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Facts
The assessee, a registered public charitable trust, applied for approval under Section 80G(5) of the Income Tax Act. The CIT(E) rejected the application, stating that two of the trust's objects were religious in nature and that the assessee had incurred expenditure on religious activities exceeding the permissible limit.
Held
The Tribunal held that the identified objects were not substantially religious in nature. Furthermore, the Tribunal found that the CIT(E) had erred in presuming certain event expenses were religious without providing the assessee an opportunity to explain. The matter was set aside for re-adjudication.
Key Issues
Whether the objects of the trust are substantially religious in nature, and whether the expenditure incurred was appropriately classified without providing the assessee an opportunity to explain.
Sections Cited
80G(5), 12AB, 80G(5B)
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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMEDABAD
O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Exemption), Ahmedabad (in short ‘the CIT(E)’) dated 29.08.2024 rejecting the application for grant of approval under Section 80G(5) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The assessee has raised the following grounds in this appeal: -
Learned CIT(E) has erred in law and on the facts of the case in passing the impugned order, rejecting the registration u/s.80G of the Act.
Shree Rajnibhai Kanada Memorial Foundation vs CIT (E) Page 2 of 6 2. Learned CIT(E) has erred in law and on the facts of the case in passing the order u/s.80G of the Act in gross violation of principle of natural justice. 3. Your Appellant reserves the right to add, alter, modify or delete any ground of appeal.”
3. Shri Mohit Balani, the Ld. AR of the assessee submitted that the assessee is a registered public charitable trust and was granted registration under Section 12AB of the Act. The assessee had filed an application in Form No.10AB for approval under Section 80G(5) of the Act which was rejected by the Ld. CIT(E) vide the impugned order. The Ld. AR explained that the Ld. CIT(E) had rejected the application of the assessee for the reason that two of the objects of the trust (object nos.14 & 18) were held to be religious in nature. Further, the Ld. CIT(E) had given a finding that during the Financial Year 2022-23 the assessee had incurred expenditure of Rs.2,20,617/-, out of total gross receipt of Rs.6,58,083/-, towards religious activities. Thus, the percentage of religious expenditure out of the total receipts was 33.52%, which exceeded the limit of 5% as provided under Section 80G(5B) of the Act. The Ld. AR explained that the object no.14 relates to spiritual teaching concerning Indian culture and that object no.18 pertains to teaching music and arts rooted in Indian tradition. According to the Ld. AR, neither of the objects referred to propagation of any specific religion nor included any ritualistic or denominational practices. He further submitted that mere presence of a spiritual or culturally inspired object does not render the trust religious in nature. In this regard, he placed reliance on the decision of Co-ordinate Bench of this Tribunal in the case of Gurukrupa Foundation vs. CIT(E), 172 taxmann.com 737 (ITAT Ahmedabad).
Shree Rajnibhai Kanada Memorial Foundation vs CIT (E) Page 3 of 6 3.1 The Ld. AR further submitted that the Ld. CIT(E) had suo motto concluded that Rs.2,20,617/- pertaining to event expenses was spent for religious purpose, without issuing any specific show cause notice in this regard and without calling for event-wise bifurcation. He submitted that the assessee was denied opportunity to explain or furnish classification of expenses. He, therefore, requested that the matter may be restored to the file of the Ld. CIT(E) with a direction to issue specific show cause notice regarding classification of event expenses and allow an opportunity to the assessee to explain the nature of these expenses.
On the other hand, the Ld. CIT-DR relied upon the order of the Ld. CIT(E) rejecting the application of the Trust and requested to uphold the same.
We have considered the rival contentions and carefully gone through the order of the Ld. CIT(E). The Explanation-3 to Section 80G of the Act defines charitable purpose, as per which “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature. Thus, as per the definition of charitable purpose given in Section 80G of the Act, the charitable purpose should not include any purpose of substantial religious nature. The Ld. CIT(E) had reproduced the following objects in his order which were held to be religious in nature and for which the registration under Section 80G(5) of the Act was denied to the assessee.
