BANASKANTHA PALANPUR JAIN ASSOCIATION SHREE,CHENNAI vs. ITO, EXEMPTIONS WARD-2, CHENNAI

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ITA 2767/CHNY/2026Status: DisposedITAT Chennai14 August 20267 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(E) was not justified in rejecting the application solely on the basis of the "religious-cum-charitable" classification without examining the predominant objects and actual activities. The Tribunal also noted that the claim of not filing a reply needed verification.

What were the facts?

The assessee's application for approval under Section 80G was rejected by the CIT(E) for not furnishing a reply to a show-cause notice and for being registered as a "religious-cum-charitable" institution. The assessee claimed to have submitted a reply via email and that the classification was an inadvertent error.

What were the issues?

Whether a trust registered as "religious-cum-charitable" is ineligible for Section 80G approval, and whether the CIT(E) properly considered the assessee's reply to the show-cause notice.

Which sections of the Income-tax Act were involved?

Section 80G,Section 12AB,Section 80G(5B)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI INTURI RAMA RAO

Hearing: 13.08.2026Pronounced: 14.08.2026

आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Exemption), Chennai dated 26.03.2026, rejecting Form No.10AB filed for seeking approval u/s.80G of the Income Tax Act, 1961 (hereinafter the ‘Act’).

- 2 - ITA No.2767/CHNY/2026 Banaskantha Palanpur Jain Association Shree 2. At the very outset, we notice that the CIT(E) has rejected the application filed by the assessee seeking approval u/s.80G of the Act, on the ground that the assessee had not furnished any reply to the show-cause notice and that the assessee-trust had been granted registration u/s.12AB of the Act as a “religious-cum-charitable” institution. The CIT(E) was of the view that a trust established for religious or religious-cum-charitable purposes is not eligible for approval u/s.80G(5) of the Act. Accordingly, the CIT(E), vide the impugned order, rejected the assessee’s application for approval u/s. 80G of the Act.

3.

Aggrieved, assessee has filed the present appeal before the Tribunal. Before us, the Ld. AR further submitted that the assessee- trust had duly furnished a written submission by email in response to the show-cause notice issued by the CIT(E), but the same was not considered while passing the impugned order. The Ld. AR produced a copy of the email along with the written submission before the Tribunal and submitted that the assessee had, in fact, responded to the show-cause notice and had furnished the requisite explanations and supporting documents. It was therefore contended that the observation of the CIT(E) that no reply was filed to the show-cause notice was factually incorrect. The Ld.AR further submitted that the

- 3 - ITA No.2767/CHNY/2026 Banaskantha Palanpur Jain Association Shree assessee had earlier been granted approval u/s.80G of the Act under the erstwhile regime and continues to hold valid registration u/s.12A of the Act, with no change in its objects or activities. The Ld.AR submitted that assessee had also furnished its financial statements, audit reports, MOA, activity reports, donor details and other supporting documents, besides regularly filing Form No.10BD. With regard to the classification as “religious-cum-charitable”, the Ld. AR submitted that the same was an inadvertent and bona fide error in the application, which was brought to the notice of the CIT(E). The dominant objects and actual activities of the assessee are purely charitable, and the said inadvertent classification cannot alter its charitable character. The Ld. AR contended that the CIT(E) erred in drawing an adverse inference without examining the actual activities and application of funds. He accordingly prayed that the impugned order be set aside and approval u/s.80G be granted.

4.

The Ld.DR supported the order of the CIT(E).

5.

We have heard the rival submissions and perused the material available on record. The CIT(E) rejected the assessee’s application primarily on the ground that the assessee had not filed any reply to the show-cause notice and that the assessee was registered u/s.12AB

- 4 - ITA No.2767/CHNY/2026 Banaskantha Palanpur Jain Association Shree of the Act as a “religious-cum-charitable” institution. The Ld. AR submitted that the assessee had, in fact, furnished a written submission by email in response to the show-cause notice, which was not considered by the CIT(E). A copy of the said email and written submission was also produced before us. We find that the assessee’s contention that the classification as “religious-cum-charitable” was due to an inadvertent and bona fide error in the application requires proper consideration. It is also the claim of the assessee that it had earlier been granted approval u/s.80G and that no adverse finding has been recorded by the CIT(E) regarding the genuineness of its activities or application of its funds for non-charitable purposes.

6.

