80G Approval Granted Despite Minor Religious Objects; CIT(E) Order Reversed

ORDER

Ms. Astha Chandra, Judicial Member. – The appeal filed by the assessee is directed against the order dated 16.11.2024 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him in Form No. 10AB under clause (iii) of first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961 (the “Act”) on 04.05.2024.

2. The brief facts are that on receipt of the assessee’s application filed in Form No. 10AB under clause (iii) of first proviso to section 80G(5) of the Act along with annexures thereto, with a view to verify the genuineness of the activities of the assessee and fulfillment of the conditions laid down in clauses (i) to (v) of section 80G(5) of the Act, the Ld. CIT(E) issued notice on 19.06.2024 through ITBA portal duly served upon the assessee requesting the assessee to upload certain information/clarification contained therein by 04.07.2024. On verification of the details/documents filed by the assessee, the Ld. CIT(E) noticed various discrepancies which were communicated vide issue of another notice dated 07.10.2024 seeking compliance by 14.10.2024. The said discrepancies are reproduced below :

“(i) Year-wise details of donations with full name, address, PAN of donors, date and mode of donation, amount, receipt no. issued. has not been furnished.

(ii) Major source of income seems to be from advertisements for magazines. Said activity appears to be of commercial nature. Please clarify.

(iii) You have furnished a general note on activities. Details like date and place of activity, details of beneficiaries, how they were identified, experts who rendered services, other relevant information has not been furnished.

(iv) No supporting evidence viz bills/invoices of expenditure on each activity, cuttings etc. has been furnished to prove the genuineness of activities.”

3. The assessee furnished its reply to the above notice on 14.10.2024, On verifying the same, the Ld. CIT(E) observed that the objects of the trust and the activities carried out by the assessee trust are religious in nature. Hence applying the provisions of section 80G(5)(ii) and Explanation 3 to section 80G of the Act, the Ld. CIT(E) rejected the application of the assessee and also cancelled the provisional registration granted earlier by observing as under:

“6. The assessee has furnished its compliance on 14/10/2024. On verification of the same, it is seen that the assessee has carried out the activities viz. Datta Jayanti, Guru Purnima utsav, Datta Yaag, Shri Swarmi Samarth Prakat Din etc. Which is purely religious in nature. It is also seen that the evidences produced by the assessee trust i.e. photographs & bills/invoices, etc. are indicated to religious activity. Further, the objects of the assessee has also been religious in nature i.e. giving religious education, to purchase or acquire land for the trust and to construct temples, mangal offices, monasteries, dharamshalas, satsang buildings and others thereon, to celebrating Bhajans, Kirtans, Parayanas, conversations and religious festivals, Regular puja, upasana, abhishek, rituals, deva puja, religious rituals, yatra, palanquin procession etc.

7. Therefore, the provisions of clause (ii) of sub-section (5) of section 80G are attracted in this case which are reproduced below:

8. The provisions of Explanation 3 to section 80G also excludes any purpose of religious nature from the definition of ‘charitable purpose’ for the applicability of section 80G(5) of the Act, which are reproduced below

9. Thus, the provisions of clause (ii) of sub-section (5) of section 80G do not allow any provision in the trust deed / MoA to transfer or to apply any income or assets for purposes other than charitable purposes and provisions of Explanation 3 to section 80G specifically exclude religious purpose from the applicability of section 80G. Whereas the object / objects of the assessee, as discussed above, are religious in nature and thus the instrument under which the assessee is constituted provide for application of income other than charitable purposes.

10. Considering the above facts discussed, conditions laid down under clause (ii) of sub-section (5) of Section 80G of the Income Tax Act, are not fulfilled in this case. Further, the provisions of Explanation 3 to section 80G of the Income Tax Act, 1961 are attracted.

11. In view of the above, the application filed by the assessee is hereby rejected and the provisional approval granted on 07/04/2023 under clause (iv) for first proviso to section 80G(5) of the Income Tax Act, 1961 is hereby cancelled.”

