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Facts
The assessee, a trust, applied for approval under Section 80G(5) of the Income Tax Act, 1961. The CIT(Exemption) rejected the application because the assessee claimed expenses for a 'Bhagwat Katha' event which constituted 36.87% of its total receipts, exceeding the permissible 5% limit for religious expenditure. The CIT found the event to be inherently religious.
Held
The Tribunal noted that while the assessee admitted to incurring religious expenditure exceeding 5% in prior years, it contended that this was not the case for the impugned year. The Tribunal, considering the issue and the arguments, decided to restore the matter to the CIT for de-novo consideration, allowing the assessee to present further judicial precedents.
Key Issues
Whether the expenditure incurred on a 'Bhagwat Katha' event by the assessee trust qualifies as a religious expenditure exceeding the permissible limit under Section 80G(5B) of the Income Tax Act, 1961.
Sections Cited
80G(5), 80G(5B)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Exemption), (in short “Ld. CIT(E)”), Ahmedabad vide order dated 27.12.2024.
The Assessee has taken the following grounds of appeal:-
“1. On the facts and in circumstances of the case as well as law on the subject, the learned CIT(Exemption) has erred in rejecting assessee’s application for approval u/s. 80G(5) of the Income Tax Act, 1961.
2. It is therefore prayed that order of CIT(Exemption) passed u/s. 80G(5) of the Income Tax Act, 1961 may be set aside and he may be directed to pass fresh order granting approval u/s. 80G(5).
Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
Moti Daman Hindu Samashan Bhoomi Trust vs. CIT(E) Asst.Year –N.A. - 2– 3. The brief facts of the case are that in the order passed by the Commissioner of Income Tax (Exemptions), the application filed by the assessee for grant of registration under Section 80G(5) of the Income Tax Act, 1961 (Act), was rejected on the grounds of violation of the provisions contained in sub-section (5B) of Section 80G of the Act. The CIT(Exemptions) noted that this provision allows an institution or fund to incur religious expenditure only up to a limit of five percent of it’s total income while carrying out charitable activities. A show cause notice was issued to the applicant after the audit report for the Financial Year 2023-24 showed that the assessee had claimed expenses of ₹5,56,745 on a “Bhagwat Katha” event, which constituted 36.87% of total receipts amounting to ₹15,09,785. Accordingly, CIT(Exemptions) was of the view that this expenditure clearly exceeded the permissible limit and appeared to be of a religious nature, thereby violating Section 80G(5B) of the Act. In response to the notice, the assessee filed a reply on 27.12.2024 explaining that the Bhagwat Katha was not a religious event but rather a series of philosophical and spiritual lectures open to the general public and beneficial to all sections of society regardless of religion. The applicant emphasized that the Katha covered topics such as family values, mental wellness, and cultural promotion, and included expenses for logistical arrangements like food, sound systems, and stage setup etc. It was submitted by the assessee that these were not religious in nature and therefore should not disqualify the society from obtaining 80G registration. However, upon examining the reply and the financial records, the CIT(Exemptions) found the explanation to be unsatisfactory. CIT(Exemptions) held that the Bhagwat Katha, centered around the Shreemad Bhagwat scripture, is inherently religious in nature.
Moti Daman Hindu Samashan Bhoomi Trust vs. CIT(E) Asst.Year –N.A. - 3– Further, it was found that the assessee had incurred such religious expenditure exceeding the prescribed 5% limit not only in the Financial Year under consideration but also consistently in prior years. Given this pattern of non- compliance, the CIT(Exemptions) held that the assessee had violated the conditions laid down under Section 80G(5B) of the Act. As a result, the application filed in Form No. 10AB was rejected and the provisional approval granted earlier was also cancelled.
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Exemptions). Before us, the Counsel for the assessee submitted that Ld. CIT(E) while rejecting the application filed by the assessee / applicant trust has given an incorrect finding of fact that the assessee has incurred expenditure of religious nature in excess of more than 5% of it’s income for the relevant assessment year. The Counsel for the assessee submitted that though, admittedly, in the earlier assessment years, the assessee had incurred expenditure of religious nature in excess of 5% of it’s total income, but for the impugned assessment year, Ld. CIT(E) has given an incorrect finding of fact that the assessee incurred expenditure of religious nature in excess of 5% of it’s total income.
In response, Ld. D.R. placed reliance on the decision of ITAT Jaipur Bench in the case of Shiv Ratan Rathi Foundation vs. CIT, Kota (Raj.) 20 taxmann.com 221 (JP.), in which it was held that organizing ‘Bhagwat Katha’ is a religious activity and where expenditure incurred thereon by a trust exceeds 5% of it’s income of year, trust would not be granted approval under Section 80G for that year.
Moti Daman Hindu Samashan Bhoomi Trust vs. CIT(E) Asst.Year –N.A. - 4– 6. We have heard the rival contentions and perused the material on record.
Before us, the Counsel for the assessee placed reliance on various judicial precedents on the proposition that expenditure incurred on supporting prayer halls at places of worship, which are open to the public at large are not expenses of a “religious nature”. Accordingly, in the interest of justice, the matter is restored to the file of Ld. CIT(E) for de-novo consideration and the assessee / applicant trust would be at liberty to place judicial precedents on the subject in support of it’s case.
In the result, the appeal of the assessee / applicant trust is allowed for statistical purposes. This Order pronounced in Open Court on 26/05/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 26/05/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,