Loading judgment…
Facts
The Assessee applied for approval under Section 80G(5) of the Act. The CIT(E) rejected the application ex-parte, stating the trust's objects included religious purposes, violating Section 80G(5). The Assessee contended that most objects were charitable and no expenditure was religious in nature.
Held
The Tribunal held that the CIT(E) acted summarily without inquiry. The inclusion of a religious object does not disqualify the trust if the activities are not wholly or substantially religious, and expenditure on religious purposes is less than 5% of total income.
Key Issues
Whether the rejection of an application for approval under Section 80G(5) without proper inquiry is justified, solely based on the inclusion of a 'religious' object when the trust predominantly has charitable objects and minimal religious expenditure.
Sections Cited
80G(5), 80G(5B)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” 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 27.11.2024.
The Assessee has taken the following grounds of appeal:-
“(1) The learned CIT(E) was not justified in rejecting application u/s. 80G(5) by passing ex-parte order without hearing the appellant. (2) The appellant deserves a chance in view of the natural justice. (3) On the facts and circumstances of the case, the learned CIT(E) was not justified in rejecting the application particularly when the appellant demonstrated that no religious activities were undertaken in the last 3 years as also the objects that meekly pointed to the spiritual and religious side was on the financial assistance to the needy. (4) All of the above grounds are prejudiced to one another. (5) The appellant craves leave to add, alter or vary any of the grounds of appeal.”
Shree Smasta Gurjar Kshatriya Kadiya Samaj Navsari vs. CIT(E) Asst.Year –2023-24 - 2– 3. The brief facts of the case are that the assessee / applicant trust applied for grant of approval under Section 80G(5) of the Act in Form 10AB. On perusal of the objects of the applicant trust, the CIT(E) observed that there is a specific object, in the trust deed, which shows that the trust activities are aimed towards “religious purposes”. CIT(E) was of the view that since one of the objects of the assessee’s trust is “religious” in nature, then there is a clear violation of Clause (ii) of Section 80G(5) of the Act which puts a bar on grant of approval under Section 80G(5) of the Act to an institution or fund, whose objects provide for application of the trusts income towards religious purposes. Ld. CIT(E) of the view that from perusal of the objects of the trust, it is clear that the assessee trust was not established wholly for charitable purposes, whereas, Section 80G of the Act makes it amply clear that for grant of registration under Section 80G of the Act, the assessee / applicant trust has to be established only for charitable purposes and that there is no transfer or application of funds for any purposes other than charitable purposes. Accordingly, Ld. CIT(E) rejected the grant of approval under Section 80G(5) of the Act, with the following observations:
“9. In view of the above, the applicant has violated existing main condition of sub- section (5) of section 80G i.e. it is not a purely charitable trust. Also it has violated the provision of clause (ii) of sub-section (5) of section 80G of the act and hence the applicant is not entitled to get approval u/s. 80G(5) of the Income Tax Act therefore the present application filed in Form 10AB is liable to be rejected.
Looking to the above facts, the present application filed in Form No.10AB for approval under clause (iii) of first proviso to section 80G(5) of the Act is rejected and your provisional approval also stands cancelled.”
Shree Smasta Gurjar Kshatriya Kadiya Samaj Navsari vs. CIT(E) Asst.Year –2023-24 - 3– 4. Before us, the Counsel for the assessee submitted that assessee is a trust with mixed objects, where majority of the objects are charitable in nature. The trust holds regular registration under Section 12A of the Act. The Counsel for the assessee submitted that out of eleven objects, CIT(E) relied only on one object i.e. object No. 9 to classify the trust as one having been established for “religious” purposes. It was submitted that once the aforesaid object is read along with all other charitable objects of the trust, then it would be seen that mere inclusion of the word “religious” in one of the clauses would not categorize the trust as one with “religious objects”. Further, the Counsel for the assessee submitted that the assessee has not incurred any expenditure of a “religious nature” in the past three years. The Counsel for the assessee submitted before us the audited profit and loss account of the assessee / applicant trust for F.Y. 2019-20, 2020-21 and 2021-22 as part of the Paper Book in support of the above contention. The Counsel for the assessee submitted that Section80G(5) of the Act specifically provides that if the trust incurs expenditure towards religious purposes below 5% of it’s total income, then the benefit of Section 80G(5) of the Act cannot be denied to the such trust.
In response, Ld. D.R. placed reliance on the observations made by Ld. CIT(E) in the order rejecting grant of registration under Section 80G of the Act.
We have heard the rival contentions and perused the material on record.
Shree Smasta Gurjar Kshatriya Kadiya Samaj Navsari vs. CIT(E) Asst.Year –2023-24 - 4– 7. Section 80G(5) of the Act states that this section applies to donation to any institution or fund only if it is established in India for “charitable purposes”. Explanation 3 to Section 80G states that the term “charitable purpose” does not include any purpose the “whole” or “substantially the whole” of which is of a religious nature. Further, Section 80G(5B) of the Act states that notwithstanding Explanation 3, any institution or fund which incurs expenditure which is of a religious nature for an amount not exceeding 5% of it’s total income for that previous year shall be deemed to be an institution or fund to which the provisions of Section 80G shall apply. From a combined reading of these provisions, it is apparent that in case any trust applies or expends less than 5% of it’s income towards “religious” purposes, then it cannot be denied benefit of deduction under Section 80G of the Act on the ground that has been incorporated for “religious purposes”. Further, even in the definition of the term “charitable purposes” it has been stated that the purpose of Trust should not one which is “wholly” or “substantially wholly” of a religious nature. Therefore, even as per Explanation 3 referred to above, in order to qualify as “charitable purpose” within the meaning of section 80G of the Act, the only qualification is that the activities should not be “wholly” or “substantially wholly” religious. Therefore, in view of the statutory provisions quoted above, we are of the considered view that the application for grant of deduction under Section 80G cannot be denied to the assessee only on the ground that one of the objects content the term “religious”. Further, we observe that the applicant / assessee trust had specifically submitted that the trust has not incurred any expenditure towards religious Shree Smasta Gurjar Kshatriya Kadiya Samaj Navsari vs. CIT(E) Asst.Year –2023-24 - 5– purposes. However, Ld. CIT(E), without carrying out any enquiry into this aspect, summarily rejected the application filed by the assessee / applicant trust. In fact, Ld. CIT(E), while rejecting the application for grant of registration under Section 80G of the Act has not dealt with any of the submissions / contentions of the assessee / applicant trust.
In the result, the matter is restored to the file of Ld. CIT(E) to consider the grant of registration under Section 80G of the Act afresh and to carry out necessary verification whether the assessee / applicant trust has expended / utilized less than 5% of it’s total income towards religious purposes. If that be the case, the assessee / applicant trust may be granted registration, in accordance with law.
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 : अपीलाथ� / The Appellant 1. 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,