SHRI NANABHAI BHARVAD SEVA SAMAJ GUJRAT,RAJKOT vs. CIT(EXEMPTION), AHMEDABAD, AHMEDABAD

ITA 888/RJT/2024Status: DisposedITAT Rajkot21 July 2025AY 2024-2521 pages

AI SummaryN/A

Facts

The assessee trust, Shri Nanabhai Bharvad Seva Samaj, sought approval under Section 80G(5)(iii) of the Income-tax Act. The CIT(E) rejected the application, contending that some of the trust's objects, particularly related to community halls and religious activities, were religious in nature. This led the CIT(E) to categorize it as a composite religious-cum-charitable trust, deeming it ineligible for 80G approval which requires a purely charitable trust.

Held

The Tribunal noted the trust's prior registration under Section 12A and provisional 80G approval, and its main activities (dharmshala and bhojanshala) served the general public charitably. Applying Explanation 1 to Section 80G, which states that an institution for the benefit of Scheduled Castes, backward classes, or Scheduled Tribes shall not be deemed to be for the benefit of a religious community, the Tribunal held that the Nanabhai Bharvad Samaj falls under these categories. Therefore, the religious nature of its objects, in this context, should not prevent 80G approval, and the CIT(E) was directed to grant the approval.

Key Issues

Whether a trust established for the benefit of a Scheduled Tribe/backward class can be denied Section 80G(5)(iii) approval if some of its stated objects appear religious, considering Explanation 1 to Section 80G of the Income Tax Act.

Sections Cited

Section 80G(5)(iii), Section 80G(5), Section 80G(5B), Section 80G, Section 2(15), Section 12A, Section 12AB(1)(b), Explanation 1 to Section 80G, Explanation 3 to Section 80G(5)

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

For Appellant: Shri Rajendra Singhal, AR

For Respondent: Shri Sanjay Punglia, CIT DR

Hearing: 02/06/2025Pronounced: 21/07/2025

आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, is directed against the order passed by the Learned Commissioner of Income Tax (Exemption), Ahmedabad [in short, ‘Ld. CIT(E)’] vide order dated 28.09.2024, wherein Ld. CIT(E) rejected the application filed by the assessee in Form No. 10AB for approval under Clause (iii) of First Proviso to Section 80G(5) of the Income-tax Act, 1961(hereinafter referred to as ‘the Act’) holding that assessee has violated existing main condition of sub-section (5) of Section 80G, that is assessee-trust is not a purely charitable trust. Since it has violated the provisions of Clause (ii) of sub-section 5 of Section 80G of the Act and therefore, it was observed by Ld. CIT(E) that assessee is not entitled to approval under Section 80G(5)(iii) of the Act.

The grounds of appeal raised by the assessee are as follows:

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat “1. The order passed u/s. 80G(5) of the Act by the ld. Commissioner of Income- tax (Exemption), Ahmedabad is bad in law and invalid. 2. The ld. CIT (Exemp.) erred on facts as also in law in rejecting application for regular approval u/s. 80G(5) of the Act, in violation of the provisions of Explanation-1, appended below sec. 80G of the Act. 3. The Assessee prays that the order of the ld. CIT (Exemp.) may kindly be set aside and regular approval u/s. 80G(5) may kindly be accorded. 4. The grounds of are without prejudice to one another. 5. Your Honour’s assessee craves leave to add, to amend, alter, vary and/or withdraw any one or more grounds of appeal on/or before hearing of appeal.” 3. Brief facts of the issue in dispute are stated as under. The assessee before us is a trust and filed an application in form No. 10 AB, under clause (iii) of first proviso to sub-section (5) of section 80G of the Act, before the Ld.CIT(E). Therefore, notices were issued by the ld. CIT(E) to the trust, stating that why the approval u/s 80G(5)(iii) should not be denied to the assessee. In a response to the notice of the ld. CIT(E), the assessee has filed submissions dated 20.08.2024 and 21.08.2024. However, ld.CIT(E) issued, further, a show cause notice to the assessee on 21.09.2024, wherein the ld. CIT(E) stated that the objects of the trust at serial no. 1 and 7 are religious in nature and not charitable in nature as per section 80G(5) of the Act. Therefore, there is violation of the Section 80G(5) of the Act. The ld. CIT(E) also asked the assessee to furnish complete details of religious expenditure made towards the objects of Trust in past 3 years.

In response to the show-cause notice of the Ld. CIT(E), the assessee submitted its reply before the Ld. CIT(E) on 23.09.2024. The assessee pleaded before the ld. CIT(E) that trust is maintaining a dharmshala and a bhojanshala in village Dwarka, Gujarat for whole human being. The assessee-trust did not ask for consideration on account of stay and food in the dharmshala and bhojanshala. All the expenditure are being incurred

