THE THANTHI TRUST,CHENNAI vs. CIT(EXEMPTIONS), CHENNAI

:-5-: ITA. No:1369/Chny/2024 5.1 The ld.AR briefed the detailed facts of the trust which was created on 28/06/1961. Application for registration u/s.12A(a) was made on 20/07/1973.

- Registration was granted u/s 12A(a) on 30/06/1989. - The DIT(E) Issued SCN u/s 12AA (3) and the registration was cancelled on 08/12/2011 w.e.f.01/04/2009. - The trust filed an appeal before the ITAT and the appeal was dismissed. - Thereafter, the trust filed the TC(A) and the Hon’ble Madras High Court held in favour of the assessee vide [2020] 121 taxmann.com 119 (Madras). - Against the MDS HC decision, the revenue filed a SLP and the case is admitted and is pending before the SC as on date.

5.2 The Ld.AR submitted that any issue relating to computation of the application of income is not free from doubt. More than one view is possible at the threshold stage; Viz: The ITAT, Bangalore order in the case of HMV Educational Cultural & Social Trust vs ITO(E) in dt. 23.03.2023 (refer Pgs. 200-207 of the Paper Book) narrates the AO/CIT(A)’s stand which is that 15% should be worked on gross receipts. The same view is also indicated by the ITAT Chennai in the case of M/s. Thamizhvel PT Rajan

:-6-: ITA. No:1369/Chny/2024 Commemoration Trust vs. ITO(Exemptions) in to 1098/CHNY/2023 dt. 11.06.2024 (Refer Pg. 208 – 234 of Paper Book).

5.2.1 The contrary view is that commercial principles to be taken and only the net income should form the base to work out the 15%.

5.2.2 The third view is expressed by Supreme Court in the case of ACIT vs ALN Rao Charitable Trust (1995) 216 ITR 697(Sc) dt. 13.10.1995 (Refer Pg. 98 – 106 of Paper Book) and other where the SC held 11(1)(a) has two limbs and Sec 11(2) is in addition to that computation. In ACIT vs ALN Rao Charitable Trust (1995) 216 ITR 697(Sc) dt. 13.10.1995 case the claim was on Gross.

5.2.3 The fourth view is the one expressed by the CBDT Circular in Circular No. 3/2024 dt. 06.03.2024(Refer Pgs. 72 – 74 of Paper Book) Refer the Computation chart as well as the Memo of income and Income & Expenditure and Balance sheet.

5.3 The Ld. AR stated that the issue raised by the CIT(E) in the revision order are highly debatable issues and more than one view is possible.

:-7-: ITA. No:1369/Chny/2024 Issue No:1: Corpus donation cannot be considered as application of income – amendment in Section 11(d) comes into force is applicable to A.Y.2018-19.

Issue No:2:Advance tax paid in excess – prejudicial to the interest of the revenue.

Issue No:3: Transaction with M/s.Metronation Chennai Television P. Ltd is hit by Section 13(1)(c) - this is an academic issue since the amount was spent to purchase equipment etc., to further the “business of the trust” which is the “property held under trust” and the amounts earned therefrom has been spent on educational purposes as is done from the other amounts in the past. Earlier assessment years the said point was raised and decided against the assessee by the AO and CIT(A) but the ITAT has allowed the entire income as exempt.

5.4 Further, the ld. AR stated that the appeal filed by the Revenue against the DB judgment of the Hon’ble Madras High Court-Thanthi Trust vs DIT [2020] 121 taxmann.com 119(Mad) dt.29.10.2020 in SPECIAL LEAVE PETITION (CIVIL) NO. 7253 OF 2021. In respect of the issue of section 12AA, which is not yet decided one way or the other by the Hon’ble Supreme Court the present proceeding are :-8-: ITA. No:1369/Chny/2024 protective in nature and has no legs to stand. The Ld.AR further argued that on merits of the case that the CIT in the impugned order u/s.263, seeks to cancel the exemption u/s.11 for A.Y.2018- 19.

5.5 Firstly, the Corpus donation by Thanthi to Aditanar Educational Institution - Rs.19,7158,098/-. Regarding the Corpus donation said to have been made by the assessee in the year of account in favour of M/s.Aditanar Educational Institution, the ld.AR submitted, factually no letter was filed by the assessee trust to the effect indicating that the corpus donation was made to M/s.Aditanar Educational Institution. It is not known how the ld.CIT(E) has observed that the appellant has made any corpus donation as such in the year of account in favour of M/s.Aditanar Educational Institution.

