SHREE VARDHMAN SAMAJ UTKARSH FUND,SABARKANTHA vs. THE CIT(EXEMPTION), AHMEDABAD

3. Violation of Principles of Natural Justice The appellant was not provided with an adequate opportunity to present clarifications. The order was passed in undue haste without considering submissions or allowing additional explanations.

A.Y. N.A. 3 Shree Vardhman Samaj Utkarsh Fund vs. CIT(E)

2. N.N. Desai Charitable Trust vs. Commissioner of Income-Tax Gujarat High Court) 3. Indrashil Innovative Foundation vs. CIT (Exemption) [ITAT Ahmedabad) 4. Shri Sadhumargi Shantikranti Jain Trust vs. Commissioner of Income Tax (Exemption) (ITAT Ahmedabad) 5. Shrouta Vijnam Gurukulam, Mangalore vs. Income Tax Officer (ITAT Banglare) 5. Failure to Consider the Trust's Activities in Public Interest The trust has been engaged in public welfare activities since 1954, benefitting students and needy individuals. The rejection order disregards the well-documented evidence of charitable work undertaken by the trust. 6. Failure to Appreciate Compliance with Section 80G(5B) The appellant has not incurred any expenditure exceeding the permissible limit of 5% for religious activities. The trust's primary activities remain charitable, with only incidental religious functions. 7. Incorrect Interpretation of Section 80G(5) & Explanation 3 Explanation 3 to section 80G does not completely prohibit any religious activity but rather limits its scope. The appellant's religious activities, if any, are well within the statutory limits and should not form the basis for rejection.

for supporting documents and explanations regarding its objectives and activities. The applicant replied to the initial notice but failed to respond to the subsequent and final show-cause notice dated 17.12.2024, despite being clearly informed by CIT(Exemptions) that it was the final opportunity. Based on the information available on record, the CIT(Exemptions) examined the trust’s founding documents (MOA) and observed that the trust’s main objectives were aimed at benefiting a specific community, namely the Vardhaman Samaj (42 Dasha Dhrumad Digambar Jain Samaj), and included provisions for religious advancement. The CIT(Exemptions) was of the view that these objects were both community-specific and composite in nature, meaning that these objects were a mix of charitable and religious purposes. The CIT(Exemptions) observed that such objects did not serve the public at large, which is a necessary condition under section 80G(5) of the Act. Even if charitable in part, the religious and community-based focus of the trust’s objects disqualified the assessee / applicant trust from approval, since Explanation 3 to section 80G of the Act clearly excludes religious or substantially religious purposes from the definition of “charitable purpose.” Further, CIT(Exemptions) noted that the assessee / applicant trust had violated several key conditions of section 80G(5) of the Act, including clause (ii), which prohibits application of trust income or assets for purposes other than charitable purposes. The CIT(Exemptions) held that even though the law allows religious expenditure up to 5% under section 80G(5B) of the Act, that provision cannot be used to justify the presence of religious objects in the trust’s founding documents. It only permits incidental A.Y. N.A. 5 Shree Vardhman Samaj Utkarsh Fund vs. CIT(E) religious expenses for otherwise fully charitable institutions. This interpretation was supported by judicial precedents, including rulings from the Hon’ble ITAT Ahmedabad and ITAT Agra, in which it was held that trusts must be established solely for charitable purposes and cannot have religious objectives, even partially, if they are seeking benefits under section 80G of the Act. Since the trust had not provided any convincing evidence to show that it was acting solely for charitable purposes, and had not responded to the final notice issued, the CIT(Exemptions) held that the applicant violated the conditions under section 80G(5)(ii), 80G(5)(iii), and Explanation 3 to section 80G of the Act. As a result, the trust was held ineligible for approval under section 80G(5), and its application in Form No. 10AB was rejected. Consequently, the assessee/applicant trust’s provisional approval under section 80G of the Act was also cancelled.

4. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the counsel for the assessee submitted that the order passed by the CIT(Exemptions) rejecting the application for approval under section 80G(5)(iii) of the Act is factually incorrect, legally unsustainable, and deserves to be set aside. It was argued that the CIT(Exemptions) erred in concluding that the trust was formed for the benefit of a particular community or for religious purposes. The assessee clarified that its activities are purely charitable in nature and open to all sections of society, without any discrimination based on religion, caste, or community. The counsel pointed out that the donations received have been used for public welfare A.Y. N.A. 6 Shree Vardhman Samaj Utkarsh Fund vs. CIT(E)

purposes, and the financial statements and audit reports clearly support this fact. The counsel for the assessee drew our attention to the audit reports filed in Form 10B for the financial years 2022– 23 and 2023–24 (AY 2023–24 and AY 2024–25), wherein in para 30 clauses (d) and (e), it has been explicitly stated by the Chartered Accountant that no expenditure was incurred either for private religious purposes or for the benefit of any particular religious community or caste. The counsel for the assessee further submitted that the CIT(Exemptions) has misinterpreted the nature of the trust’s objectives by branding them as “composite,” suggesting a mix of religious and charitable purposes. It was submitted that any minor religious activity undertaken is merely incidental and falls well within the 5% threshold allowed under section 80G(5B) of the Act. The core activities of the trust, such as providing scholarships and financial aid, are meant for the public at large and not confined to any specific group. Therefore, the invocation of Explanation 3 to section 80G is misplaced in this context. Further, the counsel submitted that the principles of natural justice were violated in the present case. The assessee was not afforded a fair or adequate opportunity to explain its position, and the final order was passed in undue haste, without fully considering the submissions already placed on record. The appellant should have been given an opportunity to provide clarifications or additional documents, which was unjustly denied by CIT(Exemptions). The counsel for the assessee also submitted that the rejection order runs contrary to several judicial precedents wherein approval under section 80G has been granted to charitable institutions despite the presence of incidental religious activities. In A.Y. N.A. 7 Shree Vardhman Samaj Utkarsh Fund vs. CIT(E) support of this, reliance was placed on several decisions in which it was held that the presence of minor or incidental religious activity does not disqualify a trust from getting 80G approval, so long as its primary purpose remains charitable. It was also submitted that the trust has been active in public welfare since 1954, helping students and needy individuals without bias. The rejection order has ignored this long-standing track record and CIT(Exemptions) erred in overlooking substantial documentation showing the trust’s charitable intent and activities. The assessee submitted that there has been full compliance with section 80G(5B) of the Act and that the trust has not spent more than the permissible 5% limit on any religious activity. The trust’s foundational objects, while including cultural or traditional references, do not make it a religious trust per se, and any such interpretation by the CIT(Exemptions) is unsupported by facts or law. Finally, the counsel contended that the Explanation 3 to section 80G does not impose a blanket ban on any religious activity but merely restricts it. The trust's religious involvement, if any, is incidental, minimal, and compliant within legal limits. Therefore, rejection of the application on this basis alone is unjustified.

Order pronounced in the open court on 23 -09-2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 23/09/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद