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Facts
The assessee, Shree Uma Bhavan Samaj Seva Trust, appealed against the CIT(E)'s rejection of its application for registration under Section 80G(5) of the Income Tax Act. The CIT(E) found that the trust's objectives included establishing a religious center, concluding it was not purely charitable and violated Section 80G provisions, specifically Section 80G(5)(ii) and Explanation 3 to Section 80G. The assessee argued that the religious reference was minor and no contravention occurred.
Held
The Tribunal observed the assessee's failure to provide details to the CIT(E) regarding religious expenses. It imposed a cost of Rs. 5,000/- on the assessee and remanded the matter back to the CIT(E) for re-examination. The CIT(E) was directed to grant another opportunity and verify if the religious expenditure exceeded the 5% limit permitted under Section 80G(5B) before deciding on the Section 80G(5) approval.
Key Issues
The primary issues were whether the trust's objectives and actual religious expenditures qualified it as purely charitable for Section 80G(5) registration, and the assessee's non-compliance in furnishing requested details to the CIT(E).
Sections Cited
80G(5), 80G(5)(ii), 80G(5B), 80G (Explanation 3)
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & 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 29.12.2024, in the proceedings u/s. 80G(5) of the Act.
The assessee has taken the following grounds of appeal:
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2 “[1] In law and in the facts and circumstances of the appellant's case, the order passed by the Ld. CIT (Exemption), Ahmedabad rejecting application for registration of the trust u/s. 80G(5) of the Income Tax Act, 1961 is void ab initio and in violation of principles of natural justice hence being bad in law. [2] In law and on the facts and in the circumstances of the case of appellant, the Id. CIT (Exemption), Ahmedabad has erred in rejecting application for registration of the trust u/s. 80G(5) of the Income Tax Act, 1961 on the basis of incorrect reasons/observations. [2.1] In law and on the facts and in the circumstances of the case of appellant, the Id. CIT (Exemption), Ahmedabad has erred in not granting registration u/s 80G(5) of the Act to the appellant on the basis some of the object are partly religious / Composite in nature which is wrong and incorrect. [3] The appellant craves leave to add, alter or amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal."”
3. Shri Kunal Sanghavi, Ld. AR appearing for the assessee submitted that the Ld. CIT(E) had rejected the application of the assessee on the ground that the assessee-trust was not purely charitable trust. He explained that the Ld. CIT(E) had picked up one of the objectives wherein reference to establishing religious centre was mentioned and on that basis he had held that provision of section 80G(5)(ii) and Explanation 3 to section 80G was contravened. The Ld. AR explained that it was only a passing reference in the objective and that the religious expense incurred didn’t contravene the provisions of the Act. Therefore, the rejection of the application by the Ld. CIT(E) was not correct. The Ld. AR submitted that the details as called for by the Ld. CIT(E) couldn’t be furnished and the assessee may be allowed another opportunity to produce the documents and evidences by setting aside the matter to the file of Ld. CIT(E).
Per Contra Shri R P Rastogi, Ld. CIT. DR supported the order of the Ld. CIT(E). However, he had no objection if the matter was set aside to the file of Ld. CIT(E).
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3 5. We have considered the submissions of the assessee and also gone through the documents brought on record in the paper book. We are not convinced with the explanation of the assessee for the non-compliance before the Ld. CIT(E). Considering the fact that the mention of certain activity of religious nature was appearing in the objectives of the Trust, the Ld. CIT(E) had called for complete details of the religious expenses incurred towards such objective. The assessee didn’t provide the required details. No cogent explanation has been given for non- compliance before the Ld. CIT(E). The assessee had neither complied to the requirements of the Ld. CIT(E) nor sought any adjournment. Therefore, we deem it proper to impost a cost of Rs. 5,000/- on the assessee, payable to the Prime Minister National Relief Fund within two weeks from the date of receipt of copy of this order. On production of receipt for payment of the cost, the Ld. CIT(E) is directed to give one more opportunity of hearing to the assessee for the approval u/s 80G(5) of the Act in accordance with the provisions of law. 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 could be given by the Ld. CIT(E) as the requisite details were not filed before him. 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
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4 u/s. 80G(5) of the Act are complied. The assessee is also directed to comply before the Ld. CIT(E) in the course of set aside proceeding and produce the required details and clarifications, as required. In case the assessee fails to comply, the Ld. CIT(E) will be free to decide the issue in accordance with the provisions of law.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 17th July, 2025 at Ahmedabad.