,82,392/- received as donations, which were not routed through the profit and loss account but directly taken to reserves and surplus in the balance sheet to avoid taxation. 5. Whether an addition on account of remission of liability is taxable, especially when the creditor was shown as a debtor in the assessee's books, and the assessee had directly taken it to the balance sheet instead of the profit and loss account to avoid taxes. The appellant argued that Section 68 should apply due to unexplained sources and genuineness of donations, and that the property was indeed owned by the assessee. The respondent's arguments are not explicitly recorded in the provided text, other than the fact that the Tribunal had deleted the additions.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 68

AI-generated summary — verify with the full judgment below

TCA NO. 432 of 2021 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26-02-2025 CORAM THE HONOURABLE MR JUSTICE S. S. SUNDAR AND THE HONOURABLE MR JUSTICE C. SARAVANAN TCA NO. 432 of 2021 The Commissioner Of Income Tax Chennai .. Appellant Vs M/s Prajit Foundation Private Limited No.33, Shafee Mohammed Road, Rutland Towers, IV Floor, Greams Road, Chennai 600 006 ..Respondent Prayer : This Appeal is filed under Memorandum of Appeal under Section 260-A of the Income Tax Act 1961 against the order of the Income Tax Appellate Tribunal dated 25.04.2017 in ITA No. 1344/Mds/2016. For Appellant: Mr. Karthick Ranganathan, Senior Standing Counsel For Respondent Mr. M.Velmurugan JUDGMENT (Order of the Court was made by the Hon'ble S.S.Sundar J.) This appeal is directed against the formal order of the Income Tax Appellate Tribunal dated 25.04.2017 in ITA No. 1344/Mds/2016. In this appeal the appellant has raised the following substantial question of law to be answered; https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/03/2025 02:58:17 pm ) i. Will not Section 68 of the Act come into play in respect of donations received from the Assessee, since the source, means and genuineness of the amount received from Anugraha Trust and Nachiappar Educational Trust for construction and Meditation Hall was not satisfactorily explained & proved? ii. Whether the Tribunal was right in deleting the addition made u/s 68 on the ground that the land and Meditation Hall was owned by two trust and not by the Assessee company when the fact remains that during the survey conducted in the Assessee's Company premises it was proved beyond doubt that the property was owned by the Assessee Company? iii.Whether the addition made u/s. 68 could not be disallowed even if the Assessee does not prove the credit worthiness, means to pay and the source for giving such donation to the Assessee Company? iv.Whether the finding of the Tribunal is proper especially when a sum of Rs.16,52,82,392/- being donation received during the year which were not routed through profit and loss account but was directly taken to Reverse and Surplus in the balance sheet for the purpose of avoiding taxation is to be brought to tax? v. Whether the addition made on account of remission of liability is taxable especially when the creditor had continued to be shown as assessee debtor in its books of accounts and the Assessee in order to avoid paying taxes had directly taken it to the balance sheet instead of routing it through the profit and loss account? 2. Learned senior standing counsel appearing for the appellant submitted that the amount involved in the present appeal is below the monetary limit as per the circulars issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes in Circular No. 5/2024 and 09/2024 dated 15.03.2024 and 17.09.2024 respectively. https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/03/2025 02:58:17 pm ) 3. In view of the aforesaid submissions made by the learned senior standing counsel for the appellant, the appeal is dismissed as withdrawn. However, the substantial questions of law are left open. No costs. (S.S.SUNDAR J.) (C.SARAVANAN J.) 26-02-2025 Index : Yes/No Internet : Yes ak https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/03/2025 02:58:17 pm ) S.S.SUNDAR,J.) and C.SARAVANAN, J. ak TCA No. 432 of 2021 26.02.2025 https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/03/2025 02:58:17 pm )

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