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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
This appeal is filed by the assessee against the order dated 14.12.2024 passed by the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as “CIT(E)”], rejecting the assessee’s application in Form No. 10AB for approval under section 80G(5)(iii) of the Income-tax Act, 1961[hereinafter referred to as “the Act”].
Shri Umedkumari MandirTrust vs. CIT(E) 2 Facts of the Case 2. The assessee is a public charitable trust created by a trust deed dated 26.05.1905. The trust filed an application in Form No. 10AB on 28.06.2024 seeking approval under section 80G(5)(iii) of the Act. The trust had already been granted provisional approval from 31.05.2021, which was valid up to A.Y. 2024–25. During the course of proceedings, the Learned CIT(Exemption) issued a letter dated 17.09.2024 calling for details, which were furnished by the assessee vide reply dated 02.10.2024. Subsequently, a show cause notice dated 25.11.2024 was issued, wherein it was observed that certain object clauses in the trust deed were indicative of a religious purpose. The assessee submitted a detailed written reply dated 27.11.2024, explaining that its activities were charitable, cultural, and educational in nature and did not involve any religious practice, ritual, or expenditure. However, the Learned CIT(Exemption), in the impugned order dated 14.12.2024, rejected the application for approval under section 80G(5), holding that the trust was not established solely for charitable purposes. The CIT(E) observed that the object clause evidenced a religious character. The CIT(E) also observed that Explanation 3 to section 80G(5) clearly excludes institutions having religious objects, and the 5% tolerance under section 80G(5B) is applicable only to trusts which are otherwise established solely for charitable purposes. To support his conclusion, the CIT(Exemption) relied upon some judicial precedents. Accordingly, the CIT(Exemption) held that the assessee violated the conditions of section 80G(5), particularly clause (ii) and Explanation 3, and was thus ineligible for approval. The provisional approval granted earlier was also cancelled.
3. Aggrieved by the above, the assessee has preferred the present appeal before us raising following grounds of appeal:
Shri Umedkumari MandirTrust vs. CIT(E) 3 1. Rejection Order passed by the Ld. Commissioner of Income Tax (Exemption) Ahmedabad is bad in Law and against the natural justice.
The Ld. Commissioner of Income Tax (Exemption) Ahmedabad has eared in Law and on facts, in rejecting the application in form 10AB U/S 80G(5)(iii) of the Income Tax Act, 1961.
The Ld. Commissioner of Income Tax (Exemption) Ahmedabad has considered charitable objects and activities as the religious objects and rejected the application.
4. As Rejection order passed by the Ld. Commissioner of Income Tax (Exemption) Ahmedabad is against the provisions of procedure of approval and Explanation 3 of Section 80G(5). As per the procedure, the genuineness of the activities and conditions i to v are to be verified as mentioned in the rejection order also. The Ld. Commissioner of Income Tax (Exemption) Ahmedabad is not supposed to verify the objects clause of the trust deed while granting the approval U/s 80G(5), when the application has been is made under clause (ii) or clause (iii) [or sub-clause (B) of clause (iv)]. Hence, the rejection order is to be quashed and approval U/s 80G(5) to be granted.
5. Your appellant crave, leave to add, alter, & or to emend modify substitute all or any ground of appeal before final hearing if necessity so arise.
When the case was called for hearing, none appeared on behalf of the assessee. However, on perusal of the record, it is observed that the assessee has placed on file a detailed written submission along with a statement of facts in support of the grounds of appeal. In view of the same and having regard to the nature of the issues involved, we proceeded to dispose of the appeal on the basis of the material available on record, including the written submissions and statement of facts filed by the assessee.
