SREE AYYAPPAN BAJANAI MANDALI ANNADHANA TRUST,SALEM vs. CIT EXEMPTIONS, CHENNAI

At the outset, we notice that there is a delay of one day in filing the present appeals by the assessee before us. We have carefully considered the petition filed by the assessee seeking condonation of the said delay, along with the affidavit filed in support thereof, explaining the reasons which prevented the assessee from filing the appeals within the prescribed period of limitation. Having considered the averments made in the condonation petition and the accompanying affidavit, and having regard to the facts and circumstances of the case, we are satisfied that the assessee was prevented by sufficient cause from preferring the appeals within the period prescribed under the Act. The explanation offered appears to be bona fide and does not indicate any deliberate inaction, negligence or mala fide intention on the part of the assessee. It is well settled that where sufficient cause is shown, a liberal approach should be adopted in matters relating to condonation of delay so as to advance the cause of substantial justice. Accordingly, we are inclined to condone the delay of one day in filing the present appeals. The delay is, therefore, condoned and the appeals are admitted for adjudication on merits in accordance with law.

The brief facts of the case are that the assessee is a Trust, registered as a religious charitable trust u/s.12AB of the Act with the nature of the activities as religious-cum-charitable Trust. Subsequently, the assessee filed its application dated 28.09.2025 in Form 10AB seeking approval under clause (ii) of first proviso to sub-section (5) of sec.80G of the Act. After considering the facts of the case, the ld.CIT(E) issued notice to the assessee by calling for the details and documents in support of the application filed for granting the approval u/s.80G of the Act. The assessee accordingly submitted the details and the corresponding documents in support of the application filed. However, on perusal of the submissions and documents, the ld.CIT(E) rejected the application seeking for approval u/s.80G of the Act as not maintainable by passing an order dated 26.03.2026 by holding as under:-

Aggrieved by the order of the ld.CIT(E), the assessee is in appeal before us by raising the following grounds of appeal:-

The ld.AR for the assessee, assailing the action of the ld.CIT(E), submitted that the ld.CIT(E) has committed an error in rejecting the application without examining 5% threshold prescribed u/s.80G(5B) of the Act, which is a mandatory precondition before any Trust can be held disqualified on account of religious expenditure. The ld.CIT(E) has rejected the application for the only reason that the Trust has been granted registration u/s.12AB of the Act as “religious-cum-charitable”. Therefore, the ld.AR submitted that the ld.CIT(E)’s order is non-speaking, perverse and contrary to the weight of the judicial authority and hence prayed for setting aside the order passed in Form 10AD of the Act and direct the ld.CIT(E) to grant the registration u/s.80G of the Act.

Per contra, the ld.DR supported the order of the Ld.CIT(E) and prayed that the same be upheld.

We have heard the rival submissions, perused the material available on record and carefully gone through the order of the Ld.CIT(E). The question for our consideration is whether the Ld.CIT(E) was justified in rejecting the application of the assessee for approval u/s.80G of the Act as not maintainable, on the ground that sub-clauses (a), (b) and (c) of clause 3 of the trust deed are religious in nature and that the assessee has been registered u/s.12AB of the Act as a religious-cum-charitable trust.

Section 80G(5) of the Act lays down the conditions which an institution or fund must fulfil to be eligible for approval. Among them, clause (ii) requires that the instrument under which the institution is constituted does not contain any provision for the transfer or application of the whole or any part of its income or assets for any purpose other than a charitable purpose, and clause (iii) requires that the institution is not expressed to be for the benefit of any particular religious community or caste. Explanation 3 to section 80G of the Act provides that “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature. Sub-section (5B) of section 80G of the Act, however, opens with a non-obstante clause and provides that, notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure of a religious nature during any previous year for an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of section 80G of the Act apply.

A reading of the above provisions makes it clear that the Act does not exclude every trust having religious objects from the purview of section 80G of the Act. Explanation 3 excludes only a purpose the whole or substantially the whole of which is religious, and section 80G(5B) of the Act expressly carves out an institution whose religious expenditure in a previous year does not exceed five per cent of its total income of that year, by deeming it to be an institution to

We further find that the registration of the assessee u/s.12AB of the Act as a religious-cum-charitable trust is not determinative of its eligibility for approval u/s.80G of the Act. Section 11 of the Act exempts income applied for charitable as well as religious purposes, and registration u/s.12AB is granted with reference to both. Approval u/s.80G of the Act, on the other hand, is governed by the distinct conditions in section 80G(5) of the Act, Explanation 3 and section 80G(5B) of the Act. The description of the trust in the registration order u/s.12AB of the Act cannot, therefore, take the place of an examination of these conditions.

In the present case, the Ld.CIT(E) has rejected the application as not maintainable merely by noting that sub-clauses (a), (b) and (c) of clause 3 of the trust deed are religious in nature and that the assessee is registered as a religious-cum-charitable trust. The impugned order does not examine the remaining objects of the trust or the activities actually carried on by it; it does not record any finding as to whether the whole or substantially the whole of the purpose of the trust is religious; it does not ascertain the expenditure of a religious nature incurred by the assessee in the relevant previous years vis-à- vis its total income, so as to determine whether section 80G(5B) of the Act is attracted; and it does not deal with the contention of the assessee that activities such as Annadhanam are charitable in character and that the trust is not expressed to be for the benefit of any particular religious community or caste. The reply of the assessee dated 12.03.2026, referred to in Ground No.5, has

We find support for this view in the decision of a co-ordinate Bench of the Tribunal in Shree Sahajanand Gaushala Trust v. CIT(Exemption) (ITA No.179/Rjt/2023, order dated 28.02.2024), wherein, on a rejection of approval u/s.80G of the Act on the ground of religious expenditure, the Tribunal restored the matter to the Ld.CIT(E) for a fresh examination of whether the religious expenditure of the trust was within five per cent of its total income in terms of section 80G(5B) of the Act, after affording proper opportunity to the assessee.

Since the facts necessary to decide the eligibility of the assessee, particularly the quantum of its religious expenditure in relation to its total income, have not been examined by the Ld.CIT(E), the record before us does not permit a final finding on the application. We, therefore, set aside the order of the Ld.CIT(E) dated 26.03.2026 and restore the application of the assessee dated 28.09.2025 in Form No.10AB to the file of the Ld.CIT(E) for fresh adjudication in accordance with law. The Ld.CIT(E) shall examine the objects of the trust as a whole along with the activities actually carried on by it, ascertain the expenditure of a religious nature incurred by the assessee in each of the relevant previous years as a proportion of its total income of that year, and decide whether the assessee is entitled to the benefit of section 80G(5B) of the Act, besides considering whether the other conditions of section 80G(5) of the Act, including clause (iii) thereof, are satisfied. The Ld.CIT(E) shall also consider the reply of the assessee dated 12.03.2026 and pass a speaking order after affording a reasonable opportunity of being heard to the assessee. The assessee is directed to furnish its audited accounts, a break-up of its expenditure into religious and charitable heads, and such other details and evidence as may be called for, and to co-operate in the proceedings. Since the matter is restored for fresh adjudication, the other contentions raised by the assessee are left open, and the grounds of appeal are allowed for statistical purposes.

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