DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS) , CHENNAI vs. THE ICICI FOUNDATION FOR INCLUSIVE GROWTH , MUMBAI

of Rs.19,34,72,836/- from the corpus fund to meet expenditure

during the year. According to the Assessing Officer, the

administrative expenditure had increased substantially as compared

to the earlier year and, therefore, the utilisation of corpus funds was

not in line with the directions of the donors. He accordingly treated

the said amount of Rs.19,34,72,836/- as income of the assessee.

During the assessment proceedings the AO found that the assessee

has incurred expenditure of Rs.12,81,95,061/- as an administrative

expense and incurred only Rs.2,20,54,740/- on charity classified as

program related cost This administrative cost also includes foreign

travel. Further this administrative cost has increased substantially

as compared to the last year. Therefore disallow 50% of this

expenditure and thus made addition of Rs.5,30,70,160/- to the total

income.

submissions of the assessee, copies of donor letters and the trust

deed dated 04.01.2008, recorded a categorical finding that:

• There was no dispute that the assessee is a charitable trust carrying on charitable activities. • The Assessing Officer had not disputed that the donations received were corpus donations. • The donor letters clearly stated that the amounts were contributed as corpus in accordance with the trust deed. • On perusal of expenditure details, it was evident that the amounts were spent for charitable activities of the trust. • The Assessing Officer had not brought any material on record to show that the corpus donation was utilised contrary to the directions of the donors.

The Ld.CIT(A) relied upon the decision of the ITAT, Pune Bench

in Thermax Social Foundation vs ITO (77 taxmann.com 30) and the

judgment of the Hon’ble Karnataka High Court in DIT v. Shri

Ramkrishna Seva Ashram (18 taxmann.com 37) and held that

corpus donations could not be treated as income of the assessee.

Accordingly, the addition of Rs.19,34,72,836/- was deleted.

Regarding deleting the ad-hoc disallowance of administrative

expenses amounting to Rs.5,30,70,160/-, the assessee submitted

before the ld.CIT(A) that the entire administrative expenditure of

Rs.12,81,95,061/- was incurred wholly and exclusively for the

objects of the trust and was claimed as application of income.

Detailed bifurcation of expenses was furnished. It was specifically

contended that no foreign travel expenditure was debited as alleged

by the Assessing Officer.It was further submitted that the books of

accounts were duly audited and no adverse or qualified remark was

made by the auditors regarding utilization of funds for charitable

purposes. The assessee also contended that the Assessing Officer

had already treated the deficit as income and therefore further

disallowance of administrative expenditure would result in double

addition. After considering the facts and submissions, the ld.CIT(A)

held that the administrative expenses consisted of salary,

professional and consultancy fees, travel, conveyance and other

program related costs incurred for carrying out the objects of the

trust. The ld.CIT(A) further observed that the Assessing Officer had

not brought on record any factual finding to establish that the

expenditure was not related to the charitable objects of the trust.

The disallowance was held to be purely ad-hoc and based on

assumptions. Accordingly, the CIT(A) directed the Assessing Officer

to delete the disallowance of Rs.5,30,70,160/- and allowed the

appeal.

Revenue is also aggrieved and is in appeal before us, contending

that the ld.CIT(A) erred in deleting the disallowance of

administrative expenditure which was excessive and unreasonable

The Ld. AR of the assessee supported the order of the ld.CIT(A) and

submitted that no contrary material was placed by the Revenue.

available on record.It is an admitted fact that the assessee is

registered under section 12AA and is carrying on charitable

activities. It is also undisputed that the donations received during

the year were towards corpus and were accepted as such by the

Assessing Officer. The sole basis for making the addition was the

alleged improper utilisation of corpus funds.From the record, we find

that the Ld. CIT(A) has examined the donor letters as well as the

trust deed and has given a clear finding that the corpus donations

were utilised in accordance with the objects of the trust and there is

no evidence to show that the utilisation was contrary to the

directions of the donors. The Assessing Officer has merely

proceeded on suspicion due to increase in administrative expenses,

without bringing any concrete material on record.

Further, the judicial precedents relied upon by the Ld. CIT(A) clearly

support the proposition that voluntary contributions made with

specific direction towards corpus cannot be treated as income under

section 11(1)(d) of the Act. We also note that the amendment to

section 11(1)(d) by Finance Act, 2021 is prospective and not

applicable to the assessment year under consideration. In view of

the above facts and respectfully following the judicial precedents,

we find no infirmity in the order of the Ld. CIT(A). Accordingly, the

same is upheld.

Regarding deleting the ad-hoc disallowance of administrative

expenses, we have perused the material available on record. It is

undisputed that the administrative expenditure was incurred in the

normal course of carrying out the charitable activities of the

assessee. The Assessing Officer has not pointed out any specific

item of expenditure which was personal, non-genuine or not

incurred for the objects of the trust.The disallowance has been

made solely on the ground that the administrative expenditure had

increased compared to the preceding year. Mere increase in

expenditure, without bringing any cogent material on record, cannot

be a valid basis for making ad-hoc disallowance. It is well settled that ad-hoc disallowances without identifying specific defects are not sustainable in law. We further note that the Assessing Officer himself has observed that the expenditure was incurred towards charity but considered it to be high and unreasonable. Once it is accepted that the expenditure was incurred for charitable purposes, the same cannot be disallowed on mere perception of excessiveness, particularly in the absence of any statutory cap or violation. The ld.CIT(A) has given a clear finding that the Assessing Officer has not brought any factual material to establish that the expenditure was not related to the objects of the trust. These findings have not been controverted by the Revenue with any evidence.In view of the above facts and circumstances, we find no infirmity in the well-reasoned order of the ld.CIT(A). The deletion of the ad-hoc disallowance of Rs.5,30,70,160/- is justified. Accordingly, the order of the CIT(A) is upheld.

चे�ई/Chennai, िदनांक/Dated: 20th January, 2026. EDN, Sr.PS आदेशकीlितिलिपअqेिषत/Copy to: 1. अपीलाथk/Appellant 2. lmथk/Respondent 3. आयकरआयुr/CIT, Chennai /Madurai/Coimbatore/Salem 4. िवभागीयlितिनिध/DR 5. गाडJफाईल/GF