The assessee, through its written submissions and statement of facts placed on record, has vehemently contested the findings of the CIT(Exemption) and submitted that the rejection of the application under section 80G(5)(iii) is unjustified both on facts and in law. The contentions advanced by the assessee may be summarised as under:
i. The assessee submitted that the objects of the trust are directed towards educational and literary advancement of the public and include maintaining and operating public libraries, providing a space for lectures and cultural discussions, and reciting and Shri Umedkumari MandirTrust vs. CIT(E) 4 explaining literary and historical texts. The trust is engaged in organising literary programs under the title “Granth No Panth”, which is open to all sections of the society without any restriction based on caste or creed. ii. The assessee contends that the CIT(Exemption) has erroneously interpreted certain terms such as “katha”, “shastri”, “purani”, “vedic”, “puranic”, and “aitihasik” as indicative of religious activity, without appreciating that these terms relate to Indian knowledge systems, culture, and literature. It is argued that the use of these terms, in their true context, relates to historical narration, philosophical discourse, and literary exposition, and does not involve any ritual, pooja, archana, or worship. iii. The assessee has placed on record the audited financial statements and activity reports (pages 78–113 of the paper book) to demonstrate that: a. No religious activity of any kind is conducted; b. No expenditure of religious nature is incurred; c. The public libraries run by the trust are accessed by persons of all backgrounds; d. The trust promotes awareness of Gujarati literature, conducts free lectures and reading sessions, and recently undertook the digitisation of its libraries. iv. The word “Mandir” in the name Shri Umedkumari Mandir Trust refers to Sahitya Mandir or Literary Temple and not to a religious temple. There is no murti or idol, no pooja or archana, and no religious vidhi performed within the premises of the trust. v. It is argued that the CIT(E) has erroneously applied Explanation 3 to section 80G(5), without correlating it with the actual conduct of the trust. Since there is no religious object in substance, and no expenditure incurred for any religious activity, the bar under Explanation 3 is not attracted. The trust also satisfies all five conditions under section 80G(5)(i) to (v), and its accounts and operations reflect genuine charitable intent. vi. The assessee distinguishes the cases relied upon by the CIT(E) by submitting that: a. The decisions in Yug Chetna Parmarth Trust and OM Tapovan Charitable Trust dealt with situations where religious expenditure was incurred or religious objects were explicit. b. In contrast, the present trust has not incurred even 1% religious expenditure, and thus section 80G(5B) is not even attracted. c. The case of Sri Ashvalayana Vrunda v. ITO(E), Bangalore – has been cited in support, where it was held that Vedic knowledge is not religious in nature, but a way of life and source of knowledge, thereby qualifying as charitable activity. vii. The assessee has submitted that although a detailed reply was filed on 27.11.2024, explaining the nature of the trust’s activities and enclosing supporting material, the CIT(E) has summarily stated that the reply is "not acceptable", without assigning any specific reasons. Further, the CIT(E) has not dealt with or discussed the financial records and activity reports submitted by the assessee and has arrived at the conclusion purely on the plain reading of select clauses in the trust deed, thereby violating principles of natural justice and judicial discipline.
Shri Umedkumari MandirTrust vs. CIT(E) 5 viii. It is finally submitted that since the trust is solely engaged in public charitable activities in the field of education, literature, and public benefit, and has neither violated any of the conditions under section 80G(5), nor attracted the mischief of Explanation 3 or section 80G(5B), it is fully entitled to grant of approval. The assessee has thus prayed that the impugned order of rejection be quashed and the CIT(E) be directed to grant the approval under section 80G(5)(iii).
The Learned Departmental Representative appeared and relied upon the impugned order passed by the Commissioner of Income Tax (Exemption), Ahmedabad. He submitted that the CIT(E) has recorded detailed findings with reference to the trust deed and the provisions of section 80G(5) read with Explanation 3 thereto and rejected the application on the ground that the trust was not established solely for charitable purposes. However, considering the detailed written submissions placed on record by the assessee and the elaborate explanation given regarding the nature of its objects and activities, the Learned DR fairly submitted that he has no serious objection if the matter is remanded to the file of the CIT(Exemption) for fresh adjudication in accordance with law, after considering all relevant facts and submissions on record.
