Case Law Details
DCIT (Exemptions) Vs ICICI Foundation for Inclusive Growth (ITAT Chennai)
ITAT Chennai Upholds Exemption of Corpus Withdrawals and Deletes Ad-hoc Disallowance of Administrative Expenses
The Chennai Bench of the ITAT dismissed the Revenue’s appeal and upheld the order of the CIT(A) deleting (i) the addition of ₹19.34 crore made by treating withdrawal from corpus fund as income, and (ii) the ad-hoc disallowance of ₹5.30 crore towards administrative expenses for AY 2012-13. The assessee, a charitable trust registered u/s 12AA and approved u/s 80G, had received corpus donations which were accepted as such by the AO. The Tribunal held that merely because corpus funds were utilised for meeting expenditure, they do not lose their character as corpus when applied in accordance with the donors’ directions and the trust deed. The AO failed to bring any material to show misuse or violation of donor conditions; suspicion based on increased administrative spend was insufficient.
On administrative expenses, the Tribunal found the disallowance to be purely ad-hoc, made without identifying any specific non-charitable, personal, or non-genuine expense. Audited accounts carried no adverse remarks, and the expenditure comprised salaries, professional fees, travel and program-related costs incurred for the trust’s objects. Mere increase in expenditure compared to the prior year cannot justify disallowance. The Tribunal also noted that the Finance Act, 2021 amendment to s.11(1)(d) is prospective and inapplicable to the year in question. Accordingly, the CIT(A)’s well-reasoned order was affirmed and the Revenue’s appeal dismissed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [CIT(A)] dated 24.06.2025 for the Assessment Year 2012-13.
2. The Revenue has challenged the action of the Ld.CIT(A) in deleting the addition of Rs.19,34,72,836/- made by the Assessing Officer by treating withdrawal from corpus fund as income of the assessee and also deleting the ad-hoc disallowance of administrative expenses amounting to Rs.5,30,70,160/- made by the Assessing Officer.
3. Facts of the Case are that the assessee is a charitable trust registered under section 12AA and also approved u/s.80G of the Income Tax Act, 1961. During the year under consideration, the assessee received corpus donations aggregating to Rs.26,10,59,858/- from ICICI Bank Ltd., ICICI Home Finance Ltd., ICICI Venture Fund Management Company Ltd. and IKP Knowledge Park.
The Assessing Officer accepted that the receipts were corpus donations and were exempt u/s.11(1)(d) of the Act. However, he observed that the assessee had withdrawn an amount of Rs.19,34,72,836/- from the corpus fund to meet expenditure during the year. According to the Assessing Officer, the administrative expenditure had increased substantially as compared to the earlier year and, therefore, the utilisation of corpus funds was not in line with the directions of the donors. He accordingly treated the said amount of Rs.19,34,72,836/- as income of the assessee.
During the assessment proceedings the AO found that the assessee has incurred expenditure of Rs.12,81,95,061/- as an administrative expense and incurred only Rs.2,20,54,740/- on charity classified as program related cost This administrative cost also includes foreign travel. Further this administrative cost has increased substantially as compared to the last year. Therefore disallow 50% of this expenditure and thus made addition of Rs.5,30,70,160/- to the total income.
4. The Ld.CIT(A), after examining the assessment order, written submissions of the assessee, copies of donor letters and the trust deed dated 04.01.2008, recorded a categorical finding that:
- There was no dispute that the assessee is a charitable trust carrying on charitable activities.
- The Assessing Officer had not disputed that the donations received were corpus donations.
- The donor letters clearly stated that the amounts were contributed as corpus in accordance with the trust deed.
- On perusal of expenditure details, it was evident that the amounts were spent for charitable activities of the trust.
- The Assessing Officer had not brought any material on record to show that the corpus donation was utilised contrary to the directions of the donors.
The Ld.CIT(A) relied upon the decision of the ITAT, Pune Bench in Thermax Social Foundation vs ITO (77 taxmann.com 30) and the judgment of the Hon’ble Karnataka High Court in DIT v. Shri Ramkrishna Seva Ashram (18 taxmann.com 37) and held that corpus donations could not be treated as income of the assessee. Accordingly, the addition of Rs.19,34,72,836/- was deleted.
