Care Today Fund Vs ITO (Exemption) (ITAT Delhi)
ITAT Delhi: Payment to Implementing NGOs Is Application of Income – ₹1.89 Cr Addition u/s 11(3) Deleted
Assessee, a registered charitable trust u/s 12A & 80G, filed its return for AY 2017-18 declaring nil income. It carried out various welfare projects such as construction of bio-toilets & repair of educational institutions.
During scrutiny, AO disallowed ₹1,89,64,378 treating it as deemed income u/s 11(3) on the ground that payments made to other trusts (like Anchal Charitable Trust & Bal Raksha Bharat) amounted to donations & not application of income. CIT(A) confirmed the disallowance.
Assessee’s Stand
- It had not given any donations or grants, but only made project-linked payments under agreements for executing charitable works (repairs, sanitation projects, education support, etc.).
- Funds were applied strictly per its objects, under its supervision & control, supported by agreements, progress reports, & CA certificates.
- As per CIT v. HPS Social Welfare Foundation (329 ITR 310, Delhi HC), payments made to NGOs for implementing charitable activities on behalf of assessee still constitute application of income under section 11.
Tribunal’s Findings /Decision
- Trust’s agreements clearly established that other implementing agencies (like Anchal Charitable Trust) only executed the charitable projects under the supervision of Care Today Fund, & not as independent donees.
- AO & CIT(A) failed to show that such funds were misused or diverted for non-charitable purposes.
- Delhi HC in HPS Social Welfare Foundation (329 ITR 310) squarely applied — where genuine utilization of funds for charitable objectives through third parties does not attract s.11(3).
- Hence, the disallowance of ₹1.89 crore as deemed income was illegal & unsustainable.
- Appeal allowed- Addition of ₹1,89,64,378 u/s 11(3) deleted; penalty & interest grounds rendered infructuous.
Key Takeaway
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