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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order dated 17.12.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A)-NFAC, Delhi. In this case, the facts may be briefly captured for reference. During the year under consideration, the assessee had received an amount of Rs.2.28 crores as part of CSR funds from M/s Lohia Corp. Limited. Thereafter, Rs.33 lakhs was returned/refunded by the assessee to M/s Lohia Corp ostensibly on the ground that this amount was required to be spent through another charitable organization. This activity happened before the close of the financial year being 31.03.2023. The Ld. AO treated this exercise as a violation of Section 13(1)(c)(ii) of the Act, r.w.s. 13(3)(b) of the Act. Thereafter, the Ld. AO made an addition of Rs.176 crores by treating the entire receipts of the assessee during the year as taxable.
The aggrieved assessee approached the Ld. CIT(A) where he could succeed on the basis of findings given on pages 5 to 6 of the impugned order. In brief, the Ld. CIT(A) has held that merely returning Rs.33 lakhs to the donor organization does not amount to any violation of Section 13(1)(c)(ii) of the Act.
The Revenue is aggrieved with the action and has approached the ITAT with the following grounds: -
“1.That the Ld. CITIA), NFAC erred in deleting the addition of Rs.176,84,62,667/-made by the Assessing Officer by wrongly allowing exemption under section 11 of the Income-tax Act, 1961, without appreciating that the assessee had violated the provisions of section 13(1)(c)(ii) of the Act.
2.That the Ld. CITIA) erred in law and on facts in holding that the returning of Rs. 33,00,000/- to M/s Lohia Corp. Ltd. does not constitute direct or indirect benefit to a person referred to in section 13(3), whereas section 13(1)(c)(ii) clearly prohibits any such benefit, irrespective of the explanation furnished by the assessee.
3.That the Ld. CIT(A) erred in concluding that section 13(1)(c) can be invoked only when the conditions enumerated in section 13(2) are satisfied, whereas section 13(2) is illustrative and not exhaustive, and violation of section 13(1)(c)(ii) can arise independently. 4. That the Ld. CIT(A) erred and failed to appreciate that once a donation is received by a charitable trust, return of any part thereof vitiates the voluntary and irrevocable character of donation, thereby rendering the transaction conditional in nature and disentitling the assessee from treating the amount as corpus donation.
5.That the Ld. CIT(A) erred to rely upon the fact that transactions were routed through banking channels, without appreciating that the substance of the transaction must prevail over its form, and mere banking mode does not legitimize a transaction prohibited under section 13.
6.That the order of the Ld. CIT(A) is erroneous, contrary to law, and prejudicial to the interest of Revenue. Hence, the order of Ld. CIT (A) be cancelled and the order of the AO be upheld.”
Before us the Ld. DR argued with the help of the assessment order and stated that the donor M/s Lohia Corp Limited had made a substantial contribution to the assessee within the meaning of Section 13(3)(b) of the Act, and due to this fact, the provisions of Section 13(1)(c)(ii) of the Act were attracted. It was pointed out by the Ld. DR that since the contributions exceeded Rs.50,000/- in this particular year, then M/s Lohia Corp would become a “specified person” u/s 13(3) of the Act. It was argued by the Ld. DR that donations once given cannot be taken back and in case a person falling within the definition of Section 13(3)(b) of the Act takes back a certain amount out of the donations given by it then it would be hit by the provisions of Section 13(1)(c) of the Act.
The Ld. AR, on the other hand, relied on the impugned order and also brought to our notice that M/s Lohia Corp desired to also spend money on promoting rural education. For this purpose, there was another charitable organization which was required to be funded. Since due to an oversight a certain excess amount had been passed on to the assessee, hence, the same was immediately requisitioned back. It was argued that by no stretch of imagination was there any benefit accruing to the donor out of such refund, especially when it was a relatively small amount out of Rs.2.28 crores granted by M/s Lohia Corp. The Ld. AR also argued with the help of some case laws and the extant provisions of the Act. It was the submission that the action of Ld. AO was not justified on two counts: (a) by treating the refund of Rs.33 lakhs as being hit by Section 13(1)(c)(ii) of the Act; and (b) by treating the entire donation received during the year as taxable, and not merely the amount of Rs.33 lakhs.
We have carefully considered the rival submissions and have gone through the records before us. It is seen that the facts themselves render the balance of convenience in favour of the assessee since there is no evidence whatsoever that there was any benefit accruing to the donor merely because an amount of Rs.33 lakhs was returned to him. We do not find that M/s Lohia Corp have derived some benefit out of this refund as this amount has then, immediately, been passed on to another charitable organization which was running rural education programmes. Accordingly, we do not deem it fit to interfere with the findings of Ld. CIT(A) on pages 4 & 5 of the impugned order and we uphold the same.
In the result, appeal of the Revenue is dismissed.