Regarding deleting the ad-hoc disallowance of administrative expenses amounting to Rs.5,30,70,160/-, the assessee submitted before the ld.CIT(A) that the entire administrative expenditure of Rs.12,81,95,061/- was incurred wholly and exclusively for the objects of the trust and was claimed as application of income. Detailed bifurcation of expenses was furnished. It was specifically contended that no foreign travel expenditure was debited as alleged by the Assessing Officer.It was further submitted that the books of accounts were duly audited and no adverse or qualified remark was made by the auditors regarding utilization of funds for charitable purposes. The assessee also contended that the Assessing Officer had already treated the deficit as income and therefore further disallowance of administrative expenditure would result in double addition. After considering the facts and submissions, the ld.CIT(A) held that the administrative expenses consisted of salary, professional and consultancy fees, travel, conveyance and other program related costs incurred for carrying out the objects of the trust. The ld.CIT(A) further observed that the Assessing Officer had not brought on record any factual finding to establish that the expenditure was not related to the charitable objects of the trust. The disallowance was held to be purely ad-hoc and based on assumptions. Accordingly, the CIT(A) directed the Assessing Officer to delete the disallowance of Rs.5,30,70,160/- and allowed the appeal.
5. Before us, the Ld. DR relied upon the assessment order. The Revenue is also aggrieved and is in appeal before us, contending that the ld.CIT(A) erred in deleting the disallowance of administrative expenditure which was excessive and unreasonable The Ld. AR of the assessee supported the order of the ld.CIT(A) and submitted that no contrary material was placed by the Revenue.
6. We have heard the rival submissions and perused the material available on record.It is an admitted fact that the assessee is registered under section 12AA and is carrying on charitable activities. It is also undisputed that the donations received during the year were towards corpus and were accepted as such by the Assessing Officer. The sole basis for making the addition was the alleged improper utilisation of corpus funds.From the record, we find that the Ld. CIT(A) has examined the donor letters as well as the trust deed and has given a clear finding that the corpus donations were utilised in accordance with the objects of the trust and there is no evidence to show that the utilisation was contrary to the directions of the donors. The Assessing Officer has merely proceeded on suspicion due to increase in administrative expenses, without bringing any concrete material on record.
Further, the judicial precedents relied upon by the Ld. CIT(A) clearly support the proposition that voluntary contributions made with specific direction towards corpus cannot be treated as income under section 11(1)(d) of the Act. We also note that the amendment to section 11(1)(d) by Finance Act, 2021 is prospective and not applicable to the assessment year under consideration. In view of the above facts and respectfully following the judicial precedents, we find no infirmity in the order of the Ld. CIT(A). Accordingly, the same is upheld.
Regarding deleting the ad-hoc disallowance of administrative expenses, we have perused the material available on record. It is undisputed that the administrative expenditure was incurred in the normal course of carrying out the charitable activities of the assessee. The Assessing Officer has not pointed out any specific item of expenditure which was personal, non-genuine or not incurred for the objects of the trust.The disallowance has been made solely on the ground that the administrative expenditure had increased compared to the preceding year. Mere increase in expenditure, without bringing any cogent material on record, cannot be a valid basis for making ad-hoc disallowance. It is well settled that ad-hoc disallowances without identifying specific defects are not sustainable in law. We further note that the Assessing Officer himself has observed that the expenditure was incurred towards charity but considered it to be high and unreasonable. Once it is accepted that the expenditure was incurred for charitable purposes, the same cannot be disallowed on mere perception of excessiveness, particularly in the absence of any statutory cap or violation. The ld.CIT(A) has given a clear finding that the Assessing Officer has not brought any factual material to establish that the expenditure was not related to the objects of the trust. These findings have not been controverted by the Revenue with any evidence.In view of the above facts and circumstances, we find no infirmity in the well-reasoned order of the ld.CIT(A). The deletion of the ad-hoc disallowance of Rs.5,30,70,160/- is justified. Accordingly, the order of the CIT(A) is upheld.
7. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on the 20th day of January, 2026 at Chennai.
Author Bio
