ITAT Delhi Partly Favours Assessee: Relief on Disallowances, but Donation Income Taxable

The present appeal (ITAs No.333 & 334/Del/2021) has been filed by a company named M/s FIITJEE Limited (appellant) in the Income Tax Appellate Tribunal (ITAT), “F” Bench, New Delhi, before Shri Anubhav Sharma, Judicial Member and Shri Krinwant Sahay, Accountant Member, against the ACIT (respondent). The appeal is related to the assessment years 2010-11 and 2011-12. The case was heard on August 18, 2025, and was decided on October 29, 2025.

The appellant challenged orders dated 31.01.2020 passed by the Ld. Commissioner of Income-tax (Appeals)-25. The appeals were made against the earlier orders passed on March 31, 2015, under Sections 153A and 143(3) of the Income Tax Act, 1961, by the Assistant Commissioner of Income Tax (ACIT), Central Circle-06, New Delhi.

The appellant has been involved in the business of providing training and coaching classes to students preparing for engineering entrance examinations since the year 1997.

Main Issues:

There were two main issues related to tax deductions claimed by the assessee:

• First is the disallowance of Rs. 4,08,586 under Section 14A (Rule 8D). This is related to expenses claimed against exempt income (like dividends). On this, the assessee argued,  they did not spend anything to earn tax-free income. On this, the tribunal said the expenses computed were wrongly calculated by the Assessing Officer (AO). The investments did not generate any exempt income, so the disallowance was incorrect.
• Second is the disallowance of Rs. 27,11,047 for Foreign Travel Expenses; the assessee claimed travel expenses for its directors’ business trips to the UK. From which, the assessing officer (AO) disallowed 20% of the expenses, without giving logical reasoning. On this, the tribunal said that if travel was for business and the details were submitted, arbitrarily disallowing 20% is not justified.

FIITJEE claimed that in earlier years, FIITJEE argued that amounts totalling crores received as ‘conditional grants’ from Sad-Bhawna Trust and Commitment Morality Vision Education Society (CMV) were wrongly included as taxable incomes. They also asked the tribunal to remove this amount from taxable income, saying these were not income but grants received to give scholarships to poor and meritorious students. They even returned the amount in the next year because the donation conditions were not fulfilled.

ITAT Delhi’s Response:

The tribunal did not accept this point of FIITJEE, saying, the grants were supposed to be used for charitable purposes, but they were not. A previous order against the donating trust (CMV Education Society) had already found that the funds were not used for charity but to benefit FIITJEE’s business. Therefore, the receipts cannot be called “incomplete income” or “mistakenly taxable”; they were income in the year they were received. Therefore, ITAT Delhi, in its final decision, partially allowed the appeal. ITAT has deleted the disallowance under Section 14A and disallowed foreign travel expenses; this decision was in favour of the assessee, but additionally, the request to remove “donation income” has also been denied.