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Facts
The assessee, Sudharma Prachar Mandal, appealed against the CIT(E)'s order denying approval under Section 80G(5) of the Act. The CIT(E) rejected the application arguing that the trust was not purely charitable due to its objectives involving religious activities, contravening Section 80G(5)(ii) and Explanation 3 to Section 80G. A 101-day delay in filing the appeal was condoned by the Tribunal.
Held
The Tribunal held that merely listing religious activities in the trust's objectives does not make it wholly religious. It noted that the CIT(E) failed to investigate whether the assessee had actually incurred expenditure on religious activities beyond the 5% permissible limit under Section 80G(5B). Consequently, the Tribunal set aside the CIT(E)'s order and remanded the case for re-examination of actual expenditure and re-evaluation of the 80G(5) approval.
Key Issues
The primary issue was the correctness of the CIT(E)'s denial of Section 80G(5) approval, specifically whether the trust's objectives or actual expenditure on religious activities violated the provisions of Section 80G(5)(ii) and Explanation 3 to Section 80G.
Sections Cited
80G(5), 12AA, 80G(5)(ii), 80G(5B), Explanation 3 to 80G
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
आदेश/O R D E R
PER NARENDRA PRASAD SINHA, AM:
This appeal is filed by the assessee against the order passed by the Commissioner of Income Tax (Exemption) Ahmedabad, (in short “the CIT(E)”) dated 27.12.2024, in the proceedings u/s. 80G(5) of the Act.
There was delay of 101 days in filing of this appeal. The assessee has filed a condonation application along with affidavit of Shri Mayank Asst. Year NA Sudharma Prachar Mandal vs. CIT(E)
2 Jashwantlal Shah, trustee of the assessee-trust and explained the reason for the delay. It is submitted that the delay was for the reason that the trustees were stationed in Mumbai whereas the activities of the trust were carried on in Ahmedabad and there was a delay in coordination regarding the future course of action after receipt of Ld. CIT(E)’s order. The trustee had to travel from Mumbai to discuss the matter with the lawyers and in the process there was this delay. It was submitted that the assessee was engaged in charitable activities and the delay was not deliberate. Considering the explanation of the assessee, the delay in filing the appeal is condoned.
The assessee has taken the following grounds of appeal:
“1. The Ld. CIT (Exemption) erred on facts and in law in not granting approval u/s.80G(5) despite approval u/s.12AA granted to the appellant.
2. The Ld. CIT (Exemption) erred on facts and in law in not granting approval u/s.80G(5) on the ground that appellant is engaged in religious activities even though no such activity is reported in the audited accounts by the Auditors.”
None appeared on behalf of the assessee on the date of hearing. We have heard the Ld. CIT-DR who explained that the Ld. CIT(E) had rejected the application of the assessee for approval u/s 80G(5) of the Act on the ground that the assessee-trust was not purely charitable trust. He explained that the Ld. CIT(E) had referred to certain objectives of the trust wherein reference to construction, maintenance and financial help to religious centres, assistance to organizations/institution carrying on such activities, printing and publishing religious books and literature etc. was made and on that basis he had held that provision of section 80G(5)(ii) and Explanation 3 to section 80G was contravened. Therefore, the Ld. CIT(E) had held that the assessee Asst. Year NA Sudharma Prachar Mandal vs. CIT(E) had violated the provision of section 80G(5)(ii) of the Act and was not entitled to get approval u/s 80G(5) of the Act. The Ld. CIT-DR, therefore, supported the order of the Ld. CIT(E).
We have considered the facts of the case and submissions of the Ld. CIT-DR. The Ld. CIT(E) had considered some of the objectives of the trust wherein reference to construction, maintenance and financial help to religious centres, assistance to organizations/institution carrying on such activities, printing and publishing religious books and literature etc. was made and on that basis he had held that provision of section 80G(5)(ii) and Explanation 3 to section 80G was contravened. The Explanation 3 to section 80G defines “charitable purpose” as not to include any purpose the whole or substantially the whole of which, is of a religious nature. A mere mention of construction, maintenance, financial help to religious centres, assistance to organizations/institution carrying on such activities, printing and publishing religious books and literature etc. in the objects, does make the object of the trust wholly or substantially wholly as religious in nature. Therefore, the action of the Ld. CIT(E) in rejecting the application of the assessee on this basis alone cannot be held as correct.
The provision of Section 80G(5)(ii) of the Act, on which reliance has been placed by the Ld. CIT(E) to deny the approval reads as under: (5) This section applies to donations to any institution or fund referred to in sub- clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :— ….. (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the Asst. Year NA Sudharma Prachar Mandal vs. CIT(E)
transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; No finding has been given by the Ld. CIT(E) that any clause in the instrument stipulated that any income or asset of the trust will be transferred for other than charitable purposes. Further, as per the provisions of section 80G(5B) of the Act, the assessee was entitled to incur up to 5% of the expenditure on religious activities. In order to incur such expense, it was imperative that mention of certain religious activity would be there in the objectives of the trust. What was relevant to consider was whether the assessee had incurred any expenditure in excess of the permissible limit of 5% on the religious activities. No findings in this regard has been given in the order of the Ld. CIT(E). We, therefore, deem it proper to set-aside the matter to the file of Ld. CIT(E) with a direction to examine whether the assessee had incurred any expenditure on religious activities beyond the permissible limit of 5%. If not, the assessee should be allowed approval u/s.80G(5) of the Act, after ensuring that all other conditions as stipulated u/s. 80G(5) of the Act are complied. The assessee may also be allowed an opportunity of being heard in the matter.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 10th September, 2025 at Ahmedabad. Sd/- Sd/- Sd Sd/- (SIDDHARTHA NAUTIYAL) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy)
अहमदाबाद/Ahmedabad, �दनांक/Dated 10/09/2025 Asst. Year NA Sudharma Prachar Mandal vs. CIT(E)
5 , Sr. PS