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
