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Facts
The assessee, Shree Virraj Prabhu Parivar Foundation, filed an application for approval under section 80G(5) of the Income-tax Act. The CIT(E) rejected the application, stating that some objects of the trust were religious in nature, despite the assessee arguing that no funds were spent on religious activities and providing proof of charitable activities. The CIT(E) relied on case laws holding that if any object is religious, the institution falls outside the scope of 80G.
Held
The Tribunal held that the CIT(E) erred in rejecting the application solely based on the inclusion of the word "religion" in the trust's objects without considering the overall charitable nature and actual activities. The Tribunal also noted that the CIT(E) had not examined the details of expenditures, including potential religious expenditures, and that the objects of the trust should be viewed as a whole.
Key Issues
Whether the inclusion of the word 'religion' in the trust deed's objects, without actual expenditure on religious activities, disqualifies the trust from approval under Section 80G(5) of the Income Tax Act. Whether the CIT(E) properly considered the overall charitable purpose and actual activities of the trust before rejecting the application.
Sections Cited
80G(5), 80G(5B), 10AB, 10AC, 10AD, 12AB, 8(2)(a)(iv), 80G(5)(ii)
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Before: SHRI PAWAN SINGH & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R PER BIJAYANANDA PRUSETH: This appeal by assessee emanates from the order dated 20.03.2024, passed by the learned Commissioner of Income-tax (Exemption), Ahmedabad [in short, ‘CIT(E)’], wherein the CIT(E) rejected the application filed in Form No.10AB for approval u/s 80G(5) of the Income-tax Act (in short, ‘the Act’). 2. The grounds of appeal
1. raised by assessee are as under: “1. The CIT(Exemption), Ahmedabad has erred in rejecting the appellant’s application filed for approval under clause (iii) of first proviso to section 80G(5) of the Income Tax Act, 1961 solely on the basis of one word “religion” incorporated in object clause of the section 8 company even though no single penny paisa has been spent on activities of the trust which is religious in nature. Sir, mere inclusion of word “religion” in the object clause does not ipso facto make the trust/institution wholly and/or substantially religious in nature.
2. The CIT(Exemption), Ahmedabad has erred in mis-interpreting the spirit and intent of clause (iii) of First Proviso to Section 80g(5) while applying it to present Shree Virraj Prabhu Parivar Foundation case by dismissing the application filed vide clause (iii) of First Proviso to Section 80G(5) without considering the fact that inclusion of one word “religion” in object clause does not mean object of the section 8 company is religious in nature. The trust has included the word religion in the object so that it may incur expenses to the extent of 5% of total income (if required in exceptional circumstances) as per Section 80G(5B) of the Act which is allowed by the Act.
3. The CIT(Exemption), Ahmedabad has erred in his approach by considering object of the institution wholly and substantially religious in nature on the basis of one word “religion” in object clause of the trust and ignoring the numerous objects i.e., related to education, medical relief, relief of poor, yoga, preservation of environment etc., which is wholly and substantially of charitable purpose only.
4. The CIT(Exemption), Ahmedabad has erred by rejecting application without considering the submission in which it is clearly stated that the applicant has not given single donation towards any religious activity. Further, also the applicant has donation receipt as a proof of activity which is purely of charitable purpose only and not of religious nature.
5. The appellant seeks a fair and impartial evaluation of its application for approval under clause (iii) of first proviso to section 80G(5), taking into consideration the genuine intentions and good efforts of the appellant. The rejection of the application by the CIT(Exemption), Ahmedabad without due consideration, violates the principles of natural justice and causes hardship on the part of the appellant.
6. On the facts and merits of the case appellant craves for admission of additional evidences in the interest of natural justice and equity.”
Brief facts of the case are that the assessee filed application in Form No.10AB, u/s 80G(5) of the Act on 26.09.2023. The assessee had been granted order for provisional approval in Form No.10AC issued on 28.02.2023 under clause (iv) of first proviso to sub-section (5) of section 80G for the period commencing from 28.02.2023 to AY.2025-26. On perusal of trust deed / instrument of creation of trust furnished by the assessee-trust, the CIT(E) observed that the some of the objects of the trust are religious in nature. The CIT(E) issued a show cause notice dated 12.03.2024 to the assessee-trust and the same is reproduced at page 6 to 7 of the order. In response to the notice, the 2 Shree Virraj Prabhu Parivar Foundation assessee-trust filed its reply, which is at pages 8 to 9 of the order. The CIT(E) observed that provisions of section 80G(5) of the Act stipulates that the said section applies to donations to any institutions or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils other conditions mentioned therein. The provisions of section 80G(5)(ii) of the Act stipulates that the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provisions for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose and the section 80G(5)(ii) of the Act stipulates that the institution or fund is not expressed to be for the benefit of any particulars religious community or caste. Expenditure not exceeding 5% of total income being religious nature, is not fatal as per section 80G(5) of the Act. The CIT(E) relied on the decision of Hon’ble Supreme Court in case of Upper Ganges Sugar Mills Ltd. vs. CIT, 93 Taxman 645 (SC) where it was held that if any one of these objects is wholly, or substantially wholly, of a religious character, the institution or fund falls outside the scope of section 80G and a donation to it does not secure the advantage of the deduction than it gives. The CIT(E) further observed that the assessee-trust has to be established only for charitable purposes and there should be no transfer or application of funds for any purposes, other than a charitable purpose, subject to concession granted to the extent of 5% of total income as per section 80G(5B) of the Act. Similarly, he relied Shree Virraj Prabhu Parivar Foundation on decision of ITAT, Agra in case of Yug Chetna Parmarth Trust, 44 taxmann.com 446 and ITAT, Pune in case of Shri Kalaram Sansthan vs. CIT(E), dated 08.06.2023. The CIT(E) concluded that the assessee- trust had violated the provisions of the Act and the assessee-trust was not entitled to get approval u/s 80G(5) of the Act. The application filed by assessee was accordingly rejected and provisional approval was also cancelled.
