NIRAKAR TRUST,VADODARA vs. THE CIT(EXEMPTION), AHMEDABAD

3.2 On the assessee’s Form 10AB, the learned CIT(E) issued notices calling for information. The record reflects a sequence of notices and responses in the year 2024, namely a notice dated 11.07.2024, a reminder dated 13.08.2024, a further reminder dated 08.10.2024, and a final notice dated 18.10.2024. Replies were eventually placed on record including the assessee’s reply dated 22.10.2024.

3.3 The learned CIT(E) noted that, for Financial Year 2021-22, the assessee reported total income of Rs.77,239/- and, out of its charitable outgoings, it incurred Rs.20,000/- toward food preparation on various occasions and Rs.34,500/- toward floor mats distributed to persons undertaking Narmada Parikrama. According to the CIT(E), this activity constituted expenditure of a religious nature. The learned CIT(E) issued a show cause notice to the assessee questioning the allowability of its application. The notice further pointed out that, since this religious expenditure exceeded 5% of the assessee’s total receipts, it attracted the restriction contained in section 80G(5B) of the Act, which disqualifies a trust or institution from being treated as eligible for approval under section 80G if such a threshold is crossed. The assessee was therefore called upon to explain why its application should not be rejected for violation of section 80G(5B).

3.4 In response, the assessee, by its reply dated 22.10.2024, submitted that it has no object of religious nature and that the expenditure incurred is toward charitable activity only, being relief to poor pilgrims, and not in relation to repair or renovation of any temple or for conducting any religious tour or ritual. It was asserted that the activity cannot be said to be of religious nature but purely charitable 4 in character. The assessee also set out that its activities include relief of the poor by providing food, clothing and shelter to pilgrims, collection and distribution of old clothes and footwear to the poor, and other welfare activities without distinction of caste, creed or religion.

3.5 The learned CIT(E), after examining the assessee’s reply dated 22.10.2024, rejected its contention that the expenditure was charitable in nature. He held that distribution of floor mats to pilgrims amounted to a religious activity and therefore could not be accepted as charitable. He further noted that the judicial precedents relied upon by the assessee were distinguishable on facts, as they related to Gift Tax cases or trusts with specific community-based objects, and thus were not applicable to the assessee’s situation. Noting that in FY 2021-22 the assessee spent Rs.54,500/- in total, comprising Rs.20,000/- on food preparation and Rs.34,500/- on floor mats for Narmada Parikrama pilgrims, the CIT(E) concluded that the assessee had incurred religious expenditure exceeding 5% of total income, thereby violating section 80G(5B). On this reasoning, the CIT(E) held the assessee to be ineligible for approval under section 80G and ordered that the application in Form 10AB be rejected and the earlier provisional approval cancelled.

3.6 Aggrieved, the assessee is in appeal before us raising following revised grounds:

1.01 On the facts and circumstances of your appellant's case and in law, the Id. CIT(E) has grossly erred in passing order in Form 10AD, whereby rejecting application filed in form 10AB of Act by your appellant, on the erroneous plea that Your appellant had incurred expenditure of religious nature which is more than 5% of its total income and hence violated provisions of section 80G(5B) of Act without appreciating the fact that expenses incurred on distributing floor mats to people doing Narmada 5 Parikrama does not form or results into incurring religious nature activity rather same is charitable activity only and hence there is no violation of provision of section 80G(5B) of Act. 1.02 Your appellant therefore prays Your Honor to hold so now and treat the expense incurred by your appellant towards Charitable purpose/activity only and not for religious purpose/activity and thereby direct Id. CIT(E) to accept application filed by your appellant in Form 10AB and grant registration u/s 80G of Act.

3.7 During the course of hearing before us, the Authorised Representative (AR) of the assessee, reiterated the facts and this expenditure was incurred solely to provide comfort and relief to poor pilgrims and was in the nature of charitable relief of the poor, not expenditure for religious purposes. The AR emphasised that the Trust Deed of the assessee does not contain any object of religious nature. The objects clearly provide that the trust will work for welfare of mankind without discrimination of caste, creed, or religion. The expenditure in question was not applied toward any temple, religious ritual, or propagation of religion, but rather to alleviate hardship of the poor during pilgrimage. The AR strongly contended that the learned CIT(E) erred in treating the distribution of mats as “religious activity” without properly appreciating the dominant charitable intent.

