2023 (6) TMI 435 - AT - Income Tax

Denial of granting of exemption u/s. 80G - substantial objects of the trust are to perform religious practices and activities - Assessee trust is registered u/sec. 12AA - HELD THAT - The Hon'ble Supreme Court in the case of CIT(E) v. Sant Girdhar Anand Parmhans Sant Ashram 2023 (3) TMI 566 - SC ORDER has held that while there is no dispute that the assessee asserts that it continues to hold exemption u/sec.12AA, nevertheless, for the benefit u/s.80G(5B), the requirements of that provisions have to be satisfied separately. Therefore, the proposition of law emerges is that even if a trust is having registration u/sec. 12AA still, in order to get exemption u/sec. 80G, the conditions in this provision needs to be complied with also along with the conditions specified in sec. 80G(5B) of the Act separately. In the referred judgment, the details of percentage of expenses incurred for religious purpose vis-a-vis the total income were not appearing in the order of the ld. CIT(E) nor in the order of the Tribunal and, therefore, the matter was remanded back for fresh adjudication, but in the instant case of the assessee before us, in the order of the ld.CIT(E) itself specifically mentioned that for all the three F.Ys.2019-20 to 2021-22, assessee had spent more than 5% for religious purpose from its total income which details where voluntarily submitted by the assessee trust itself. As, there is a clear violation of sec. 80G(5B) no infirmity with the findings of the ld.CIT(E), which is hereby upheld. Appeal of the assessee stands dismissed.

Summary

Issues Involved:
The denial of granting exemption u/s. 80G of the Act based on the violation of provisions of sec. 80G(5B) due to excessive religious expenses incurred by the assessee trust.

Summary:

Issue 1: Denial of Exemption u/s. 80G
The appeal was filed by the assessee challenging the denial of exemption u/s. 80G of the Act by the Commissioner of Income Tax (Exemption), Pune. The denial was based on the assessee's violation of sec. 80G(5B) due to excessive religious expenses incurred, which exceeded the prescribed limit of 5% of total income for the relevant years.

Details:
The Commissioner observed that the trust primarily focused on religious activities, with substantial expenses incurred for such purposes. The assessee voluntarily provided percentage-wise details of religious expenses vis-a-vis total income for each year, showing violations of sec. 80G(5B). The trust's objects emphasized religious practices, with surplus income to be used for charitable activities after religious expenditures. The Tribunal upheld the Commissioner's decision, emphasizing the unambiguous nature of sec. 80G(5B) and the trust's failure to comply with the prescribed limits.

Issue 2: Segregation of Expenses
The assessee attempted to segregate substantial electrical expenses from overall religious expenses to fall within the 5% limit set by sec. 80G(5B).

Details:
The Tribunal rejected this argument, stating that all expenses related to religious activities, including electricity costs, are considered a single expense. Religious activities took precedence over charitable endeavors, as indicated by the trust's object clauses, leading to the denial of exemption u/s. 80G.

Issue 3: Registration u/s. 12AA and 80G
The assessee argued that having registration u/s. 12AA should automatically entitle them to exemption u/s. 80G.

Details:
The Tribunal clarified that registration u/s. 12AA does not guarantee exemption u/s. 80G. Both provisions serve distinct purposes, with sec. 80G requiring compliance with specific conditions, including the limit on religious expenses. The Tribunal cited a Supreme Court case emphasizing the separate requirements for sec. 80G exemption, leading to the dismissal of the assessee's appeal.

In conclusion, the Tribunal upheld the denial of exemption u/s. 80G, emphasizing the necessity for compliance with sec. 80G(5B) even with registration u/s. 12AA. The appeal of the assessee was dismissed.