Establish, run and maintain prayer centres, meditation centres, spiritual buildings, ashrams, gurukulas and other similar institutions for the development of spiritual and cultural spirit among the people. To carry out various activities to promote and disseminate the basic elements of Indian culture, celebrating stories, weeks, parayans, spiritual discourses and festivals. Activities such as Navratri Mahotsav, Shivaratri Mahotsav, Shree Rajnibhai Kanada Memorial Foundation vs CIT (E) Page 4 of 6 Ganeshotsav etc. are carried out as part of the festival celebrations. To do the work of maintaining faith and belief in the past and to explain the greatness of Suryashakti among the people.
Performing all kind of activities such as performing various musical arts, dramas and ras garba, dances etc., giving training etc. that reveal the ancient Indian culture like traditional ras-garba, drama festivals, garbi, Navratri festivals etc. which are part of Indian culture. To carry out activities related to promotion of traditional folk arts - musical arts, folk literature, folk art crafts, village art etc. with a focus on Indian culture. Conducting various cultural activities and functions and organizing competitions. Such competitions, programmes etc. are organized by participating artists, cultural organizations etc., to give them necessary support and encouragement. Organizing bhavai, folkdira, folk music, folk dances and folk programs at all levels as part of cultural activities. To encourage such activities. Establishing, running, maintaining music schools. 5.1 In the trust deed, the assessee had altogether 21 objects, out of which, the above two objects were held to be of religious nature by the Ld. CIT(E). As per the object no.14, the activities of the trust to establish, run and maintain prayer centres, meditation centres, spiritual building, ashrams, gurukulas and other similar institution for the development of spiritual and cultural spirit among the people cannot be held as religious in nature. The objective of the trust is to carry out activities to promote and disseminate the basic tenets of Indian culture and spiritual teachings. Similarly, as per the object no.18, the activities of performance of musical art, drama, Garba, promoting folk art & craft, music etc. also can’t be considered as religious in nature. Therefore, the Ld. CIT(E) was not correct in holding that these two objects were religious in nature. Even if certain tenets of religious activity is embedded in organising Navratri Mahotsav, Shivaratri Mahotsav, Ganesh Utsav etc. this does not make the overall objects of the trust as substantially religious in nature. It was held by the Co-ordinate Bench of this Tribunal in the case of Gurukrupa Shree Rajnibhai Kanada Memorial Foundation vs CIT (E) Page 5 of 6 Foundation (supra) that since the assessee was given option as per statute to spend upto 5% of its total income for religious purpose, it was imperative that some of the objects would have tenets of religious nature, otherwise it might not be able to spend that 5% permissible expense for religious purpose. Therefore, the action of the Ld. CIT(E) in rejecting the application under Section 80G(5) of the Act on the ground that two of the objects of the assessee were religious in nature, cannot be sustained. We don’t find those two grounds to be substantially religious in nature so as to deny the approval.
5.2 At the same time, a finding was also given in the case of Gurukrupa Foundation (supra) that if the assessee had spent more than 5% of its total income on religious purpose as stipulated under Section 80G(5B) of the Act, then the registration of the trust can be denied. The Ld. CIT(E) has given a finding that the expenditure incurred for religious purpose during the Financial Year 2022-23 was 33.52% of the total receipts as against permissible limit of 5%. On the other hand, the assessee has contended that no opportunity was provided to explain the nature of expense for religious purpose and the Ld. CIT(E) had suo moto presumed that the entire “event expense” was for religious purpose only. A copy of income and expenditure account for the Financial Year 2022-23 has been brought on record. It is found therefrom that no expense in the nature of any religious nature is debited in the accounts. The assessee had claimed expense of Rs.2,20,617/- on account of “event expense” which was considered by the Ld. CIT(E) as religious nature. However, no opportunity was provided to the assessee to explain the nature of event expense as debited to the account. In the income and expenditure account for Financial Year 2021-22 as well as in the Financial Year 2023-24 also, no expense of religious nature is found debited. The suo moto conclusion of Shree Rajnibhai Kanada Memorial Foundation vs CIT (E) Page 6 of 6 the Ld. CIT(E) that entire event expense was incurred for religious purpose, is found to be without any basis. There was no material on record to conclude that the entire event expense was incurred in connection with religious activities. Since the Ld. CIT(E) had not provided any opportunity to the assessee to explain the nature of event expense, we deem it proper to set aside the matter to the file of the Ld. CIT(E) with a direction to allow another opportunity to the assessee to explain the nature of event expense and thereafter re-decide the matter.
In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open Court on this 4th June, 2025.