Facts of the Case

The assessee, Bhaktidham Seva Trust, a public charitable trust, filed an application for approval under Section 80G(5)(iii) of the Income-tax Act. The Commissioner of Income Tax (Exemption), Ahmedabad rejected the application vide order dated 16.12.2024 on the ground that some of the trust’s objects were religious in nature and that the trust had incurred religious expenditure exceeding the permissible limit of 5%. Consequently, the provisional approval earlier granted was also cancelled.

Aggrieved by the rejection, the assessee filed an appeal before the Tribunal.

Issues Involved

Whether the trust could be treated as a religious trust merely because certain objects involved organising satsang or providing accommodation and food to Vaishnavs, whether incidental religious activities disentitle a composite charitable trust from approval under Section 80G, and whether the application could be rejected without proper verification of actual religious expenditure vis-à-vis the statutory limit of 5%.

Petitioner’s Arguments

The assessee submitted that it is a public charitable trust engaged primarily in education, medical aid and relief to the poor. It was contended that organising satsang and providing accommodation and food to Vaishnavs were activities meant for upliftment of human life and were not confined to any particular religion, caste, creed or community.

It was further argued that even if some religious element was involved, it was only incidental to the dominant charitable objects. With regard to religious expenditure, the assessee submitted that the CIT(E) wrongly presumed celebration expenses, Granth Mahotsav printing expenses and decoration expenses as religious expenditure without proper examination, and that actual religious expenditure did not exceed the statutory limit of 5%.

Respondent’s Arguments

The Revenue supported the order of the CIT(E) but fairly stated that it had no objection if the matter was restored to the file of the CIT(E) for verification of religious expenditure incurred by the trust.

Court Order / Findings

The ITAT Ahmedabad observed that organising satsang and providing accommodation and food for Vaishnavs could not be treated as religious objects per se. The Tribunal held that satsang is meant for upliftment of human life and does not propagate any particular religion, and that providing facilities to Vaishnavs was not restricted by caste, creed, community or sex.

The Tribunal further held that even if certain religious activities such as daily worship existed, they were only incidental and subsidiary to the dominant charitable objects of the trust, which included running an educational institution, providing medical aid, organising medical camps and promoting cultural and social development. Therefore, the trust could not be treated as a religious trust merely on this basis.

On the issue of religious expenditure, the Tribunal held that rejection of the application under Section 80G could be justified only if religious expenditure exceeded the statutory limit of 5% prescribed under Section 80G(5B). The Tribunal found that the CIT(E) had treated certain expenses as religious based on presumption without proper verification. In the interest of justice, the Tribunal set aside the order of the CIT(E) and restored the matter for fresh examination of religious expenditure.

Important Clarification

The Tribunal clarified that incidental religious activities do not disentitle a composite charitable trust from approval under Section 80G. Approval can be denied only if religious expenditure exceeds the statutory limit prescribed under Section 80G(5B), which must be determined after proper verification and not on presumptions.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The order of the CIT(E) rejecting approval under Section 80G was set aside, and the matter was remanded to the file of the CIT(E) to verify whether religious expenditure incurred by the assessee exceeds the limit prescribed under Section 80G(5B) and to grant approval accordingly after providing due opportunity of hearing to the assessee.

 

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