RAHULKUMAR BAJAJ CHARITABLE TRUST,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 26(1), MUMBAI, MUMBAI

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ITA 4587/MUM/2025Status: DisposedITAT Mumbai31 August 2026AY 2018-197 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the donation made in furtherance of the trust's charitable objects is allowable as a deduction under Section 57(iii) when income is assessed under 'Income from Other Sources' and Sections 11/12 benefits are not claimed. The disallowance by the AO and CIT(A) was not sustained.

What were the facts?

The assessee, a charitable trust, did not claim benefits under Sections 11 and 12 and offered income under 'Income from Other Sources'. It claimed a deduction of Rs. 65,00,000/- for donations made to other charitable trusts for its objects.

What were the issues?

Whether donations made by a charitable trust, assessed under 'Income from Other Sources', are deductible under Section 57(iii) for expenditure incurred on its charitable objects.

Which sections of the Income-tax Act were involved?

Section 57(iii),Section 11,Section 12,Section 80G

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI ANIKESH BANERJEE & SHRI ARUN KHODPIA

PER SHRI ANIKESH BANERJEE, JUDICIAL MEMBER: The instant appeal of the assessee filed against the order of the NFAC Delhi [for brevity “Ld. CIT(A)”], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2018-19, date of order 20.06.2025. The impugned order emanated from the order of National E- Assessment Centre, Delhi (for brevity ‘Ld. AO’), order passed under Section 143(3) r.w.s. 143(3A) r.w.s. 143(3B) of the Act, date of order 15.02.2021. 2. The assessee has taken the following grounds: “I. DENIAL OF DEDUCTION UNDER SECTION 57(iii) OF THE ACT OF RS.65,00,000/-: 1.1 On the facts and in the circumstance of the case and in Law, the learned Commissioner of Income-tax (Appeals) [CIT(Appeals)] erred in upholding the denial of the deduction by the learned Assessing Officer for a sum of Rs.65,00,000/-under Section 57(iii) of the Act for the donations of Rs. 65,00,000/-paid by the appellant to the eligible trusts and Institutions as "Expenditure on the objects of Trust". 1.2 The learned CIT(Appeals) erred in not considering the claims and contentions of the Appellant as contained in the written submissions furnished by the appellant in justification of the claim for the deduction for donations paid and also considering the various case laws cited and referred to in the said submissions. 1.3. The Appellant prays that the learned Assessing Officer be directed to grant deduction under Section 57 (iii) of the Act for a sum of Rs. 65,00,000/- and reduce the total income of the Appellant accordingly.” 3. The brief facts of the case are that the assessee is a Public Charitable Trust engaged in pursuing charitable objects and activities. The assessee had initially received shares of Bajaj Auto Ltd. by way of donation towards its corpus and, pursuant to the scheme of demerger, subsequently received shares of Bajaj Auto Ltd., Bajaj Holdings & Investment Ltd. and Bajaj Finserv Ltd. Since the investments in such shares were not in conformity with the modes prescribed under Section 11(5) of the Act, the assessee has not claimed the benefit of Sections 11 and 12 of the Act from AY 1993-94 onwards. Its income has accordingly been offered under the head “Income from Other Sources” in the status of an Association of Persons (AOP).

4.

For the year under consideration, the assessee filed its return of income declaring total income of Rs.3,65,85,940/-. The assessment was completed under Section 143(3) r.w.s. 143(3A) and 143(3B) of the Act on 15.02.2021 determining total income at Rs.4,40,85,940/-. The principal dispute relates to denial of deduction of Rs.65,00,000/- under Section 57(iii) of the Act in respect of donations made to eligible charitable trusts/institutions. The alternative claim under Section 80G was also not allowed.

5.

During the relevant year, the assessee earned interest income of Rs.68,67,616/- and dividend income of Rs.3,72,18,323/-. The assessee claimed that an amount of Rs.65,00,000/- was applied by way of donations to various charitable trusts/institutions having valid exemption certificates and carrying on similar charitable objects. The Ld. AO disallowed the claim under Section 57(iii) on the ground that there was no direct nexus between the donations paid and the earning of interest income and, therefore, the expenditure could not be regarded as having been incurred wholly and exclusively for earning income from other sources. The Ld. CIT(A) upheld the disallowance. Aggrieved, the assessee is in appeal before us.

6.

The Ld. AR argued and filed a paper book comprising pages 1 to 30 which has been placed on record. The Ld. AR contended that the assessee has not claimed any benefit under Sections 11 and 12 of the Act and its income has been assessed under the head “Income from Other Sources”. However, the assessee continues to pursue its charitable objects as mandated by the Trust Deed. The donations of Rs.65,00,000/- were made to eligible charitable trusts/institutions in furtherance of such objects and, therefore, constitute expenditure on the objects of the Trust. The assessee had also furnished the relevant details and supporting documents relating to the donee trusts/institutions.

7.