4. Aggrieved, the assessee is in appeal before the Tribunal raising the following grounds of appeal:

“1. That the Hon’ble CIT(E) has erred in passing the rejection and cancellation order without appreciating the fact that the activities of the appellant are charitable in nature.

2. That the Hon’ble CIT(E) has erred in passing the rejection and 0 cancellation order without appreciating the fact that the activities of the appellant are substantially charitable in nature.

3. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”

5. At the outset, the Ld. AR submitted that the assessee trust holds a valid regular registration certificate under section 12A of the Act. Referring to the various discrepancies pointed out by the Ld. CIT(E), he submitted that assessee had responded to all of them in detail, however, the Ld. CIT(E) failed to consider and appreciate the submission of the assessee in correct perspective.

5.1 The Ld. AR submitted that before applying and submitting documents for permanent registration u/s 80G of the Act, the assessee had submitted same set of documents while applying for provisional registration u/s 12A, regular/permanent registration u/s. 12A and provisional registration u/s 80G of the Act. The assessee had categorically submitted that it is engaged in the charitable activity in its respective application(s) for registration. The Ld. CIT(E) granted these registration certificates to the assessee but has denied registration u/s 80G of the Act.

5.2 Regarding the observation of the Ld. CIT(E) with reference to the issue that as per provisions of Explanation 3 to section 80G of the Act, charitable purpose excludes any purpose whole or substantially the whole of which is of a religious nature. The Ld.AR submitted that almost all the objects of the assessee trust are charitable in nature which can be substantiated from the objects mentioned in the trust deed. The Ld. AR submitted that the activities undertaken by the assessee trust are not for the benefit of any particular religion or caste etc. The activities/objects which are not undertaken for the benefit of a particular religion or caste are charitable in nature and terming the same as religious as done by the Ld. CIT(E) is not correct.

5.3 The Ld. AR further submitted that if the trust/institution incurs expenses for religious purposes which is inclusive and is only a small part of the income, and if the substantial work done by the trust is charitable in nature benefitting the public at large then the institution or trust has to be granted exemption u/s 80G of the Act.

5.4 The Ld. AR also submitted that the assessee trust deed does not contain any provision for the transfer or application at any time of the whole or any part of income or assets of the institution or fund for any purpose other than a charitable purpose.

5.5 In support of the above contentions, the Ld. AR relied on the following cases:

i. Channamallikarjuna Trust Committee Gangavathi v. CIT (Exemptions) [IT Appeal No. 1829 (Bang.) of 2018, dated 4-5-2022];

ii. Shiv Mandir Devsttan Panch Committee Sanstan v. CIT  (Nagpur – Trib.) and

iii. Santshreshtha Gajajan Maharaj Sevabhavi Sanstha v. CIT(Exemption) [IT Appeal No. 2004/Pune/2019, dated 06.12.2022].

6. The Ld. DR, on the other hand, strongly supported the order of the Ld. CIT(E).

7. We have heard the rival arguments made by both the sides, order of the Ld. CIT(E), submissions along with the paper book filed by the Ld. AR on behalf of the assessee as well as the judicial precedents relied upon by the Ld. AR. We find that the Ld. CIT(E) has rejected the application for grant of approval u/s 80G of the Act for the reasons mentioned in the preceding paragraphs which are primarily that – (i) the predominant objects of the assessee trust are religious in nature (ii) activities carried out by the trust are purely religious in nature and as per proviso of Explanation 3 to section 80G, charitable purpose excludes any purpose whole or substantially the whole of which is of a religious nature. It is the submission of the Ld. AR that the Ld. CIT(E) has picked up only 3-4 activities viz. Datta Jayanti, Guru Purnima Utsav, Datta Yaag, Shri Swami Samarth Prakat Din etc. and 3-4 objects such as to purchase land and construct temple, to celebrate bhajan, to perform puja etc. and concluded that the assessee trust is carrying out purely religious activities and the objects of the trust are predominantly religious in nature. The Ld. AR has pleaded that this observation of the Ld. CIT(E) is factually incorrect. Had it been the case where more than 50% to 75% objects of the trust are religious in nature then only it could have been said that the objects of the trust are predominantly religious in nature. We find that the objects of the assessee trust as listed out in the trust deed dated 21.04.2010 (pages 2652 of the paper book refers) are as under :

i. Health treatment through spiritual work, e.g., Upasana (worship), Prana Shakti (life force energy) healing methods,

ii. Conducting philosophical research to enlighten society and improve social well-being,

iii. Developing body, mind, and intellect through Yoga and Meditation centers,

iv. Daily worship centers and proper guidance for them, individual and collective worship.

