ITAT Delhi: Specific Grants by Charitable Trust to Other Registered Institutions Not Hit by Section 11(3)(d).

The ITAT Delhi held that where a charitable trust makes specific-purpose grants to other registered charitable organizations, such expenditure cannot be treated as a violation of Explanation to Section 11(2) or deemed income under Section 11(3)(d) of the Income Tax Act, 1961. The Tribunal found that the grants were tied to definite charitable purposes like scholarships, rehabilitation of handicapped children, and hostel construction, duly confirmed by recipient organizations. The disallowance of ₹25,65,000 was therefore deleted.

1. The assessee, Om Satya Mehra Public Charitable Trust, registered under Sections 12A and 80G, filed a nil return for A.Y. 2016–17.
2. During scrutiny, the Assessing Officer noted that the trust had disbursed ₹25,65,000 from accumulated funds to various organizations registered under Section 12AA.
3. The AO held that such payments violated the Explanation to Section 11(2) and treated them as deemed income under Section 11(3)(d).
4. The Commissioner (Appeals) upheld the addition. The assessee appealed before the ITAT.

1. The payments were not general donations but specific-purpose grants for identifiable charitable objectives.
2. The recipient organizations confirmed the purpose-specific use of funds through utilization certificates and supporting documents.
3. The assessee had no staff to execute projects directly and thus funded other reputed institutions for the same.
4. A grant differs from a donation — a grant mandates specific utilization and reporting, whereas donations do not carry such obligations.
5. Section 11(3)(d) was intended to prevent diversion or accumulation of exempt funds, not to penalize genuine charitable expenditure.\

1. The Tribunal accepted that the assessee made the payments for specific charitable purposes and that confirmations were produced.
2. It held that the authorities below erred in treating the disbursements as general donations falling foul of Section 11(3)(d).
3. The disallowance was unsustainable in law, as the funds were applied towards legitimate charitable objects in line with the trust’s aims.

1. Addition of ₹25,65,000 deleted.
2. Assessee’s appeal allowed.

1. Section 11(2) – Accumulation of income for charitable or religious purposes.
2. Section 11(3)(d) – Treatment of income applied in contravention of Section 11(2).
3. Section 12A / 12AA – Registration of charitable or religious trusts.

Citation: 2025:ITAT:DEL:5824

Case: Om Satya Mehra Public Charitable Trust v. Income Tax Officer, Ward Exempt. 2(4), Delhi

Court: Income Tax Appellate Tribunal, Delhi Bench “SMC”

Coram: Ms. Madhumita Roy, Judicial Member

Date of Hearing: 6 November 2025

Date of Pronouncement: 13 November 2025

Assessment Year: 2016–17

Appeal No.: ITA No. 5824/Del/2025