The Ld. AR further contended that the issue is squarely covered by the order of the Coordinate Bench of ITAT, Mumbai in Mahakalp Arogya Pratisthan vs. ITO, ITA No.2368/Mum/2022, order dated 10.01.2023, pertaining to Assessment Year 2018-19. It was submitted that in the said case also the assessee had not claimed benefit under Sections 11 and 12 and the expenditure incurred towards its charitable objects was held allowable under Section 57(iii). The assessee placed reliance on the principle adopted therein from The relevant paragraph of the said order is reproduced as below:

“We observe that as per the decision of Hon'ble Delhi High Court as supra all expenses incurred by the assesse for charitable object for which it was established are allowable as deduction u/s 57(iii) of the Act. The Id. D.R relied on the decision of ITAT, Pune in the case of Poona Club Ltd. Vs. ACIT (2018) 90 taxman.com 422 (Pune). We find that the fact of that case is distinguishable from the fact of the case of the assesse as in the case of the assesse they have not claimed any benefit u/s 11 and 12 of the Act and the expenses were incurred by the assesse for the charitable object for which it was established. The Hon'ble Delhi High Court in the case of Petroleum Sport Promotion Board as supra has also considered the decision of Hon'ble Supreme Court in the case of CIT Vs. Rajendra Prasad Modi 115 ITR 519 (SC) wherein held that Sec. 57(iii) must be construed broadly and the some what wider language of Sec. 37(1) do not affect the interpretation of Sec. 57 (iii) of the Act. We have also considered the decision of ITAT, Indore in the case of DCIT (Exemption) Bhopal Vs. Shri Vaishnav Polytechnic College Govn by VSK Market Tech Educational Society (2020) 122 taxman.com 287 (Indore Tribunal) and the case of Shri Sanatan Dharm Mandir Sabha Vs. ITO, Ward 41(2) vide ITA No. 5791/Del/2019 wherein the decision of Hon'ble Delhi High Court as discussed supra was followed. We have also perused the paper book wherein the assesse has enclosed supporting evidences i.e. donation receipts and evidences of payment made by cheques etc. were placed to demonstrate that expenditure were incurred for the object of the assesse. Looking to the above facts and circumstances and after following the decision of Hon'ble Delhi High Court in the case of Petroleum Sport Promotion Board we consider that decision of ld. CIT(A) is not justified, therefore, we direct the A.O to allow the claim of deduction made by the assesse. Therefore, ground of appeal of the assesse is allowed.” 8. Per contra, the Ld. DR relied upon the orders of the revenue authorities. The Ld. DR submitted that the language of Section 57(iii) requires the expenditure to be laid out or expended wholly and exclusively for the purpose of making or earning the income. According to the revenue, the donations 4 made to various charitable institutions did not have any direct nexus with the interest income earned from bank deposits and, therefore, the conditions prescribed under Section 57(iii) were not satisfied. The Ld. DR accordingly supported the disallowance made by the Ld. AO and sustained by the Ld. CIT(A). The assessment order records this precise basis for the disallowance.

9.

We have heard the rival submissions and perused the material available on record. The limited issue for our consideration is whether the donation of Rs.65,00,000/- made by the assessee in furtherance of its charitable objects is allowable as deduction under Section 57(iii) of the Act, where the assessee has not claimed exemption under Sections 11 and 12 and its income has been assessed under the head “Income from Other Sources”. It is undisputed that the assessee has not been claiming the benefit of Sections 11 and 12 from AY 1993-94 onwards and has been computing its income under the head “Income from Other Sources” in the status of an AOP. It is also the assessee's case that the donations in question were made to charitable trusts/institutions having valid exemption certificates and pursuing similar charitable objects.

10.

We find that an identical issue came up for consideration before the Coordinate Bench of ITAT, Mumbai in Mahakalp Arogya Pratisthan (supra) & the Coordinate Bench had considered the principle laid down by the Hon'ble Delhi High Court in DDIT (E) vs Petroleum Sports Promotion Board reported in (2014) 111 DTR (Del) 55 that where exemption is not available and income is assessed under the residuary head, Section 57(iii) has to be given due effect while computing the taxable income. The assessee's appellate submissions also reproduce the Delhi High Court's reasoning that disallowing expenditure incurred for carrying out the very objects of such an entity may result in taxation of gross receipts rather than income.

11.

On comparison, the material facts of the present case correspond with those considered by the Coordinate Bench in Mahakalp Arogya Pratisthan (supra): the assessee has not claimed the benefit under Sections 11 and 12; its income is assessed under the head “Income from Other Sources”; and the disputed expenditure represents donations stated to have been made in furtherance of its charitable objects. The revenue has not brought before us any material distinction in the factual or legal position which would make the ratio of the Coordinate Bench inapplicable. Accordingly, following the ratio laid down by the Coordinate Bench in Mahakalp Arogya Pratisthan (supra), the reasoning supporting the disallowance of Rs.65,00,000/- under Section 57(iii) cannot be sustained. The consequential alternative claim under Section 80G does not require separate adjudication once the principal claim under Section 57(iii) is accepted.

12.

In the result, the appeal of the assessee bearing ITA No.4587/Mum/2025 is allowed. Order pronounced in the open court on 31st day of August 2026 Sd/- Sd/- (ARUN KHODPIA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 31/08/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file.

BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI

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