v. Instilling values through ancient Indian culture, efforts for deaddiction, preservation of moral values.

vi. Starting counseling centers for problem resolution, guiding individuals, groups, or institutional members to boost their selfconfidence.

vii. Studying, researching, and imparting knowledge to society about ancient saint literature from Indian tradition.

viii. Establishing and running Gurukul ashram schools and Sanskrit pathshalas for imparting Vedic, religious, and spiritual education.

ix. Running cow shelters and implementing various related projects.

Implementing animal husbandry projects.

x. Running scientific research centers. Conducting research through the scientific coordination of spirituality, yoga, and science.

xi. Running research centers for Indian history and ancient texts.

xii. Running literary publication centers.

xiii. Establishing a university through this institution after fulfilling legal requirements and exchanging various university-level educational and research works.

xiv. Collaborating with various international organizations for human welfare projects.

xv. Implementing library projects.

xvi. Tree plantation, afforestation, cultivation of medicinal plants and other useful herbs.

xvii. Implementing rural development projects.

xviii. Purchasing or acquiring land for the trust and constructing temples, community halls, monasteries, rest houses, satsang bhavans, and other buildings thereon.

xix. Promoting Indian culture and devotion in society through bhajans, kirtans, parayans (recitations), discourses, and religious festivals.

xx. Regular puja, upasana, abhishek, anushthan, devpuja, religious rituals, pilgrimages, palanquin processions, etc.

xxi. Celebrating cultural programs, social, and national festivals in a traditional manner.

8. From the above list, it is seen that the assessee is carrying out charitable activities baring few alleged religious activities pointed out by the Ld. CIT(E) viz. imparting religious education, to purchase land and construct temples, to perform Puja and bhajan etc. Moreover, the activities undertaken by the assessee trust are not for the benefit of any particular religion or caste etc. It can thus be said that the conclusion drawn by the Ld. CIT(E) that the activities undertaken by the assessee are purely religious in nature and the objects of the trust are predominantly religious in nature, in our considered view, is not justifiable.

9. It is also the contention of the Ld. AR that even when the assessee has submitted the application(s) for registration u/s 12A of the Act for permanent and provisional registration and also for the provisional registration u/s 80G of the Act in the respective Forms, the assessee had mentioned that the trust is engaged in the charitable activities and submitted a copy of the trust deed along with details/documents pertaining to the activities carried out by the assessee trust. The Ld. CIT(E) accepted the submissions of the assessee and granted these registration to the assessee considering the activities undertaken by the assessee being charitable in nature. The Ld. CIT(E) has, however, in contradiction in the instant case, denied the grant of approval u/s 80G of the Act. We find some force in this contention of the assessee. The fact on record reveal that the Ld. CIT(E) granted provisional registration u/s 12A of the Act in Form 10AC vide order dated 27.05.2021 to the assessee (pages 58-60 of the paper book refers). The permanent registration u/s 12A of the Act was granted to the assessee in Form 10AD vide order dated 13.09.2023 (pages 71-74 of the paper book refers). The assessee has also been granted provisional registration u/s 80G of the Act by the Ld. CIT(E) in Form 10AC vide order dated 07.04.2023 (pages 80-81 of the paper book refers). The assessee in the respective application(s) for these registrations had mentioned the nature of activities as „charitable’. The said application(s) were duly supported by filing the relevant documents/details such as the registration certificate of the trust, trust deed, audited financial statement etc. and only after taking into consideration the submissions made by the assessee, is made by the assessee, these registrations were granted by the Ld. CIT(E). However, while passing the impugned order, the Ld. CIT(E) has taken a contrary view and rejected the impugned application u/s 80G of the Act holding that the objects and activities of the trust are religious in nature. We find that the Pune Tribunal in the case of Santshreshtha Gajanan Maharaj Sevabhavi Sanstha (supra) under similar set of facts as that of the assessee in the instant case, allowed the appeal of the assessee and directed the Ld. CIT(E) to grant approval u/s 80G of the Act. The relevant findings and observations of the Tribunal are reproduced below :