Aggrieved by the order of CIT(E), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted copy of Memorandum of Association (MoA), copy of application filed in Form 10AB for final registration u/s 80G(5), copy of form 10AC granting provisional registration u/s 80G, copy of order u/s 10AD rejecting 80G application, copies of donation receipts for donation towards charitable objects, copy of audit report of FY.2022-23 and 2024-25, copy of certificate u/s 12AB and also relied various case laws of ITAT. The ld. AR of the assessee submitted that the appellant is a charitable institution incorporated on 03.01.2023 vide Registration No. U85300GJ2023NPL138001 with the object to carry out the activities relating to education, medical relief, social welfare, animal care, animal welfare, relief of poor, preservation of environment, yoga, poverty alleviation and various other charitable activities without any distinction as to caste, creed and religion. However, the CIT(E) deemed some of the objects of the appellant as religious in nature and rejected the application u/s 80G(5) of the Act. The ld. AR of the assessee also submitted that the CIT(E) rejected the appellant’s application Shree Virraj Prabhu Parivar Foundation filed for approval under clause (iii) of first proviso of section 80G(5) of the Act solely on the basis of one word “religion” incorporated in object clause of the section 8 of the company, even though no single rupees had been spent on activities of the trust which is religious in nature. He relied upon the following decisions of ITAT in cases of: (i) K. V. C Trust vs. DIT(E), 11 taxmann.com 91 (Chennai), (ii) Sadhumargi Shantkranti Jain vs. CIT(E), 159 taxmann.com 636 (Raipur), (iii) Fernandez Hospital Educational & Research Foundation vs. DIT(E), 18 taxmann.com 339 (Hyderabad), (iv) Shirmoni Gurdwara Parbandhak Committee vs. CIT, 129 taxmann.com 214 (Amritsar), (v) NSHM Academy vs. CIT, 17 taxmann.com 2 (Kolkata), (vi) CIT-II vs. Sri Radha Raman Niwas Trust, 42 taxmann.com 77 (Allahabad), (vii) M/s Sri Channa Mallikarjuna Trust Committee Gangavathi vs. CIT(E), dated 04.05.2022 (Banglore), (viii) Maharaja Aggarsain Charitable Trust vs. CIT(E), 87 taxmann.com 153 (Chandigarh), (ix) Sri Guru Nanak Devji Religious & Charitable Trust vs. CIT(E), ITA No.384/CTK/2018 (Cuttack), (x) Mahajan Awas Foundation vs. CIT(E), ITA No.1102/Ahd/2024, dated 10.09.2024, (xi) Aryagram Virasat Foundation vs. CIT(E), ITA No.1103/Ahd/2024, dated 25.10.2024, (xii) Kuka Martyrs Memorial Trust vs. CIT(E), 35 taxman.com 516 (Chandigarh), (xiii) Gayatri Parivar Trust vs. CIT(E), 141 taxmann.com 520 (Chandigarh).
On the other hand, learned Commissioner of Income-tax – Departmental Representative (ld. CIT-DR) for the revenue relied on the order of CIT(E). He submitted that huge amount of money has been transferred to Prem Mandir Shree Virraj Prabhu Parivar Foundation Sansthan, which is at page 136 of the paper book, being bank statement of the assessee. He also submitted that the assessee has not explained as to from where the fixed deposit of Rs.54,00,629/- came from. These are relevant facts which would determine if the appellant satisfies conditions for approval u/s 80G(5) of the Act.
We have heard both the parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by the parties. It is submission of the ld. AR that no expenditure incurred by the appellant was of religious nature and the limit of 5% in section 80G(5B) of the Act are duly complied by the assessee. On the other hand, the ld. CIT-DR has drawn attention to the bank statement given by the assessee at pages 133 to 138 of the paper book and argued that Rs.5,00,000/- was transferred to Prem Mandir Sansthan, which prima facie appears a religious expenditure. He also submitted that Rs.2,00,000/- was transferred to Shri Laxmi Narayan, which also appears to be an expenditure of religious nature. Both sides, however, fairly agreed that these issues have not been examined by the CIT(E). We find from the order of CIT(E) that he has not examined the details of the expenditure incurred by the assessee as evident from the bank account maintained by him. We are of the view that the objects of the trust are to be seen as a whole and a single object should not be picked up for deciding as to whether the trust was established for charitable purposes or was of religious in nature. Further, concession granted to the extent of 5% of total income as per section 80G(5B) of the Act is also to be verified. The