Foreign Membership and Software Payments Used for Charitable Activities in India Do Not Violate Section 11(1)(c): ITAT

Case: Advertising Standards Council of India v. CIT (Exemptions)

Court: ITAT

ITA no: 7915/Mum/2025

Assessment Year: 2025-26

Date of Order: 20 April 2026

Brief Facts:

• The assessee was granted provisional approval under section 80G and subsequently filed an application in Form 10AB seeking regular approval. 

• The Commissioner (Exemptions) rejected the application primarily on the ground that it was filed beyond the prescribed time limit. 

• The assessee explained that the delay occurred due to bona fide oversight amidst extensive compliance activities, including appellate proceedings, tax audits, income-tax return filings and assessment proceedings. 

• The Commissioner also observed that the assessee had incurred certain foreign expenditures towards membership fees paid to the International Council for Ad Self-Regulation (ICAS), contributions to international advertising initiatives and subscription charges for foreign software services. 

• According to the Commissioner, such payments amounted to application of income outside India in violation of section 11(1)(c), thereby rendering the assessee ineligible for approval. 

• Aggrieved by the rejection, the assessee preferred an appeal before the ITAT and additionally produced evidence demonstrating that it had already been enjoying approval under section 80G prior to the amendments introduced by the Finance Act, 2020 and was therefore eligible for revalidation rather than provisional approval.

Observations:

The Tribunal admitted that:

• The additional evidence furnished by the assessee, observing that the earlier approval under section 80G was a crucial document that went to the root of the controversy. 

• The Tribunal noted that if the assessee was already holding a valid approval prior to the new registration regime, the issue relating to delay in filing Form 10AB required fresh examination in light of the provisions governing revalidation of existing approvals. 

• Since these facts had not been considered by the Commissioner (Exemptions), the issue could not be conclusively decided without reconsideration. 

• On the issue of foreign expenditure, the Tribunal observed that the payments made by the assessee were in the nature of membership fees, affiliation charges and software subscriptions used for carrying out its regulatory and consumer-awareness activities within India. 

• Further, the Tribunal accepted the assessee’s contention that its charitable and regulatory functions were confined to India and that the foreign remittances merely facilitated the effective discharge of such activities. 

• Relying upon the decision of the Coordinate Bench in Aditya Birla Education Trust, the Tribunal held that payments made to overseas entities for the purpose of carrying out charitable activities in India do not amount to application of income outside India. 

• The mere fact that payment is remitted abroad does not attract section 11(1)(c) when the ultimate benefit and utilisation of such expenditure relate to charitable activities conducted within India. Accordingly, the findings of the Commissioner regarding violation of section 11(1)(c) were held to be unsustainable.
  

Accordingly, the ITAT held that payments made for international memberships, affiliations, and software services used to support charitable and consumer-awareness activities in India cannot be treated as spending outside India. The Tribunal also directed the tax authority to re-examine the delay in filing the approval renewal application after considering additional evidence submitted by the assessee. Accordingly, the appeal was partly allowed in favour of the assessee and partly sent back for fresh review.