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Facts
The assessee, Gurukrupa Foundation, a public trust, applied for regular registration under Section 80G(5) of the Income Tax Act after obtaining provisional registration and Section 12AB registration. The CIT(E) rejected the application, holding that some of the trust's objects were religious in nature, thus violating the conditions for charitable registration under Section 80G(5).
Held
The Tribunal held that the CIT(E) erred in rejecting the application solely based on the religious nature of a few objects. The Tribunal noted that the Act allows for up to 5% of income to be spent on religious purposes and that the identified objects, such as establishing halls, wadis, and dharamshalas, or educating about Jain principles, were not wholly or substantially religious. The matter was restored to the CIT(E) for a fresh analysis of the expenditure on religious purposes.
Key Issues
Whether the rejection of Section 80G(5) registration by the CIT(E) was justified when some trust objects were identified as religious, despite the trust primarily engaging in charitable activities and having the option to spend a small percentage of income on religious purposes.
Sections Cited
80G(5), 80G(5B), 12AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Ms. Suchitra Kamble & Shri Narendra Prasad Sinha
Date of hearing : 20-02-2025 Date of pronouncement : 06-03-2025 आदेश/ORDER PER : NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:-
This appeal is filed by the assessee against the order dated 14-12-2024 passed by the ld. Commissioner of Income Tax (Exemption), Ahmedabad, [in short CIT(E)] rejecting the application for request to grant final registration u/s. 80G(5) of the Income Tax Act.
A.Y. N.A. Page No. 2 Gurukrupa Foundation vs. CIT(E)
The assessee has raised the following grounds in this appeal: -
“1. The learned CIT(E) has erred in law and on facts of the case, in rejecting the application for approval under section 80G(5) of the Act on the ground of some of the objects being religious. 2. The appellant craves leave to add, amend or alter the grounds of appeal at the time of hearing, if need arise.”
3. Shri Pamil H. Shah, ld. A.R. of the assessee explained that the assessee is a public trust registered under Bombay Public Trust Act, 1950 and the date of registration is 03-12- 2018. The assessee was granted registration u/s. 12AB of the Act on 12-08-2024 for the assessment years 2022-23 to 2026- 27. The assessee trust was also granted provisional registration u/s. 80G(5) of the Act. Thereafter, the assessee had filed application for regular registration u/s. 80G(5) of the Act which was rejected by the ld. CIT(E) vide the impugned order. The CIT(E) had rejected the application of the assessee on the ground that the assessee was not a purely charitable trust that it had violated the main conditions of section 80G(5) of the Act. The ld. counsel of the assessee explained that the ld. CIT(E) had identified six objects of the trust out of total 26 objects and had concluded that those six objects were religious in nature. The ld. counsel explained that the objects that was considered by the ld. CIT(E) as religious in nature, were in fact not religious but were part of charitable activities A.Y. N.A. Page No. 3 Gurukrupa Foundation vs. CIT(E) carried out by the assessee trust. The ld. A.R. submitted that the provisions of section 80G(5B) of the Act allowed the assessee to spend upto 5% of total income on expense of religious nature. He submitted that this condition was not violated by the assessee. Therefore, the ld. CIT(E) was not correct in branding some of the objects of the assessee trust as religious in nature. According to the ld. A.R., the registration could have been denied only if the activities of the assessee trust were wholly or substantially wholly of religious in nature. He submitted that objects and activities of the trust were not substantially wholly of religious nature and, therefore, the rejection of the application was not correct. In this regard, he relied upon the judgement of Hon’ble Gujarat High Court in the case of CIT(E) vs. Rajkot Jilla Gayatri Parivar Trust (2020) 117 taxmann.com 121 (Gujarat). Reliance was also placed on the decision of Co-ordinate Bench of Rajkot in the case of Jay Mataji Religious Trust vs. CIT(E) (2024) 160 taxmann.com 276 as well as on the decision of Co-ordinate Bench of this Tribunal in the case of Shree Sattavis Kadva Patidar Pargati Mandal in dated 08-05-2024.
4. On the other hand, the ld. CIT-DR relied on the order of the ld. CIT(E) rejecting the application of the trust and requested to uphold the same.
A.Y. N.A. Page No. 4 Gurukrupa Foundation vs. CIT(E)
We have considered the rival contentions and perused the materials brought on record and the decisions relied upon by the assessee. As per provisions of section 80G(5) of the Act, the institution or fund had to be established in India for a charitable purpose. The Explanation 3 to section 80G 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 as enshrined in section 80G of the Act, the charitable purpose should not include any purpose of substantial religious nature. The benefit for registration u/s. 80G can be denied only if any purpose of the trust, is wholly or substantially wholly, of religious nature. We have to, therefore, first examine as to whether this condition was fulfilled in this case.
5.1 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 u/s. 80G(5) has been denied to the assessee:
“5) To establish halls, wadis for social and religious programs and to let the same to people of the society. 6) to establish, run and to maintain and to manage dharamshalas at the religious places. 9) to canvass education of Jain Religion to explain the people about basis principles, Aagams etc. of Jain Religion.
A.Y. N.A. Page No. 5 Gurukrupa Foundation vs. CIT(E)
12) To organize education, religious and social camps, to make endeavor for development/growth of Jailshala and that every people and child should take benefit thereof, to organize prizes fair. 17) To association with such other trusts to organize/conduct any program in the interest of members of the trust and to organize such programs. 18) To offer services in all the programs such as Swami Varsalya Sangh, SheshVitran, distribution of pass and religions camp etc and to serve Saints.”
5.2 A copy of the trust deed as well as English translation of trust deed has been brought on record in the paper book filed by the assessee. It is found therefrom that there are 26 objects of the trust out of which the above six objects have been held to be of religious nature by the ld. CIT(E). As per object no. 5, the activity of the trust is to establish “halls”, “wadis” for social and religious programmes and to let out the same to the people of the society. Similarly, as per object no. 6, the trust will establish, run, maintain and manage “dharamshalas” at the religious places. Thus, the basic activity as per these two objects is to establish halls, wadis and dharamshalas which cannot be held as religious in nature. The halls and wadis will be let out for social and religious functions. Merely because some-one is using the halls/wadis for religious programs after paying due rent, the activity of the assessee trust cannot be held as religious in nature. Similarly establishing and managing “dharamsalas” at religious places also cannot be held to be religious activity. As per the societal A.Y. N.A. Page No. 6 Gurukrupa Foundation vs. CIT(E) norms dharamshalas are established mostly at religious places so that the common people can avail the facilities by paying nominal rent. In the objects, it is nowhere mentioned that halls, wadis & dharamshalas will be hired or let out only to the persons of a particular religious community. As per the constitution of the trust any person aged 18 years or above can acquire membership and thus all the facilities being provided by the trust are available to general public. Therefore, the object no. 5 & 6 are not found to be of religious nature.
5.3 The other objects of religious nature flagged by ld. CIT(E) are to convass education of Jain religion about basic principles of Aagams and to organize education, religious and social camps. These objects too cannot be held as wholly or substantially wholly as religious purpose. Merely because camps are organized to educate about basic tenets of Jain religion, it doesn’t become a religious institute. The basic tenets of various religions are part of curriculum of many recognized universities & institutes, and for this reason alone they are not categorized as religious institute. Similarly, the object of association with other trusts to organise any programme in the interest of members also cannot be held as religious in nature. Certain activity of religious nature is indeed involved in object no.-18. However, only one object of A.Y. N.A. Page No. 7 Gurukrupa Foundation vs. CIT(E) substantially religious nature out of total 26 objects, cannot render the overall object of the trust as wholly or substantially wholly of religious nature.
5.4 In view of the above facts, we are of the considered opinion that the ld. CIT(E) was not correct in holding that the object of the trust was religious in nature. When the assessee is given the option as per statute to spend up to 5% of its total income for religious purposes, it is imperative that some of the objects will have tenets of religious nature, otherwise it might not be able to spend that 5% permissible expense for religious purposes. The provision of section 80G(5) can’t be applied to deny the benefit to such funds or institutions which are predominantly engaged in charitable activities but are either inspired to do charity by tenets of religion or spend negligible amounts on purposes other than charitable. The registration to the trust could have been denied, had it spent more than 5% of its total income on religious purposes as stipulated u/s. 80G(5B) of the Act. As no such specific finding has been given by the ld. CIT(E); we deem it necessary to set aside the matter to the file of ld. CIT(E) with a direction to carry out the necessary analysis in this respect and thereafter pass the order in accordance with law. The co-ordinate bench of this Tribunal in the case of Shree Sattavis Kadva Patidar Pargati Mandal (supra) has also taken an identical view in the matter.
A.Y. N.A. Page No. 8 Gurukrupa Foundation vs. CIT(E)
Therefore, the matter is restored to the file of the ld. CIT(E), who should examine the matter and give a categorical finding on the applicability of provision of section 80G(5B) of the Act or otherwise. If the expenditure incurred by the assessee on religious purposes is found to be within the prescribed limit of 5% of its total income, then the approval as sought for u/s 80G(5) of the Act should be allowed to the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.