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Facts
The assessee trust, Om Seva Dham, applied for approval under Section 80G(5) of the Income-tax Act, 1961. The CIT(E) rejected the application, treating the trust as a religious-cum-charitable entity based on object no. 8 of its trust deed, which mentioned propagating spiritual thoughts, and thus deemed it to be in violation of Section 80G(5).
Held
The Tribunal noted that the CIT(E) rejected the application solely on the ground of religious objects without examining whether the trust's religious expenditure exceeded the 5% limit allowed under Section 80G(5B). Therefore, the matter was remanded back to the CIT(E) for the limited purpose of examining this specific point and to reconsider the application in accordance with law.
Key Issues
Whether the CIT(E) correctly rejected the application for 80G(5) approval by treating the trust as religious-cum-charitable, without examining the religious expenditure limits under Section 80G(5B).
Sections Cited
80G(5), 80G(5B)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, Ahmedabad
O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER:-
Delay Condoned This appeal has been filed by the Assessee against the order dated 30.08.2024 passed by the Commissioner of Income-Tax (Exemption), (“the CIT(E) in short), whereby rejecting the application filed in Form 10AB seeking approval under Section 80G(5) of the Income-tax Act, 1961 (“the Act”).
The assessee has raised the following grounds of appeal:
1.1 The learned CIT(Exemption) erred in law and on facts in rejecting the appellants application for registration under section 80G of the Income Tax Act, 1961 by order dated 30.08.2024. 1.2 The learned CIT(Exemption) erred in cancelling both the provisional registration and regular application under section 80G merely on the basis of interpretation of Object No.8 of the trust deed without examining the actual activities of the trust.
Asst. Year : NA - 2– (a) Not considering that the trust operates an old age home serving approximately 40 individuals from diverse backgrounds (b) Not examining whether any actual religious expenditure exceeded the 5% limit under Section 80G(5B) (c) Not appreciating the distinction between spiritual activities and religious activities 2.1 The learned CIT(Exemption) erred in treating the trust as a composite trust (religious-cum-charitable) without: (a) Considering the explicit statement in trust deed that its objects are without any differentiation based on caste, race, cult, or religion" (b) Examining the actual implementation and nature of activities (c) Verifying the financial statements and expenditure pattern of the trust 2.2 The learned CIT(Exemption) failed to appreciate that Spiritual activities focusing on mental well-being of elderly residents cannot be automatically classified as religious activities 2.3 The learned CIT(Exemption) failed to appreciate that Object No. 8 should be read in conjunction with the trust's predominant charitable activities 2.4 The learned CIT(Exemption) ought to have understand that the trust's activities are not aligned with any specific religious denomination 3.1 Without prejudice to the above, the learned CIT(Exemption) erred in mechanically rejecting the application without conducting a holistic examination of the trust's charitable nature and public benefit.
The assessee Trust filed an application in Form 10AB seeking final approval under Section 80G(5). The CIT(Exemption) rejected the application on the ground that the Trust’s objects are not purely charitable in nature. The CIT(E) relied on object no.8 of the trust deed, thereby treating it as a composite trust i.e Religious-cum-Charitable trust and holding that it violates Section 80G(5) of the Act. The relevant extract of the order is reproduced as under:
the above reply of the applicant dated 30.07.2024 is considered However, the same is not found acceptable To begin with on perusal of the reply of the applicant it is observed that the applicant has erred in reading the show-cause notice dated 24.07 2024 and has tried to emphasized on activities been undertaken which are not religious and has tried to convince that the present application doesn't violates the condition specified in clause (ii) of sub-section (5) of section 80G of the Act where as notice of department is for Asst. Year : NA - 3– violation of the main condition of sub-section (5) of section 80G of the Act and violation of condition under clause(ii) of 80G(5) of the Act. Hence, on perusal of the objects of the applicant as stipulated in the notarized 'trust deed of the Trust is observed that the objectives/objects of the applicant are also religious in nature which put the applicant under the category of composite trust ie. Religious-cum- charitable trust. The object under dispute is re-produced as under (8) To propagate and spread spiritual thoughts and ser semons, to carry out, gef carried out different activities viz. camp, seminar, Katha tours Hence, the applicant has contravened the existing main condition of section 80G(5) of the Act which is a pre-requisite. 8.1 Further, the applicant in the para 5 of the form 10AB has also opted 'Religious' as one of its object. Hence, on plain reading of the above objects, it is evident that the said object is religious in nature and hence, it clearly contravenes main condition of 80G(5) of the which is a pre-requisite. Moreover, as explained in para 5 of this order, ceiling limit of 5 percent religious expenditure cannot grant permission to insert a purely religious or a composite object in any form under objects stipulated in instrument of creation of trust. 8.2 In view of the above, it is quite clear that assessee trust is not established only for charitable purposes. Whereas, the above referred provisions of sec. 80G of the Act makes it amply clear that the applicant/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 Sec 80G(58) of the Act.
Aggrieved by the said order, the assessee is in appeal before the Tribunal.
Before us, the learned counsel for the assessee submitted that the learned CIT(E) has drawn adverse conclusion only on the basis object no.8 of the Trust Deed, whereas the remaining objects are purely charitable in nature. It was further submitted that Section 80G(5B) of the Act specifically provides that where a trust incurs expenditure of a religious nature not exceeding 5% of its total income during the previous year, such trust shall still be deemed to be an institution to which the provisions of Section 80G apply.
We have heard the rival submissions and perused the material available on record. In the present case, we observe that the learned CIT(Exemption) rejected the application solely on the ground that the objects of the Trust are religious in nature. However, the learned CIT(Exemption) has not recorded any specific finding as to whether the expenditure incurred by the assessee towards religious activities exceeds 5% of the total income, as contemplated under Asst. Year : NA - 4– Section 80G(5B) of the Act. As per the statute, a trust is permitted to incur expenditure up to 5% of its total income for religious purposes. Therefore, the relevant aspect to be examined was whether the assessee had exceeded the statutory limit of 5% on religious expenses, as stipulated under the provisions of the Act. Having considered the facts on record, we are of the view that the interest of justice would be served by remanding the matter to the learned CIT(Exemption) for the limited purpose of examining whether the religious expenditure incurred by the assessee-trust exceeds the prescribed limit of 5% and accordingly reconsider the application of the assessee in accordance with law. The assessee is directed to comply with the notices issued by the authorities and shall not seek unnecessary adjournments.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
The order is pronounced in the open Court on 23.02.2026.
Sd/- Sd/- (DR. B.R.R. KUMAR) (SUCHITRA KAMBLE) VICE-PRESIDENT JUDICIAL MEMBER (True Copy) Ahmedabad; Dated 23.02.2026 **mv आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy