ITAT Mumbai Sends Back Trust's ₹1.89 Crore Contractual Payment Dispute for Re-Adjudication: Global Vision vs ITO
Case Overview
Court: Income Tax Appellate Tribunal, Mumbai
Case: Global Vision Vs ITO
Assessment Year: 2016-17
Order Date: 17-04-2026
A charitable trust found itself under intense regulatory scrutiny when its substantial contractual salary and incentive payments — aggregating to approximately ₹1.89 crore — were disallowed by the Assessing Officer on grounds that such expenditure could not be adequately demonstrated as serving the trust's charitable objectives. The Income Tax Appellate Tribunal (ITAT), Mumbai, upon examining the facts and rival contentions, ultimately restored the matter to the CIT(A) for a fresh, evidence-based adjudication rather than arriving at a definitive finding itself.
Background of the Case
The assessee trust filed its Income Tax Return for Assessment Year 2016-17 on 17.10.2016, declaring NIL income. The case was subsequently flagged for scrutiny under CASS, following which notices under Section 143(2) and Section 142(1) of the Income Tax Act, 1961 were issued, accompanied by detailed questionnaires.
In response, the assessee placed before the AO copies of its return, income and expenditure accounts, bank statements, balance sheet, and other relevant documents. Additionally, a statement of one of the trustees, Shri Vishanu Adhikari, was recorded under Section 131 of the Income Tax Act, 1961 on 29.11.2018.
During the course of this statement, a critical question — Question No. 25 — was posed to the trustee regarding the justification for the significant expenditure incurred towards contractual salaries and incentives, and how such expenditure was linked to the trust's charitable objects. The trustee's response was that he was not familiar with the technical provisions of the Income Tax Act, 1961 and sought time to consult his Chartered Accountant by 03.12.2018.
What the Assessing Officer Found
Nature of Disputed Expenditure
The AO identified two distinct components of contractual payments that were added back to the income of the assessee trust:
- Contractual Salaries: ₹1,57,33,598/-
- Contract Incentives: ₹31,33,368/-
- Total Disallowance: ₹1,88,66,966/-
AO's Reasoning for Disallowance
The AO noted the following concerns while making the addition:
- The total receipts of the assessee trust for the year amounted to ₹8,98,40,676/-, yet only approximately 20% of this amount was directed towards actual charitable activity.
- The contractual payments, which exceeded 20% of gross receipts, were being treated by the assessee as application of income for charitable purposes — a position the AO found untenable.
- These contractual payments were separate from and over and above the regular salary payments made to permanent employees of the trust.
- No Provident Fund (PF) deductions were made in respect of contractual employees; no gratuity provisions were maintained; and no ESIC contributions were deposited.
- The reply filed by the assessee was characterised by the AO as evasive and designed to distract from the central issue regarding necessity and purpose of such payments.
Key Concern: The AO observed that a trust that collected funds from donors and spent only 20% on charity, while directing an equivalent proportion towards contractual payments to individuals, was arguably engaged in acts that were ultra vires its charitable mandate.