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat through donations received. The boarding and lodging services are being provided to the whole society, since creation of the trust without discrepancy on cast, religion etc. Therefore, assessee`s objects relate to all religions; not for a particular religious community, whereas, the clause (iii) of section 80G(5) provides that the institute should not be expressly for a particular religious community. The assessee-trust has been considered charitable trust for these objects and had been granted provisional approval u/s. 80G(5) of the Act, vide order dated 28.10.2021. The assessee-trust has been created with total nine objects, having nature of educational, medical, natural disaster relief, held to poor & needy persons, removal of bad customs in society and upliftment of human being. The all activities are charitable without any discrimination. The assessee-trust had never incurred any expenditure towards the objects, which have been alleged to be of religious nature. Thus, assessee`s activities are of charitable nature but not of religious nature. As per the provisions of section 80G(5B) of the Act, which starts with non-obstacle clause, notwithstanding anything contained in; provides that where religious expenditure is not exceeding five percent of total income, the Trust shall not be hit by any other provisions of section 80G(5) of the Act and thereby the trust shall be eligible for approval u/s. 80G(5) of the Act. The objects of trust do not expressly provide for benefit of a particular religious community nor trust had ever incurred any expenditure towards religious objects.

However, ld.CIT(E) rejected the above contention of the assessee and observed that on perusal of the objects of the assessee, as stipulated in the instrument of creation of the Trust, the following objectives of the instrument are religious in nature which put the assessee under the category of composite trust that is, religious-cum-charitable trust. These objects are reproduced as under for the purpose of ready reference:

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat “01) For celebration of educational and religious occasions Shri Nanabhai Bharvad Seva Samaj shall construct, run and maintain Community Halls, Vadi, Schools, Rest Houses, Restaurants, and get Utensils, Mandaps, Samiyanas, necessary things, etc. for the activities relating to own community, and to give on rent. This Institute shall make all works relating to own community. Shall make activities for the Temple of the Gods and Goddesses being worshiped by Nanabhai Bharvad Community. To create union of the whole Nanabhai Bharvad Community and to make work and activities for its development. 07) To establish, run, and maintain Prayer Halls, Meditation Centers, Yoga Centers, Cultural Centers, Gurukul, etc for cultural and spiritual development of the communal people. To promote elements of Indian Culture, make various religious activities, and to arrange Kathas, Saptah, celebration of Religious Festivals, Yagnas, Hom- Havan, Nived, etc. for the same. To make activity for Religious and Spiritual development, and to arrange Satsang, get read the Main Volume of all Religions, arrange Saptah, Mantrochar, to make Devotion, Bhajan, arrange gathering, and celebrate Religions Functions relating to all Religions, invite Saints and Santos, to establish, run, and maintain lodging activities at Religious place for offering Prasad to the people without any bar of Cast and Gender, and to construct, run, and maintain Ashramas, Gaushala, Guest Houses, Dharamshalas, etc.

Hence, ld CIT(E) noticed that above said objects are religious in nature and hence, it clearly contravenes the main condition of 80G(5) of the which is a pre-requisite. Therefore, ld.CIT(E) observed that there is clear violation of clause (ii) of section 80G(5) of the Act, which put a bar on granting approval under section 80G(5) of the Act to the institution or fund set up for the benefit of any particular religious community or caste. The assessee has also not furnished the details of actual religious expenditure to enable ld.CIT(E) to verify the violation of sub-section (5B) of section 80G of the Act. The ld CIT(E) further noted that assessee- trust is not established only for charitable purposes. Whereas, the provisions of section 80G of the Act, makes it amply clear that the assessee has to be established only for charitable purposes and there is no transfer or application of funds for any purposes other than a charitable purpose, subject to concession granted under section 80G(5B) of the Act. Further, the provisions of section 80G(5B) of the Act, is not applicable to any institution/fund established for any purposes other than charitable

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat purpose, that is, religious or charitable cum religious purposes. Similar law has been laid down by the Hon'ble ITAT Agra in the case of Yug Chetna Parmarth Trust, reported in 44 taxmann.com 446. In light of above discussion and having to the provisions of Section 2(15), section 80G(5), section 80G(5B) and Explanation 3 to section 80G(5) of the Act, it is inferred that: (i) 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 aval benefits of Sec. 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 a will jeopardize the interests of donor who have made donations in good faith to the to the assessee- trust. (ii) 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. 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. (iii) 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.

(iv) 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 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. This

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat position has been explained by Hon'ble Supreme Court of India in the case of Director of Secondary Education v. Pushpendra Kumar AIR 1998 SC 2230 wherein the Supreme Court held that a provision in the nature of an exception cannot be so interpreted as to sub-serve the main enactment and thereby nullify, the right conferred by the main enactment. In view of the above, the ld.CIT(E) noted that assessee has violated existing main conditions of sub-section (5) of section 80G, that is, it is not 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 assessee is not entitled to get approval u/s. 80G(5) of the Income Tax Act, therefore the assessee`s application filed in Form 10AB, u/s 80G(5)(iii) was rejected.