We find that the Hon'ble Bombay High Court in CIT(E) vs. Shree Sai Baba Sansthan Trust, Shirdi reported in (2024) 167 taxmann.com 304 (Bombay) has held that there is no legal bar for a trust to be both religious and charitable and that a narrow interpretation excluding every religious-cum-charitable trust from the ambit of section 80G is not warranted. The Hon'ble High Court has further observed that section 80G(5B) of the Act itself recognizes that an institution may incur expenditure of a religious nature within the prescribed limit and yet continue to be eligible for the benefit of section 80G. The relevant finding of the Hon’ble Bombay High Court reads as follows:

- 5 - ITA No.2767/CHNY/2026 Banaskantha Palanpur Jain Association Shree “24. At the outset, it needs to be observed that the basis, on which the Assessing Officer proceeded to tax the anonymous donations received by the assessee, is by applying the provisions of Section 80G of the Act which pertains to deduction in respect of donations to certain funds, charitable institutions, etc. It is not in dispute that the assessee is registered for the donors to be benefited u/s.80G qua the donations which would be made to the assessee. Section 80G confers a benefit of deduction being allowed in respect of donations inter alia to charitable institutions. Thus, the assessee by virtue of its establishment/registration as a public trust, which also provides for charitable objects, has obtained registration u/s.80G of the Act. The object of Section 80G is not only to provide a benefit to tax payers in availing deduction of the charity they would make, by offering donations to charitable institutions, but also to enable the charitable trust/entity to implement/carry out their objects of welfare and well being of the society at large. A charitable institution may achieve several objects which are intended for collective benefit of the society, and it is with such purpose charitable institutions receive donations to advance charitable and philanthropic purposes. This has been legislatively recognized in terms of Section 80G of the Act.

25.

In the context of the present proceedings, sub-section (5B) of Section 80G is relevant which provides that notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a "religious nature" for an amount not exceeding five per cent of its total income, in the previous year shall be deemed to be an institution or fund to which the provisions of Section 80G apply. Thus, implicit in Section 80G is the recognition of a trust which has religious activities. This to the effect that insofar as the religious activities of such trust are concerned, if such trust incurs expenditure during any previous year, of an amount not exceeding five percent of its total income, such institution would be regarded as an institution to which the provisions of Section 80G apply. Sub-section (5B) was inserted by the Finance Act, 1999 with effect from 01 April 2000, since then it has held the field. It is for such reason, it would not be acceptable that Revenue takes a position that Section 80G would exclude religious trust and/or Section 80G applies only to charitable institutions. In any event, in our opinion, such reading of Section 80G that it would exclude religious and charitable entities, would not be the correct reading of the said provision. As fairly stated on behalf of the Revenue, there is no bar for a charitable trust also to be a religious trust. In fact, a trust being both

- 6 - ITA No.2767/CHNY/2026 Banaskantha Palanpur Jain Association Shree religious or charitable or vise-versa is well-accepted phenomena. There can be many examples of such combination. For such reason, a myopic reading of Section 80G would be wholly impermissible.”

7.

In the light of the above legal position, we are of the considered view that the CIT(E) was not justified in rejecting the assessee's application solely on the basis that the trust is described as a religious- cum-charitable trust, without examining whether its predominant objects and actual activities are charitable in nature and whether the conditions prescribed u/s.80G of the Act are otherwise satisfied. The impugned order does not disclose any examination of the trust deed, the actual activities carried on by the assessee or the applicability of section 80G(5B) of the Act. Further, the observation that no reply was filed to the show-cause notice appears to require verification in the light of the email and written submission produced before us. Accordingly, in the interest of justice, we set aside the impugned order and restore the matter to the file of the CIT(E) for fresh adjudication. The CIT(E) shall examine the objects of the trust, the nature of its activities and the applicability of the provisions of section 80G of the Act, including section 80G(5B) of the Act, in the light of aforesaid judicial pronouncement and thereafter pass a speaking order in accordance with law after affording the assessee a reasonable opportunity of being heard. The assessee shall extend full cooperation

- 7 - ITA No.2767/CHNY/2026 Banaskantha Palanpur Jain Association Shree and furnish all requisite details in support of its claim. It is ordered accordingly.

8.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 14th August, 2026 at Chennai.

Sd/- Sd/- (जॉज� जॉज� के) (इंटूर� रामा राव) (GEORGE GEORGE K) (INTURI RAMA RAO) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 14th August, 2026 RSR, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.08.17 15:25:56 +05'30'

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