We have carefully considered the material available on record, including the written submissions and statement of facts filed by the assessee, as well as the impugned order passed by the CIT(Exemption). Upon a thorough examination of the impugned order dated 14.12.2024, we find some material deficiencies and procedural lapses in the approach adopted by the CIT(Exemption) in rejecting the assessee’s application for approval under section 80G(5)(iii) of the Act.
To begin with, it is seen that the assessee had furnished a detailed reply dated 27.11.2024 in response to the show cause notice issued by the CIT(Exemption), wherein the nature of the trust's activities, the interpretation of its object clause, and the absence of any religious activity or expenditure Shri Umedkumari MandirTrust vs. CIT(E) 6 were specifically explained. The said reply was accompanied by supporting documentation including audited financial statements, reports of literary and educational activities conducted by the trust, and an explanation on the historical and cultural context of the terms used in the trust deed. The assessee also placed reliance on some judicial precedents. However, the CIT(Exemption) has merely recorded in the impugned order that the reply was “not acceptable” without assigning any reasons as to why the explanations and evidence furnished by the assessee were found unsatisfactory. There is a complete absence of analytical reasoning or discussion of the reply dated 27.11.2024, which is a clear violation of the principles of natural justice. A quasi-judicial authority is expected to examine the explanation offered and deal with it by way of a reasoned order; mere summary rejection is not permissible.
Further, the CIT(Exemption) has proceeded to form his conclusions solely on the basis of an isolated and literal reading of certain terms used in the object clause of the trust deed. No effort has been made to appreciate the object clause holistically or to examine the actual nature of the trust’s functioning. More importantly, the CIT(Exemption) has not at all referred to or analysed the audited financial statements or activity reports placed on record, which were crucial to determine whether any religious expenditure was incurred or whether the trust is engaged in religious activity. While the order reproduces the statutory provisions of section 80G(5), Explanation 3, and section 80G(5B), as well as references to certain judicial decisions, there is no attempt to correlate these legal provisions with the facts of the case, particularly the financial data and actual activities of the trust. The CIT(Exemption) has not dealt with the judicial precedents relied upon by the assessee. The entire decision-making appears to rest on a mechanical application of legal text without factual evaluation. In our considered view, such an approach renders the order legally unsustainable.
Shri Umedkumari MandirTrust vs. CIT(E) 7
The role of the CIT(Exemption) under section 80G(5) is not limited to a textual reading of the trust deed, but extends to verifying the genuineness of activities, the manner in which the funds are applied, and whether the institution is established solely for charitable purposes in substance. In the present case, the CIT(Exemption) has failed to discharge this statutory responsibility by not dealing with the material placed on record by the assessee.
We therefore find that the impugned order suffers from serious procedural and factual inadequacies, and the rejection of the application under section 80G(5)(iii) cannot be sustained in its present form.
In view of the foregoing discussion, we are of the considered opinion that the impugned order dated 14.12.2024 passed by the CIT(Exemption) is liable to be set aside, as it suffers from lack of proper examination of facts, absence of reasoned consideration of the assessee’s reply, and failure to deal with the documentary evidence placed on record.
Accordingly, the matter is restored to the file of the CIT(Exemption) with a direction to examine the assessee’s application afresh in accordance with law. The CIT(Exemption) shall:
Consider the written reply dated 27.11.2024 and all material placed on record, Examine the audited financial statements, activity reports, and the actual conduct of the trust, Record a reasoned and speaking order dealing with the factual and legal contentions raised by the assessee.
Shri Umedkumari MandirTrust vs. CIT(E) 8 14. The assessee shall be afforded a reasonable opportunity of being heard and to furnish any additional evidence, if so required, in the course of such proceedings.
The impugned order is set aside, and the matter is restored to the file of the CIT(Exemption) for fresh adjudication in accordance with law.
In the result, appeal filed by assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 10th June, 2025 at Ahmedabad.