Aggrieved by the order of the ld. CIT(E), the assessee is in appeal before us. 8. Shri Rajendra Singhal, Learned Counsel for the assessee, argued that assessee under consideration belongs to Scheduled Tribe/caste, therefore, the said trust cannot be treated for the purpose of any specific community or caste and therefore registration should be granted to the assessee. That is, as per the notification of government of Gujarat, the assessee under consideration is a Scheduled Tribe and therefore, this trust is not made for any specific community and caste hence the registration u/s 80G(5) (iii) of the Act, should be granted to the assessee-trust. The learned Counsel for the assessee submitted before the Bench, the notification of government of Gujarat in English and in Gujarati language and notification of Central Government, which is reproduced below:

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat

Therefore, learned Counsel submitted that “Bharwad, Motabhai Bharwad, Nanabhai Bharwad,” are classified by the government of Gujarat in the list of socially and educationally backward classes, therefore, as per Explanation-1 of section 80G of the Act, the registration should be granted to the assessee-trust under section 80G(5) (iii) of the Act.

10.

On the other hand, Ld. CIT-D.R. for the Revenue submitted that the notification in relation to Scheduled Tribe or Scheduled Caste, (Gujarat

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat State/Central government) should be examined by the ld. CIT(E) and thereafter approval under section 80G(5)(iii) of the Act, may be granted in accordance with law.

11.

We have heard the rival contentions and perused the material available on record. We find that the undisputed facts are that the assessee trust has been created on 20.04.2013 and registered in the office of the Charity Commissioner of Gujarat. The trust has been created for a number of objects including social, cultural, medical, educational, human upliftment through spirituality, animal welfare etc. Only activity of the trust till date is maintaining a dharmshala and a bhojanshala in village Dwarka, Gujarat. The trust did not ask for consideration on account of stay and food in the dharmshala and bhojanshala. All the expenditure are being incurred through donations received. Necessary evidences in respect of the activity were produced and the Ld. CIT(E) had also not disputed the same. We find that after verification of objects and activities, the Ld. CIT(E) has granted regular registration u/s. 12AB(1)(b) of the Act, to the trust, vide URN no. AAJTS5253N23AD01 dated 23.01.2024 from AY 2022-23 to AY 2026-27.Besides, assessee had been granted provisional approval u/s 80G(5) of the Act and also in Form No. 10AC issued on 28.10.2021, in terms of section 80G(5)(iv) of the Act, for the period from 28.10.2021 to AY 2024-25. Thereafter, an application has been made, requesting regular approval u/s 80G(5) of the Act, with supporting documents including trust deed, photos of activities and audit reports & audited financial statements for FY 2020-21 to FY 2023-24. However, the application has been rejected, on the ground that two objects at sr.no. 1 & 7 as per clause 4 of the trust deed describes object of religious nature. We note that the trust has been registered u/s. 12A of the Act, after verification of the objects and activities, therefore, deserve approval under section 80G(5) (iii) of the Act.

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat 12. We note that Ld. CIT(E) has verified assessee`s applications, audit reports as well as the audited financial reports for FY 2020-21 to FY 2023-24, while granting the registration u/s. 12A of the Act, as well as in proceedings u/s. 80G(5) of the Act. No any instance has been pointed out in any of the proceedings, showing carrying any other activity or use of trust fund for any other purpose. The trust deed has been produced before the Ld. CIT(E) and we note that the objects reproduced by the learned CIT(E) in his order are for the purpose of benefit of all sections of society and for general public benefit. As we have noted earlier, that since commencement of activities, only activity of the Trust was running a dharmshater and bhojanshala for whole humanity, which is charitable activity, not a religious activity. The assessee had never carried any religious activity nor used trust fund towards, the spiritual object as per clauses 1&7.

13.

We note that the trust has been created by the Shri Nanabhai Bharwad Samaj of Saurashtra region. The object 1 as pointed out in rejection order says that the trust shall undertake activities for the Temple of the Gods and Goddesses being worshiped by Nanabhai Bharvad Community. To create union of the whole Nanabhai Bharvad Community and to make work and activities for its development. Thus, the beneficiary of trust towards the object is Nanabhal Bharvad samaj. However, we note that this Nanabhai Bharvad samaj has been declared scheduled tribe by the Government of India in Gir area of Saurashtra region as well as the backward cast in rest of Gujarat. The relevant list and description of the Schedule Castes and Backword castes, were submitted before the Bench. This trust has been created by Nanabhai Bharwad Samaj, for Nanabhai Bharwad Samaj, which is a Schedule Tribe in the area of nesses of forests of Alech, Barada and Gir as well as a backward cast in rest of Gujarat State. Hence, even if the objects under consideration are being considered

ITA No.888/RJT/2024/AY.N.A. Shri Nanabhai Bharvad Seva Samaj Gujrat 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 cast, in terms of Explanation-1, appended below section 80G of the Act. The Explanation-1 to section 80G of the Act reads as under:

"Explanation 1. - An institution or fund established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or of women and children shall not be deemed to be an institution or fund expressed to be for the benefit of a religious community or caste within the meaning of clause (iii) of sub-section (5)." 14. Based on these facts and circumstances, we state that objects for benefit of a backward community should not to be considered, as a religious object and therefore, the trust is eligible for approval under section 80G(5) of the Act, hence, we direct the learned CIT(E) to grant the approval under section 80G(5)(iii) of the Act, in accordance with Law.

15.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes in above terms. Order is pronounced in the open court on 21/07/2025 Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot �दनांक/ Date: 21/07/2025 Dkp Outsourcing Sr.P.S

Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Rajkot