2011 (9) TMI 278 - AT - Income Tax

Rejection of grant of registration u/s 80G - charitable activity or religious activity - Held that - The assessee society has incurred the main expenditures on T.V. telecast and salaries of preachers. It is also not clear from the details furnished by the assessee that what type of education was provided by the assessee societies, though he has claimed certain salaries to teachers and hostel staff salaries. - Whereas, the preachers are generally engaged to spread the teachings of Lord Jesus Christ and therefore cannot be considered to be an expenditure incurred for charitable activities. If the salaries to preachers is taken out from the category of expenditure for charitable activities, the expenditure on religious activities would go more than 5% of the total income. Though the assessee has claimed various expenditures under the head charitable activities, but no evidence are placed to establish the same. - since the expenditure on religious activities is more than 5% of the total income of the assessee it is hit by sub-section 5(ii) read with sub-section 5B of section 80G of the Act. - Decided against the assessee.

Summary

Issues Involved:
1. Validity of the rejection of the grant of registration under section 80G of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Rejection of the Grant of Registration under Section 80G of the Income-tax Act:

Background and Facts:
The assessee society was initially recognized under section 80G of the Income-tax Act up to 31.3.2007. After a gap of more than two years, the assessee moved a fresh application for a certificate of exemption under section 80G. The society's objects included both religious and charitable activities, such as evangelizing, publishing Christian literature, and providing vocational training and relief to the poor and destitute. However, the CIT observed that the society's activities were predominantly religious rather than charitable.

CIT's Observations:
The CIT examined the accounts of the society and found that the activities were substantially of a religious nature. The CIT noted that the expenditures towards religious activities were higher compared to charitable activities. The CIT concluded that the assessee's case was hit by Explanation (3) to section 80G, which states that "charitable purpose does not include any purpose the whole or substantially the whole of which is of religious nature."

Assessee's Arguments:
The assessee argued that the CIT did not properly appreciate the facts and the details of expenditures. It was contended that salaries paid to staff should be considered under charitable activities, not religious activities. The assessee also highlighted that it had previously been granted registration under section 80G, indicating engagement in charitable activities. The assessee claimed that if salaries to preachers were considered under charitable activities, the expenditure on religious activities would be less than 5% of the total income.

Revenue's Arguments:
The Ld. D.R. argued that the assessee had not undertaken activities related to the new objects of establishing and running educational institutions. It was pointed out that substantial expenditures were incurred towards salaries to preachers, which were for spreading the teachings of Lord Jesus Christ and thus were religious in nature. The D.R. also noted that most capital expenditures were for church buildings and furniture, further indicating a religious focus.

Tribunal's Analysis:
The Tribunal gave thoughtful consideration to the rival submissions and carefully perused the CIT's order. It found that the society's main expenditures were on TV telecast and salaries of preachers, which were religious activities. The Tribunal noted that the assessee failed to provide clear evidence of charitable activities. It concluded that if salaries to preachers were excluded from charitable activities, the expenditure on religious activities exceeded 5% of the total income, disqualifying the society under section 80G(5)(ii) read with section 80G(5B).

CIT's Detailed Discussion:
The CIT made a detailed discussion of expenditures, highlighting that the society's capital expenditures towards church-related activities were substantial. The CIT referenced judicial pronouncements, noting that even if one of the objects of a public trust is religious, it disqualifies for exemption under section 80G. The CIT also pointed out that the society expressed objects to serve the minority Christian community, disqualifying it under section 80G(5)(ii).

Conclusion:
The Tribunal found no infirmity in the CIT's order and confirmed it. The appeal of the assessee was dismissed.

Final Judgment:
The appeal of the assessee is dismissed.