5.1 The facts are undisputed. The assessee reported total income of Rs.77,239/- during the year. Out of this, Rs.20,000/- was incurred for food preparation to serve the needy, and Rs.34,500/- was spent on distribution of mats to pilgrims. The contention of the assessee is that the expenditure on mats was purely for providing relief to poor pilgrims, in furtherance of its charitable objects, and did not constitute expenditure for religious purposes. The learned CIT(E), however, took the view that such outlay was inherently religious as it was linked to pilgrimage.

5.2 On a careful evaluation, we find merit in the submission of the assessee. The trust deed of the assessee does not contain any object of religious nature. The stated objects are to carry out activities for the welfare of mankind at large, without distinction of caste, creed or religion. There is no allegation or material on record to suggest that the assessee has engaged in religious propagation, performance of rituals, or application of its income for upkeep or maintenance of any temple or religious institution. The impugned expenditure was directed only to alleviate the hardship of pilgrims by providing mats, in the same way as it had incurred expenditure on food preparation for the needy. Both activities were in the nature of welfare and relief measures.

5.3 The restrictive provision of section 80G(5B) has to be applied in its proper context. The embargo is attracted only where an institution itself applies its income for religious purposes. The mere fact that the beneficiaries of a charitable activity happen to be religious pilgrims does not, by itself, render the expenditure religious in character. What has to be seen is the dominant intent of the assessee in applying its funds. In the present case, the dominant intent was to provide comfort and relief to persons in need, which squarely falls within the scope of “charitable purpose” as defined under the Act.

5.4 We also note the distinction between expenditure incurred for promoting or propagating a religion, which is restricted, and expenditure incurred for the welfare of individuals, which may incidentally benefit persons engaged in religious practices but remains charitable in essence. The distribution of food and mats in the present case falls in the latter category. Such welfare measures, undertaken without discrimination and without association with any particular religious rite or ritual, cannot be branded as religious expenditure.

5.5 The consistent principle flowing from judicial interpretation of “charitable purpose” is that the dominant purpose test must be applied. If the primary and predominant object of an institution is charitable, then an incidental association with a religious or spiritual activity cannot, by itself, render it religious in character. What is material is the true nature of the activity undertaken. In this context, it is relevant to appreciate that Parikrama in the Indian tradition is often undertaken as a cultural and spiritual journey reflecting faith and endurance and not confined merely to a ritual of religion. Viewed 8 in that spirit, the assessee’s act of distributing mats to participants was intended to provide comfort and relief to persons engaged in such a cultural-spiritual practice, and not to promote or propagate any religion. On application of the dominant purpose test, the expenditure, when seen in the larger perspective of the assessee’s declared objects and overall activities, clearly assumes the character of charitable relief and cannot be classified as religious.

5.6 In this background, we find that the learned CIT(E) erred in treating the expenditure of Rs.34,500/- as religious in nature and thereby holding that the assessee violated the limitation prescribed under section 80G(5B). The reasoning proceeds on a narrow interpretation and overlooks the charitable purpose underlying the activity. The authorities cited by the assessee, which enunciate the principle that charitable activity does not become religious merely because the beneficiaries are religious persons, were wrongly brushed aside. Applying the settled principle that provisions relating to charitable institutions deserve a liberal construction so as to advance their objects, we hold that the assessee has not incurred expenditure of religious nature within the meaning of section 80G(5B).

5.7 In the light of the above discussion, we hold that the expenditure incurred by the assessee on distribution of floor mats to pilgrims was in the nature of charitable relief and not religious expenditure. Consequently, the embargo contained in section 80G(5B) is not attracted. The assessee trust cannot be denied approval under section 80G merely on the basis of such expenditure. Accordingly, the order of the learned CIT(E) rejecting the assessee’s application in Form No. 10AB and cancelling the provisional approval earlier granted, is set 9 aside. The learned CIT(E) is directed to grant approval to the assessee under section 80G(5) of the Act.

Order pronounced in the Court on 9th October, 2025 at Ahmedabad.