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Facts
The assessee, Ahir Samaj Trust, filed an application for approval under section 80G(5)(iii) of the Income Tax Act, 1961. The Ld. CIT(E) denied the approval, holding that the trust was not purely charitable as it had objects of a religious nature and had violated the conditions of section 80G(5) of the Act.
Held
The Tribunal held that the trust's objects for the benefit of a backward community should not be considered religious objects. The trust is eligible for approval under section 80G(5) of the Act.
Key Issues
Whether the trust's objects, including those for the benefit of the Ahir community (considered a backward class/schedule caste), are considered religious objects that disqualify it from 80G approval, despite the trust not incurring expenditure on religious activities.
Sections Cited
80G(5)(ii), 80G(5)(iii), 80G(5B), Explanation 3 to Sec. 80G, Explanation -1 of Sub-section (5) of Section 80G
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
Assessment Year: N.A. बनाम Ahir Samaj Trust Principal Commissioner of Income- AT Bhoddar, Dist. tax (Exemption), Ahmedabad /Vs. Porbandar-360 570 �थायी लेखा सं./जीआइआरसं./PAN/GIR No.: AAITA 1524 D (अपीलाथ�/Appellant) (��यथ�/Respondent) िनधा�रती क� ओर से/Assessee by. : Shri Mehul Ranpura, ld.AR राज�व क� ओर से/Revenue by : Shri Abhimanyu Singh Yadav, Sr-DR सुनवाई क� तारीख /Date of Hearing : 09/07/2025 घोषणा क� तारीख /Date of Pronouncement : 23/07/2025 आदेश / O R D E R Per, Dr. Arjun Lal Saini, Accountant Member: Captioned appeal filed by the assessee, is directed against the order passed by the Ld. Commissioner of Income Tax (Exemption), Ahmedabad, [in short “Ld.CIT(E)”] wherein Ld. CIT(E) denied the approval of the assessee u/s. 80G(5)(ii) of the Act, and rejected the assessee’s application in Form 10AB for approval u/s. 80G(5)(iii) of the Act, holding that assessee trust has violated the main condition of sub-section 5 of Section 80G of the Act, as the assessee- trust is not a purely charitable trust.
The Ground of appeal raised by the assessee are as follows: 1. The grounds of appeal mentioned hereunder are without prejudice to one another.
2 2. The order passed by the learned Commissioner of Income-tax (Exemption), Ahmedabad [hereinafter referred to as the "CIT(E)"] u/s. 80G(5)(iii) of the Income Tax Act, 1961 is bad in law and on facts. 3 The learned CIT(E) erred on facts as also in law rejecting the application for registration u/s.80G(5)(iii) of the Act on the alleged ground that the appellant has violated main condition of sub-section (5) of the section 80G i.e. the object of trust is not a purely charitable trust and hence not entitled to get approval u/s.80G(5) of the Act. The learned CIT(E) may kindly be directed to grant registration u/s. 80G(5)(iii) of the Act. 4.Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.
3. The relevant material facts, as culled out from the material on record, are as follows. The assessee before as is a trust and filed an application for approval under clause (iii) of first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961, in Form no. 10AB electronically. The notices were issued to the assessee, by Ld. CIT(E), to explain the objects of the trust. Since, the assessee has filed the present application in Form No.10AB, under clause (iii) of first proviso to sub-section (5) of section 80G of the Act, therefore, Ld. CIT(E) having gone through the assessee’s application u/s. 80(5)(iii) of the Act analysed the legal provisions of section 80G(5)(iii) of the Act and sub-section 5B of section 80G of the Act and noticed that sub-section (5B) of sec. 80G of income Tax Act, 1961, provides that the institution or fund may incur expenditure, which is of a religious nature, for an amount not exceeding five percent of its total income. The provisions contained in Sub-section (5B) of sec. 80G of Income Tax Act, 1961 are applicable notwithstanding the provisions of clause (ii) of Section 80G(5) of Income Tax Act, 1961 as well as Explanation 3 to sec. 80G of Income Tax Act, 1961. This position of law implies that subject to the limit as prescribed in Sub- section (5B) of sec. 80G of Income Tax Act, 1961, an institution or fund may incur expenditure which is of a religious nature and still be eligible for benefits of Section 80G of Income Tax Act, 1961. In other words, even if an institution or fund transfers or applies at any time its whole or any part of income or assets for 3 a religious nature expenditure, which is not for charitable purpose as provided for in Explanation 3 to sec. 80G of Income Tax Act, 1961, as well as being in violation of provisions of clause (ii) of Section 80G of Income Tax Act, 1961, still such institution or fund can avail of benefits of Section 80G of Income Tax Act, 1961 provided that such expenditure, which is of a religious nature, does not exceed five percent of its total income. However, provisions of Sub-section (5B) of sec. 80G of Income Tax Act, 1961 does not mandate religious objects or allows religious objects to institutions/funds desirous of approval or approved u/s.80G(5) of the Act as this would result in violation of both general and specific provisions, contained in Income Tax Act, 1981, which unambiguously and explicitly exclude and forbids religious objects/activities from the definition of charitable purpose. It only provides for a situation wherein even a trust that is having charitable objects only can Incur some expenditure which is of a religious nature: For example, a trust running a School may incur expenditure on a "havan" / "Saraswati puja" etc subject to the extent of expenditure provided for under Sub- section (5B) of sec. 80G of Income Tax Act, 1961. However, such allowance of incurring of expenditure which is of a religious nature by such Trust, subject to the extent of expenditure provided for under Sub-section (5B) of sec. 80G of Income Tax Act 1961, will not allow the said trust to have any of its objects which are of religious nature, wholly or substantially. Considering the above legal position, the ld CIT(E ) issued a show cause notice to the assessee stating that why the approval under section 80G(5)(iii) should not be granted to the assessee.