“5. We have perused case records, heard the rival contentions, analysed the facts and circumstances in this case. The relevant provision of the Act for which the assessee-trust has applied for exemption is sec. 80G(5)(vi) of the Act. Now, for approval as per provision of section 80G(5)(vi) the first and foremost requirement which the institution or fund has to satisfy is “if it is established in India for a charitable purpose”. The conditions contemplated by clauses (i) to (iv) to section 80G(5) are the conditions which the institution was formed must additionally fulfil so as to be entitled to the approval by the Commissioner. In this case the assessee-trust is established in India and is for a charitable purpose, greatest evidence is that it has got registration u/s 12AA of the Act. It is settled legal position that once registration has been granted to a charitable trust u/s 12AA of the Act, the question whether the assessee-trust is for charitable purpose or not itself does not arise. This is so since the ld. CIT Exemption gets satisfied regarding the charitable objects of the trust and genuineness of the activities conducted for the charitable purposes and only then registration u/s 12A is accorded to a particular institution or trust. Once this is there, the question should not arise again for ascertaining the charitable purpose of the trust. The objection that has been raised by the ld. CIT (Exemption) as per para 4.2 of his order that one of the main objects of the donations received by the assessee-trust from Shri Ganapati Devasthan Trust during F.Y. 2015-16 is to construct Gajanan Maharaj Temple. In this regard, the assessee has also submitted to the ld. CIT (Exemption) the details of proposed accumulation or setting apart of amounts regarding construction of temple, gaushala, old age home, school for poor children and upkeep and maintenance of temple, etc. Thereafter at para 4.3 of his order, the ld. CIT (Exemption) holds that as per the funds received as donation during F.Y. 2015- 16 from the said Ganapati Devasthan Trust a substantial amount of fund the assessee intends to use for the purpose of construction of temple of Gajanan Maharaj and also intends to administrate and maintain the said temple which is the work of a pure religious activity. The ld. CIT (Exemption) opined that the object of the assessee-trust does not have any object regarding the construction and maintenance of the temple. In this regard, we would refer to the submissions made by the ld. Counsel for the assessee that as on date, the assessee has not constructed any temple. The assessee only intends to construct the temple and in such situation they would even approach the Charity Commissioner, Pune, for necessary amendments in the object clauses of the trust deed. Therefore, as on date, the assessee-trust has only performed activities of a charitable nature and the department is satisfied about the charitable nature of the assessee-trust because of which the ld. CIT (Exemption) has already granted registration u/s 12AA of the Act to the assessee. Even before us, ld. D.R did not raise any objection regarding noncharitable activities of the assessee-trust nor he could bring any evidence on record to demonstrate that the assessee trust is not doing any charitable activity. Regarding the objection raised by the ld. CIT (Exemption) that the assessee intends to utilise a substantial amount of funds received as donations during F.Y. 2015-16, for construction of temple of Gajanan Maharaj and for its maintenance, we have perused the entire order of the Jt. Charity Commissioner, Pune and therein at para 3 he has assigned an amount of Rs. 3,50,00,000/- out of total donations received by the assessee and this has to be spent for purchase of land, construction of temple, goshala, old age home and school for the poor students. Therefore, it cannot be said that a substantial amount the assessee proposes to spend on construction of the temple since all the aforestated expenses is to be incurred within the said amount. Furthermore, as on date, there has been no construction of the said temple. Therefore, the objection of the department that the assessee-trust intends to spend substantial amount of the said donation received for religious purpose is unsubstantiated and unfounded. The decision of Hon’ble Delhi High Court (supra) relied on by the Id. D.R is substantially different on facts as compared to the present case since therein the trust had mainly used the funds for construction of religious temple and no charitable activity was carried out. However, in the instant case of the assessee, the department has not disputed the charitable activities conducted by the assessee and as per the directions of the Jt. Charity Commissioner, Pune, the construction of the temple, if at all it would be constructed, would involve only part of the total expenditure within the designated amount which has been directed by the Jt. Charity Commissioner Pune being the appropriate authority. The ld. D.R had also referred to the provision of section 80G(5)(ii) along with Explanation 3 and in this regard it is worthwhile to refer to the provisions of section 80G (5B) which is as follows:

6. So therefore, it is a non-obstante clause taking care of section 80G(5)(ii) and the Explanation 3 and stating that the expenditure for a religious nature if it does not exceed five per cent of the total income then the said trust or institution shall be deemed to be an institution to which the provision of section 80G would apply. In this context, the assessee has given an undertaking that whenever the construction of temple would take place and the maintenance fund for the said temple it shall be in accordance with section 80G (5B) of the Act. That, the assessee would even take necessary approval from the Charity Commissioner, Pune, before undertaking such activity. However, in the present context given the facts when the assessee is registered u/s 12AA of the Act and when the provision of section 80G(5)(vi) of the Act has been complied with, we do not see any reason for refusing the assessee the grant of exemption u/s 80G of the Act. The Department has also not brought out a case where they can prove through evidences that the assessee-trust has violated the stipulations contained in sec. 80G(5B) of the Act. In fact, the revenue authorities have not demonstrated anything showing substantial expenditures of the fund received in donation by the assessee for religious purposes and whether it is exceeding the permissible limit of 5%. It has also been mentioned by the ld. CIT (Exemption) that the assessee has not provided head-wise details of various expenditure as per para 4.3 of his order but all these details have been submitted before him and as annexed before us in the paper book. The ld. D.R did not refute these facts. In this scenario it will be also worth mentioning that while exercising the power to reject or accord approval u/s 80G(5) the Commissioner acts as a quasijudicial authority. Therefore, the conclusion arrived at by him is expected to be supported by valid and cogent reasons. It is also expected that he should apply his mind to the facts of each case and give reasons either to grant or refuse recognition/approval. This requirement is very much imperative on the part of the Commissioner particularly having regard to the statutory provision under which he functions. This proposition has been observed and upheld by the Hon”ble Andhra Pradesh High Court in the case of Tirumala Tirupati Devasthanam v. Chief C.I.T. (2001) 251 ITR 849 (AP). In the case of CIT v. Christian Medical College (2015) 274 ITR 17, it was observed and held by the Hoh’ble Punjab & Haryana High Court that in a case where the assessee has been running and maintaining the Christian Medical college, Christian College of Nursing, where medical care and training the professionals were provided by the assessee society to everyone irrespective of their caste, creed, race, religion etc. the assessee was held to be entitled for grant of exemption/approval u/s 80G(5) of the Act. So therefore, if Trust/Institution incurs expenses for religious purposes which is inclusive and is only a small part of the income, and if the substantial work done by the trust is charitable in nature benefitting the public at large then the institution or trust has to be granted exemption u/s 80G of the Act. In the present case of the assessee, the department has not been able to make out a case through facts that the assessee is substantially a religious trust. That on examination of the facts and circumstances we set aside the order of the ld. CIT (Exemption) and direct him to grant exemption/approval u/s 80G of the Act to the assessee-trust. Grounds of appeal are allowed.”

10. Based on the facts and circumstances of the case and the legal position set out above and in the absence of any contrary material brought on record by the Revenue in rebuttal of the contentions raised by the assessee, we are of the view that the Ld. CIT(E) is not justified in law in refusing to grant approval to the assessee trust u/s 80G of the Act. We accordingly set aside the impugned order of the Ld. CIT(E) and direct the Ld. CIT(E) to grant approval to the assessee trust u/s 80G of the Act. The grounds raised by the assessee are accordingly allowed.

11. In the result, the appeal filed by the assessee is allowed.