Global Vision Vs ITO (ITAT Mumbai)
Heavy Contract Payments by Trust Under Scanner: Matter Remanded for Verification
The assessee trust claimed substantial expenditure (₹1.89 crore) towards contractual salaries and incentives, treating it as application of income for charitable purposes. The AO disallowed the same on the ground that such expenses were not adequately justified as being for the objects of the trust, especially when they exceeded 20% of receipts.
The Tribunal observed that although contractual appointments for fundraising may be permissible, the assessee failed to demonstrate the necessity, nexus, and effectiveness of such high expenditure-particularly how much funds were actually raised and how it furthered the charitable objectives.
Given the disproportionate ratio between charitable spending and contractual payments, and lack of supporting evidence, the ITAT held that the issue required deeper factual verification.
Accordingly, the matter was restored to the CIT(A) for fresh adjudication with directions to examine detailed evidence and justification. The appeal was disposed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is instituted by the assessee, directed against the order of Commissioner of Income Tax Appeals — ADDL/JCIT(A) — 4 Chennai [“the Ld. CIT(A)] dated 26.12.2025 for the assessment year 2016-17 arises from assessment order u/s 143(3) of the Income Tax Act, 1961 (“the Act”) dated 30.12.2018 passed by ITO (Exemption) Ward, Thane. The grounds of appeal raised by the assessee are as under:
“1. On the facts and circumstances of the case, and in Law, the CITA has erred in confirming the disallowance of Rs. 1,88,66,966/- as application of Income as not utilized towards the objective.
2. On facts and circumstances of case and in law the CITA has failed to appreciate that:-
a. The Funds were applied for object of trust, which included the personnel payment by way of Contractual and regular employments.
b. Payment of Salary are incidental to the main objects of the trust and that alone can never be the object of the trust.
c. The AO did not doubt the purpose of the said payments, and non-salary expenses are considered as utilized for charitable purpose.
d. The AO mentions that only 20% of the receipts are spent on charity and balance on contractual payments, while allowing almost 80% (7,23,10,783/- out of 9, 11,77,749/) of the receipts as charitable.
e. CIT(A) as confirmed the additions without any justification.
3. The Appellant therefore prays that the said payments may please be allowed as application of income for charitable purposes, and addition may kindly be deleted.”
2. Briefly stated, the ITR for relevant assessment years has been filed by assessee on 17.10.2016, declaring income at NIL. The case was selected for scrutiny under CASS. Accordingly, notices u/s 143(2) and 142(1) were issued along with questionnaires. The assessee submitted response before the AO by filing copies of return, income and expenditure, bank statement, balance-sheet and other details called for. Further, statements u/s 131 of the Act of one of the trustee Shri Vishanu Adhikari, Trustee were recorded on 29.11.2018. From the statements so recorded, the question regarding contract salary, contract incentives viz-a-viz trust’s needs, asked by the AO, could not be properly answered by the trustee. the Ld. AO therefore observed that, as per question no.25 of the statement, the trustee was asked to explain that a huge amount has been expended by the assessee trust towards contract and incentive, which could not be substantiated to be incurred for the object of the trust. The said amount is much higher than the 15% of the gross receipt of the trust, therefore, the same cannot be considered to be used towards object of the trust. The trustee was requested to explain, as to why the same should not be treated as willful attempt to evade taxes. In response, the trustee answered “I don’t understand the technicalities of Income Tax Act, 1961. I will answer the same after discussing with my CA by 03.12.2018.”