5.5.1 The trust in its reply to the notice issued u/s. 142(1) sent by the AO on 20.11.2020 (Refer pg. 26,27 & 28 of the Paper Book) has not indicated/ mentioned in the statutory format sent by the AO under Section 142(1) that any letter is brought on record /sent indicating any corpus donation made to Aditanar Educational Institution in the year of account. (Refer pgs. 32 & 33 of the Paper Book), the assessee has replied to the said notice u/s. 142(1) that :-9-: ITA. No:1369/Chny/2024 the assessee merely reproduced the narration/heading given in the statutory notice issued u/s 142(1) (Refer Pgs. 27 & 28 of the Paper Book) and this by itself cannot be assumed to be that of a corpus donation made by the assessee trust in the year under considerationA.Y.2018-19. It is not known how the ld.CIT(E) has observed that the assessee had made any corpus donation in favour of M/s. Aditanar Educational Institution. Affidavit is brought on record sworn by the Trustees of both donor trust and donee trust supporting the said plea. Further, the ld.AR stated that the negative fact cannot be proved by adducing positive evidence. 1)Laxmibai (Dead) thr. Lrs. &Anr.vs Bhagwantbuva (Dead) thr. Lrs. &Ors.dt.29.01.2013 -MANU/SC/0072/2013. In para 15

“The appellate courts have failed to appreciate that a negative fact cannot be proved by adducing positive evidence” 2) ShriG.K.Raju -vs- The Income-tax Officer- “D” Bench- dt. 12.07.2012 “-5- ITA 291 of 2012 forward from the earlier firm, the Commissioner of Income- tax(Appeals) feels that the assessee should prove that the amount did not represent fresh loans. The general rule is that a negative cannot be proved.”

5.5.2 Second issue is Advance tax paid in excess Rs.40,83,40,689/-. Payment of advance tax by the assessee in :-10-: ITA. No:1369/Chny/2024 excess relevant to the AY. 2018-19, is taken as erroneous and prejudicial to the interest of the revenue. Though the CIT/AO agrees that the payment of tax is application of income, makes a departure by stating that advance tax paid in excess is not in accordance with scheme of things and that the AO did not make inquiries in that regard and so the order of NFAC u/s.143(3) of the Act is erroneous and prejudicial to the interest of revenue. The ld.AR submitted that the Assessee Trust had to pay higher advance tax in this year of account, as on the due date of payment of advance tax, the issue relating to the registration U/s.12A of the Act of the assessee Trust was pending before the ITAT/High Court for adjudication. The ld.AR further submitted that on the due dates of advance tax, the assessee was not sure of the outcome of the cases pending before the ITAT/ High Court/ Supreme Court and hence it paid more advance tax as a matter of abundant caution. Since, the assessee has paid more advance tax in favour of the government, no prejudice or error has occurred on the facts of the case.

5.2.3 The third and last issue was violation of Sec 13(1) (c)/13(1)(d) Rs.19,75,00,000/- in A.Y.2018-19 (A.Y.2017-18 of Rs.33.90 Crores referred to but no addition proposed). The Ld.AR submitted that the amount paid to Metronation Chennai Television

:-11-: ITA. No:1369/Chny/2024 P. Ltd, in the reply filed by the assessee before the AO, it is clearly stated that the amount was given for expansion of the “business held under trust” and is not violative of Section 13(1)(c)/ 13(1)(d), as there is no investment or loan given by the assessee trust to get a direct or indirect benefit since, one of the trustees hold shares at 99 percent in that company. This is an academic issue since the amount was spent to purchase equipment etc., to further the “business held under the trust” which is the “property held under trust” and the amounts earned by the assessee there from has been spent on educational purposes as is being done from the other amounts in the past. Further, the ld.AR stated that in the earlier assessment years viz. 2009-10, 2010-11, 2011-12 & 2012–13, this very issue of amount paid to M/s.Metronation Chennai Television P. Ltd was raised by the Assessing Officer. The issue was decided against the assessee Trust by the Assessing Officer. On appeal, the CIT(A) held against the assessee on the ground that the assessee Trust is not eligible for exemption u/s. 11 since the very issue of registration u/s. 12A of the Income Tax Act was decided against the Assessee and the same was pending before the ITAT. The assessee Trust filed appeals before the Tribunal in respect of AYs 2009-10, 2010-11, 2011-12 & 2012–13 questioning the order of the CIT(A). The Tribunal in its common order in 1533 &

:-12-: ITA. No:1369/Chny/2024 1534/CHNY/2015 and 2015 for the A.Ys.2009- 10, 2010-11, 2011-12 & 2012–13- M/s. The Thathi Trust vs. The JCIT (OSD) (E), dt. 08.07.2022, has allowed the entire income as exempt under Section 11 of the Act by following the decision of the Hon’ble Madras High Court in assessee’s own case Thanthi Trust vs. DIT [2020] 121 taxmann.com 119(Mad) dt. 29.10.2020 u/s.2(15) r.w.s. 12A of the IT Act, 1961 (Refer Pgs 137 – 176 of the Paper Book). The Revenue has filed Tax Case Appeals against the Order of ITAT allowing exemption u/s.11 for the above four Assessment Years and no specific question of law was raised in respect of this issue of violation of Sec.13(1)(C).