In response to the notice of the Ld. CIT(E), the assessee has filed written submission before the Ld. CIT(E), along with the documentary evidences. The Ld. CIT(E) has again issued a show- notice to the assessee, on 12-12-2024. In response to that notice, the assessee submitted its reply on 12-12-2024. The assessee stated that its majority of the objects are charitable in nature and assessee 4 has not spent any amount on religious activities, therefore, just to have few objects of religious nature, does not mean that the trust is engaged wholly and substantially for religious activities. The assessee has not even incurred expenditure up to 5% of its total income as mentioned in sub-section (5B) of section 80G of the Act, on religious activities.
However, learned CIT(E), rejected the above contention of the assessee and observed that section 80G(5) of the Act applies to the donations to any institution or fund only if it is established in India for a Charitable purpose only. Thus, the purpose or object necessarily have to be only charitable, not religious, for an institution or fund to avail benefits of section 80G(5) of the Act. Even if one object is for religious purpose, approval u/s 80G of the Act cannot be granted as there is no way to stop assessee from incurring expenditure on that particular object in excess of 5% since occasion to renew such an approval will arise only after 5 years and any subsequent withdrawal of approval will jeopardize the interests of donor who have made donations in good faith to the assessee -trust. The ld.CIT(E ) also noticed that sub-section (5B) of Section 80G of the Act merely further clarifies and qualifies the conditions laid down under clause (ii) of Section 80G(5) of the Act in terms of extent of expenditure of religions nature which could be incurred by trust while carrying out its charitable activities. The Sub-section (5B) of Section 80G of the Act does not mandate religious object or allows religious objects to institutions/funds desirous of approval or approved u/s.80G(5) of the Act. Thus, for the purpose of section 80G(5) of Income Tax Act, 1961, the objects can be only of charitable nature and even not a single object can be religious in nature, as unambiguously and explicitly provided for under Explanation 3 to Section 80G of the Act. It is incorrect to interpret that Sub- section (5B) of Section 80G of the Act overrides provisions of Section 80G(5) of the Act. Provisions of Sub-section (5B) of Section 80G of the Act only clarifies 5 and qualifies the conditionality provided for by clause(ii) of section 80G(5) of the Act and has to do nothing with the object of institutions/funds desirous of approval or approved u/s.80G(5) of the Act. Such institutions/funds are mandatorily required by section 80G(5) and Explanation 3 to Section 80G of the Act to have only charitable objects. Therefore, ld.CIT(E) held that the assessee has violated existing main condition of sub-section (5) of section 80G, that is, it is not a purely charitable trust. Also it has violated the provisions of clause (ii) of sub-section (5) of section 80G of the Income Tax Act, 1961 and hence the assessee is not entitled to get approval u/s 80G(5) of the Income Tax Act, 1961 therefore the application filed in Form 10AB, for approval under clause (iii) of first proviso to section 80G(5) of the Act was rejected by ld CIT(E) and provisional approval was also cancelled by ld.CIT(E).
Aggrieved by the order of Ld. CIT(E), the assessee is in appeal before us.
Shri Mehul Ranpura, Learned Counsel for the assessee, argued that the primary and most of the objects of the assessee -trust are for general public benefit and this trust is open for all caste and community. This trust has not created for the benefit of particular caste and community, (Ahir Samaj Community), as pointed out by the Ld. CIT(E). Besides, this trust has not incurred any expenditure on religious activity.
The Ld. Counsel also submitted that assessee’s trust falls in the Explanation -1 of Sub-section (5) of Section 80G of the Act, and assessee-trust has defined, as a schedule caste, by the notification of the government. That is, any trust which is established for the benefit of schedule caste, backward class, schedule tribes or women and children shall not be deemed to be an institution for the benefit of a religious community or caste within the meaning of clause 6 (iii) of sub-section (5) of Section 80G of the Act. Therefore, Ahir caste, falls in the category of backward class/ schedule cast, as per Explanation-1 of Sub- section (5) of Section 80G of the Act and hence the assessee- trust deserve registration. The relevant government notification is placed before the Bench, which is reproduced below:
On the other hand, Ld. CIT-DR for the Revenue submitted that this trust, under consideration, has been created for a particular community and caste (Ahir caste) therefore, no approval u/s. 80G(5) should be granted to the assessee -trust and for that Ld. CIT-DR for the Revenue relied on the finding of the Ld. CIT(E).
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(E) and other materials brought on record.We note that no any instance has been pointed out in any of the proceedings, showing carrying any religious activity, by ld.CIT(E), or use of trust fund for any other purpose, except charitable purpose. The trust deed has been produced before the Ld. CIT(E) and we note that the objects reproduced by the ld. CIT(E) in his order are for the purpose of benefit of all sections of society and for general public benefit. The assessee had never carried any religious activity nor used trust fund towards, the religious purpose. Moreover, no any expenses have been incurred by the assessee- trust for religious activities.
We note that Ahir Samaj/ Community has been declared scheduled tribe by the Government of India. The Notification issued by the Government states that Ahri Samaj falls in the definition of schedule cast and therefore Ahir community is not for the benefit of a particular caste and community. The relevant list, description and notification of the Schedule Castes and Backword castes, were submitted before the Bench, which is reproduced above. Hence, even if the objects under consideration are being considered as religious, the provisions of section 80G(5) (iii) of the Act, shall not be applicable to assessee- trust, as established for the Schedule -tribe and backward caste, in terms of Explanation- 1, appended below section 80G of the Act. The Explanation-1 to section 80G of the Act reads as under: