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2018 (12) TMI 1887 - AT - Income TaxApplication u/s 80G(5) rejected - charitable activity u/s 2(15) - assessee trust incurred expenditure more than 5% of religious nature - CIT(E) granted registration to the assessee society u/s 12AA - assessee has incurred certain expenses for upkeep and maintenance of the temple premises - HELD THAT - It is not the case of the Revenue that the assessee society is governed by section 80G(5)(ii) and has in its instrument/object any provision for the transfer or application of the whole or any part of the income or asset for any purpose other than a charitable purpose. It is also not the case of the Revenue that it is for the benefit of any particular religious community or caste and any of its objects include any object the whole or substantially the whole of which is religious in nature. In view of the same, the provisions of section 80G(5B) cannot be invoked in the instant case and the order of the ld CIT(E) deserve to be set-aside on this ground itself. In terms of the nature of the Mandir Pooja expenses, it is noted that the said expenditure has been incurred in respect of an 100 years old mandir situated at village Jogalsar where the pooja is performed regularly by the locals at their expenses however, certain expenses in terms of upkeep and maintenance of the temple premises, distribution of prasad, etc is contributed by the assessee society. It has been stated that the contributions have been made to keep alive the interest of the locals in the said old heritage temple which is ancillary to assessee society s main object to preserve and promote such heritage temple buildings. The temple is visited by all locals irrespective of their religion, caste, creed or gender and the temple premises is also used for various social and festival gatherings. The line of distinction between religious and charitable purposes is very thin and no water tight compartment between the two activities can be very established. In the facts of the present case, we donot believe that where the assessee has incurred certain expenses for upkeep and maintenance of the temple premises and distribution of prasad to public at large, it would be an activity related to a particular religion or community and the expenses so incurred would be in nature of religious expenses. In case of Umaid Charitable Trust 2008 (5) TMI 232 - RAJASTHAN HIGH COURT has held that unless objective of the assessee society is for spending its income for a particular religion and it is so found in the trust deed, the Revenue cannot reject the application seeking registration under section 80G merely because the assessee has incurred certain expenses for upkeep and maintenance of the temple premises and distribution of prasad to public at large We hereby direct the ld CIT(E) to grant the necessary registration u/s 80G to the assessee society. - Decided in favour of assesee.
Issues Involved:
1. Denial of approval under section 80G of the Income Tax Act. 2. Interpretation and application of section 80G(5B) of the Income Tax Act. 3. Nature of expenses incurred by the assessee society and their classification as religious or charitable. Detailed Analysis: 1. Denial of Approval under Section 80G of the Income Tax Act: The assessee society's application for approval under section 80G was denied by the CIT(E), Jaipur, on the grounds that the society incurred expenses of a religious nature exceeding 5% of its total income, thus not qualifying for approval under section 80G(5B). The CIT(E) found that the society spent ?17,230 on "Mandir Pooja Expenses" in the financial year 2014-15, which was 5.73% of the total receipts of ?3,00,627. 2. Interpretation and Application of Section 80G(5B) of the Income Tax Act: Section 80G(5B) states that an institution or fund which incurs expenditure of a religious nature not exceeding 5% of its total income in any previous year shall be deemed eligible for approval under section 80G. The CIT(E) interpreted this to mean that if the expenses exceed 5%, the institution cannot be granted approval. The assessee argued that the term "total income" should include accumulated income, which would reduce the percentage of religious expenses below 5%. 3. Nature of Expenses Incurred by the Assessee Society: The assessee contended that the "Mandir Pooja Expenses" were not purely religious but were for the preservation and promotion of a historical temple building, which serves as a common place for the village community irrespective of caste, creed, or gender. The society also used the temple premises for social activities like training local women and maintaining cleanliness under the "Swach Bharat Mission." Judgment Analysis: Denial of Approval under Section 80G: The Tribunal found that the CIT(E) did not record any adverse findings regarding the charitable nature of the society's objects or activities. The society was registered under section 12AA, indicating its charitable status. The Tribunal noted that the CIT(E) denied approval solely based on one financial year's expenses exceeding 5% of total income. Interpretation of Section 80G(5B): The Tribunal clarified that section 80G(5B) is an enabling provision meant to grant benefits to institutions that are predominantly charitable but incur minimal religious expenses. The Tribunal emphasized that the provision should be read subservient to section 80G(5)(ii) and Explanation 3, which focus on the charitable nature of the institution's objectives. Since the assessee's objectives did not include any provision for religious purposes, section 80G(5B) should not be applied to deny approval. Nature of Expenses: The Tribunal agreed with the assessee that the expenses were for the upkeep and maintenance of a historical temple, which serves the community at large and not any particular religious group. The Tribunal cited various judgments, including those from the Rajasthan High Court and ITAT Nagpur, supporting the view that expenses for maintaining a temple with historical and community significance are charitable in nature. Conclusion: The Tribunal directed the CIT(E) to grant the necessary registration under section 80G to the assessee society, emphasizing that the expenses incurred were for charitable purposes and the provisions of section 80G(5B) were misinterpreted by the CIT(E). The appeal of the assessee was allowed. Order: The appeal of the assessee is allowed, and the CIT(E) is directed to grant the necessary registration under section 80G of the Income Tax Act.
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