Back
2025 Supreme(Online)(ITAT) 3860
INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
T.R. Senthil Kumar, JM, Narendra Prasad Sinha, AM
Revenue – Appellant
Versus
Assessee – Respondent
ITA No.1205/Ahd/2025 | ITA No.769/Ahd/2025
For the Appellants/Petitioners: Shri Alpesh Parmar
For the Respondents: Shri S.N. Soparkar
Court upheld the appellant trust's entitlement to tax exemption despite concerns over the trustee's transactions, clarifying the application of Sections 11, 12, and 13 of the Income Tax Act, 1961.
Headnote:In this judgment, the Income Tax Appellate Tribunal addressed the appeals concerning additions made under Section 68 of the Income Tax Act, 1961, for the assessment year 2018-19. The court emphasized the need for assessing the genuineness of transactions with evidence provided by the assessee. The judgment primarily deliberated on whether the additions made by the Assessing Officer were justified, especially concerning the sale proceeds of shares and the assessment of the charitable status of a trust under Sections 11 and 12. Additionally, the court examined the interpretation of Section 13(1)(c) regarding exemptions and benefits derived by trustees. It ultimately quashed the denial of exemption under Sections 11 and 12 while maintaining the order of CIT(A).
| Table of Content |
|---|
| 1. essentials of claim and appeal process. (Para 2 , 4 , 6) |
| 2. grounds for revenue's appeal and the basis for section claims. (Para 5 , 7 , 8) |
| 3. findings regarding revenue claims of unexplained cash credits. (Para 9 , 10 , 11) |
| 4. charitable status and exemption critiques. (Para 12 , 13 , 16) |
| 5. legal interpretations and conclusions drawn. (Para 14 , 20 , 23) |
ORDER
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
These cross appeals are filed by the Revenue and Assessee respectively, against the order of NFAC, Delhi (in short “the CIT(A)”), dated 31.03.2025, for the Assessment Year (A.Y.) 2018-19 in the proceedings under Section 143(3) read with Section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
2. The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2018-19 on 26.10.2018 declaring income of Rs. Nil. The case was selected for complete scrutiny under CASS. The assessment was completed under Section 143(3) of the Act on 06.06.2022 at a total income of Rs.6,15,26,94,300/-. In the course of assessment, the Assessing Officer had made an addition of Rs.538.40 Crores under Section 68 of the Act in respect of sale consideration of shares of e-infochips Limited. Further, the Assessing Officer had also denied exemption under Section 11 and 12 of the Act as claimed by the assessee.
3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was partly allowed.
4. Now, both the Revenue as well as the assessee are in appeal before us. We will first take up the appeal of the Revenue for adjudication.
ITA No.1205/Ahd/2025 filed by the Revenue
5. The only ground taken by the Revenue in this appeal is as under: -
“1. Whether on the facts and in circumstances of the case, Ld. CIT is justified in deleting the addition u/s.68 of the I.T. Act, 1961 of Rs.5,38,40,00,000/- being sale consideration of E-Infochip Limited shares received from M/s. Arrow Electronics India Pvt. Ltd., Bangalore.” Submission of Revenue
6. Shri Alpesh Parmar, Ld. CIT D.R. has taken us through the facts of the case in quite detail. Before we adjudicate the ground taken by the Revenue, it will be relevant to recapitulate the facts of the case as brought on record in the assessment order.
(i) The assessee is a public charitable trust in existence since 2001 and registered under Section 12 AA of the Act. The assessee had received 80,00,000 numbers of equity shares of e-Infochips Limited as corpus donation from its trustee Shri Pratul Krishnakant Shroff on 12.12.2017. Thereafter, all the shares of e-Infochips Limited, including those held by the assessee, were acquired by Arrow Electronics India Pvt. Ltd. (hereinafter referred as “Arrow”). Arrow is Indian subsidiary of Arrow Electronics Inc - a Fortune 500 USA Company with 99.9% of shareholding. The shares e-Infochips Limited (now known as e-Infochips Private Limited) was acquired by Arrow from more than 500 shareholders, including the assessee trust at a consideration of Rs.673/- per share.
(ii) Arrow Electronics Inc is a large USA Corporation with approximately $ 29 billion in sales in the year 2020. It ranked at #109 in Fortune 500 Company list of 2020 countries. Globally, it has 302 sales locations and 42 Fulfilment & Value-added centers serving 180,000 customers worldwide. Arrow Electronics specializes in distribution of electronic components and computer products, and value-added services and solutions around them. Arrow was founded in 1935, and therefore is one of the oldest USA Corporations. As a distributor, Arrow works with largest semiconductor global Corporations such as Intel Qualcomm, Analog Devices, etc as well as largest computer companies such as IBM, Microsoft, Amazon, etc.
(iii) Strategically, Arrow Electronics Inc, USA, has pursued aggressive growth with strategic acquisitions to bring
