SRI VIDYANIKETHAN EDUCATIONAL TRUST,CHITTOOR vs. DCIT EXEMPTION CIR,, VIJAYAWADA

ITA 412/VIZ/2026Status: DisposedITAT Visakhapatnam23 September 2026AY 2022-2319 pages
AI SummaryAllowed

What were the facts?

The assessee, Sri Vidyanikethan Educational Trust, filed its return for Assessment Year 2022-2023 declaring NIL income, claiming exemption under sections 11 and 12 of the Income Tax Act, 1961. The case was selected for scrutiny due to a discrepancy between property sale consideration in the ITR and SFT. The Assessing Officer (AO) completed the assessment under section 143(3) accepting the returned income. Subsequently, the Commissioner of Income Tax (Exemptions) [CIT(E)] initiated revision proceedings under section 263. The CIT(E) observed that the assessee sold a capital asset for Rs. 33 crore, reporting a profit of Rs. 15,97,88,530/-, but did not reinvest the entire sale consideration as per section 11(1)(a). More critically, the CIT(E) noted a foreign payment of Rs. 68,82,420/- to LOUVRY Trading Co. Ltd. for construction material, arguing that prior CBDT permission under section 11(1)(c) was mandatory for utilizing funds abroad, failing which the amount would be taxed under section 115BBI. The CIT(E) found this issue unverified by the AO, deeming the assessment order erroneous and prejudicial to revenue.

What did the Tribunal hold?

The Tribunal held that the payment of Rs. 68,82,420/- to the foreign company for construction material used in India for building construction by the assessee trust does not constitute an application of income outside India under Section 11(1)(c) of the Income Tax Act, 1961. The Tribunal noted that the Assessing Officer had indeed conducted an enquiry by issuing a show cause notice under section 142(1) and was satisfied with the assessee's reply that the expenditure was for import of construction material used for charitable purposes in India. The Tribunal found that the CIT(E) could not invoke Section 263 merely because he disagreed with the AO's plausible view. Citing various ITAT and High Court decisions, including Ohio University Christ College and Advertising Standards Council of India, the Tribunal reiterated that foreign remittances for activities carried out in India do not amount to application of income outside India. The Delhi High Court case relied upon by the revenue was distinguished as it involved expenditure on activities held outside India. Therefore, the assessment order was not erroneous or prejudicial to the revenue. The impugned order of the CIT(E) was set aside.

What were the issues?

1. Whether the payment of Rs. 68,82,420/- to a foreign company for the purchase of construction material used for building construction in India constitutes an application of income outside India, attracting the provisions of Section 11(1)(c) of the Income Tax Act, 1961, thereby rendering the assessment order erroneous and prejudicial to the interests of the revenue? Assessee's Contention: The assessee argued that the AO had already examined the issue of foreign payment by issuing a show cause notice under section 142(1) and was satisfied with the reply that the payment was for construction material used in India for charitable purposes. They contended that such payments for activities carried out in India do not fall under the ambit of Section 11(1)(c) and are not amounts spent for charitable activities outside India. Reliance was placed on the decisions in CIT (Exemptions), Bangalore vs. Ohio University Christ College, National Association for Software & Services Companies vs. Deputy Director of Income Tax (Exemptions), Aditya Birla Education Trust vs. CIT (Exemption), and Advertising Standards Council of India vs. CIT (Exemptions). Revenue's Contention: The revenue argued that the AO's enquiry was incomplete as the assessment order was silent on the outcome. They relied on the CIT(E)'s observation that the AO had not conducted a proper enquiry, making the assessment order erroneous and prejudicial. The revenue also cited the Delhi High Court's decision in Director of Income Tax (Exemptions) vs. National Association for Software Services, suggesting that income applied outside India, even for charitable purposes in India, requires prior CBDT permission.

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 11(1)(a),Section 11(1)(c),Section 115BBI,Section 143(3),Section 142(1),Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM DB-BENCH, VISAKHAPATNAM

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.

Pronounced: 23.09.2026

PER VIJAY PAL RAO, VICE PRESIDENT:

This appeal by the Assessee is directed against the revision order dated 23.03.2026 of the learned CIT(E), Hyderabad passed u/sec.263 of the Income Tax Act [in short "the Act"], 1961 for the assessment year 2022-2023. 2. The assessee has raised the following grounds of appeal:

3 ITA.No.412/VIZ./2026

3.

The assessee trust fi

The order continues below.

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