5.2.4 Therefore, the CIT’s findings in the impugned revisional order passed u/s.263 are highly whimsical and are not conclusive one way or the other. Each of the issue raised on merits are debatable and more than one view is possible in respect of each of the points raised by the ld.CIT(E) to justify the revision of the order passed u/s.143(3) of the Act. It is not open to the ld.CIT(E) that further verification is needed on certain aspects when the records speak that thorough enquiry was done by the Assessing Officer after issuing many notices and replies taken on record and it is not a case of no enquiry warranting such observation by the ld.CIT(E). In light

:-13-: ITA. No:1369/Chny/2024 of the above arguments, the ld.AR prayed for quashing the order of the ld.CIT(E) and summed up by stating as follows: i. The impugned proceedings u/s. 263 is not valid in law. ii. On merits, there is no corpus donation given by the assesseein the year of account for which no evidence was brought on record against the appellant by the CIT in the impugned proceedings. iii. The Advance tax paid- excess is not a ground which is erroneous and prejudicial to the interest of revenue. On the other hand, the Revenue Department issues advertisements, mails, SMS etc.to the adverse effect when the advance tax is not paid by the assessee on the due date for each year and also mentioning that interest and penalty will be levied for any failure to do so. The mere fact that the Assessee paid advance tax in excess than what is needed to be paid cannot be used against the Assessee/ Appellant as if the said event of payment of advance tax causes loss of revenue. iv. Regarding the application of Section 13(1)(c) in respect of the amount paid to M/s.Metronation Chennai Television P. Ltd., is not justified in law since the revenue stand in the earlier years has been decided in favour of the Assessee by the common order passed by the ITAT in 1533 & 1534/CHNY/2015 and 2015 for the A.Ys.2009-10, 2010-11, 2011-12 &

:-14-: ITA. No:1369/Chny/2024 2012-13- M/s.The Thanthi Trust vs. The JCIT (OSD) (E), dt.08.07.2022.

(i) the order of the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interest of the revenue, These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible as held in the case of Malabar Industrial Company Ltd Vs.CIT (243 ITR 83) (SC),wherein their Lordship have held that twin conditions should be satisfied before jurisdiction u/s 263 of the Act is exercised by the Ld.CIT. The twin conditions which :-15-: ITA. No:1369/Chny/2024 need to be satisfied are that (i) the order of the Assessing Officer must be erroneous and (ii) as a consequence of passing an erroneous order, prejudice is caused to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; (ii) Assessing Officer's order is in violation of the principles of natural justice; (iii) if the AO's order is passed without application of mind; or (iv) if the AO has not investigated the issue before him. In the circumstances enumerated above only, the order passed by the Assessing Officer can be termed as erroneous for the purpose of S.263 of the Act.

7.1 Coming next to the second limb, the AO's erroneous order can be revised by the Ld. CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined, one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an "erroneous" order passed by the Assessing Officer. The Hon’ble Supreme Court, held that for invoking powers conferred by S.263;

:-16-: ITA. No:1369/Chny/2024 the CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order, some loss is caused to the interest of the revenue. Their Lordship in the said judgment held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue.

7.2 It was further observed that when the Assessing Officer adopts one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. Keeping the aforesaid legal principles in mind when we apply the same to the facts of the present case, we note that the AO during the assessment proceedings has asked specific queries seeking the details (Page No.26 – 28 of Paper book) of all the three issues, now raised by the ld.PCIT in the impugned order u/s.263 of the Act.

:-17-: ITA. No:1369/Chny/2024 3. Advance tax payment as application of income Rs.40,83,40,689/- (Sl.No.12 of notice U/s.142(1) annexure)

7.3 The assessee had furnished the entire details of the questionnaire along with the replies to specific issues raised by the ld.CIT(E) in its reply dated 17.12.2020 to notice u/s.142(1) of the Act (Page No.32 – 34 of Paper book). Further, we note that the AO – NeAC, Delhi issued a detailed show cause notice as to why assessments should not be completed as per the draft assessment order dated 21.04.2021 to the assessee (Page No.35 – 58 of Paper book) discussing all the issues for framing assessment including the issues now raised in the impugned order u/s.263 of the Ld.CIT(E). The relevant portion of the show cause notice are given below:

2.13 The assessee had submitted a letter with regard to the non- applicability of the provisions of Sec. 2(15) which is reproduced as under: "The objects of the Trust as per supplementary deed dated 28.06.1961 include establishing and running a school or college for teaching of journalisms, establishing and / or running or helping to run schools, colleges or other educational institutions for teaching arts and science etc. In order to carry out the said objects the trust applies its income by giving donation to M/s. Aditanar Educational Institution which runs educational institutions after complying with the provisions of Section 11 of the Act by giving donation to Aditanar Educational Institutions the assessee trust helps or assists the other trust to run educational institutions and its activity can be termed as education in its true sense. 2.16 A perusal of the assessee's records for the year under reference and for earlier years reveal that the trust does not by itself establish and run institution though such purpose has been specified as its main object in the supplementary trust deed. The organization has also not :-18-: ITA. No:1369/Chny/2024 carried out other objects such as running or helping to run hostels for students, providing scholarships to students and establishing or helping to run orphanages. The only charitable activity is the regular donation made to Aditanar Educational Trust year after year. 2.29 Violations u/s 13(1) (c)&(d) During the year under consideration, the assessee had invested a sum of Rs. 33.9 crores in the shares of M/s Metronation Chennai Television P Ltd., which airs Thanthi TV, Further the Trustees of Thanthi Trust are the Directors of the above company. Further, one of the trustee viz., M/s Educational Trustee Co. Private Limited is holding more than 99% of the shares of M/s Metronation Chennai Television P Ltd. A show- cause was issued on 06.11.2019 as to why this investments should not be construed as violations u/s 13(1)(c) & (d) of the IT Act. The assessee vide its reply dated 29.11.2019 had contended that Section 13(1)(c) & (d) is not applicable in assessee's case but however the assessee had requested that the taxation should be confined to the violated portion of income earned through such transaction. The contentions of the assessee is not tenable. The investment has been effected during the year under consideration and suffers violation under both sections 13(1)(c) & 13(1)(d). If the said sum continues to be invested in subsequent years, the income arising out of such income is taxable at MMR. Since the provisions of Section 2(15) is invoked in assessee's case for the detailed discussion above, the taxing of this portion at MMR makes no difference in taxation. However, in the event of any possible relief in the appellant forum against invoking of Section 2(15) arises, this addition u/s 13(1)(c) & (d) would prevail for the violated sum of Rs. 33.9 crores.

Subsequently, considering the assessee’s reply the AO passed an assessment order u/s.143(3) of the Act on 24.09.2021 by holding as under:

“After examination of information furnished regarding the issues for which the case is selected for scrutiny and respectfully following the decision of the Hon'ble High Court of Madras in the assessee's own case cited supra, the assessment is completed accepting the income returned.”

:-19-: ITA. No:1369/Chny/2024 7.4 Therefore, we find that, the AO had verified and convinced that, the activities carried out by the assessee is eligible exemption u/s.2(15) of the Act and also respectfully following the decision of the Hon’ble Madras High court in allowing the appeal of the assessee against the cancellation of registration u/s.12AA of the Act, passed an order u/s.143(3) of the Act. This action of the AO, interfered by the Ld.CIT(E) exercising his jurisdiction U/s.263, which according to the ld. AR is wholly without jurisdiction and the issues that have been raked by the Ld.PCIT by treating the application of fund under three heads as not allowable. According to the Ld.CIT(E) the following payments; 1. Investment made in M/s.Metronation Chennai Television Pvt Ltd Rs.19,75,00,000/- 2. Corpus donation made to M/s.Aditnar Educational Institution Rs.19,35,00,000/- and 3. Advance tax payment as application of income Rs.40,83,40,689/- are to be disallowed as fund not utilised for the objects of the assessee trust and taxed at MMR. In the present facts of the case, we do not agree with the assertion laid by the Ld.CIT(E), since the AO during the assessment proceedings has considered

:-20-: ITA. No:1369/Chny/2024 all the three impugned issues raised by the Ld.CIT(E) and concluded the assessment by taking a plausible view permitted under the Act.

7.5 The assertion of the Ld.CIT(E) that, the AO while scrutinizing the assessment has failed to verify the issue stated (supra) is contrary to the facts revealed from the records and found to be incorrect. From perusal of the (Paper Book filed before us) the SCN for draft assessment order and the assessment order, it reveals that the AO has conducted enquiry on all the impugned three issues and the assessee had furnished all the relevant material during the assessment proceedings (provided in the paper book filed by the assessee) and which have been duly considered and verified by the AO before framing the assessment by accepting the payments made by the assessee as application of funds towards objectives of the trust as claimed by the assessee.

7.6 Since, the AO has considered the issues according to the merits and also followed the decision of the hon’ble Madras high court in assessee’s own case wherein their lordship has considered all the impugned issues before reinstating the registration granted u/s.12AA of the Act, the assessment order of the AO cannot be :-21-: ITA. No:1369/Chny/2024 treated as erroneous. Therefore, we do not countenance the impugned action of ld.CIT(E) on the facts and circumstances of the case.