2024 (3) TMI 816 - AT - Income Tax

Registration u/s 80G(5)(vi) - CIT(E) rejected the application filed on the ground that the assessee / applicant has mentioned in Form 10AB that two of the objects of the assessee are religious in nature - CIT(E) observed that the assessee / applicant in Form No. 10AB has mentioned that it has incurred expenditure of religious nature and was of the view that Section 80G of the Act specifies that there is no provision for application of fund for any purposes other than a charitable purpose - HELD THAT - Explanation 3 to Section 80G(5) suggests that the termed charitable purpose does not include any purpose, the whole or substantially the whole of which is of a religious nature. This implies that some part of the activities of a trust are permitted to be of a religious nature Sub-Section (5B) provides that an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding 5% of it s total income in that previous year, shall be deemed to be a institution or fund to which the provisions of this section apply. Further, notably sub-Section 5B starts with the words Notwithstanding anything contained in Clause (ii) of sub-Section (5) and Explanation 3 . Therefore, on plain reading of sub-Section (5B) to Section 80G, it is evident that if any institution or fund incurs any expenditure which is of a religious nature for an amount not exceeding 5% of it s total income, in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply. In the instant facts, we observe that Ld. CIT(E) has relied upon only two out of ten objects to show that the assessee is a religious trust. CIT(E) has not made any specific observations as to whether less than 5% of the total income has been spent by the assessee towards religious purposes. Accordingly, in the interest of justice, the matter is being restored to the file of CIT(E) for de-novo consideration after analyzing whether less than 5% of the total income has been incurred by the assessee trust towards religious activities. In case it is found that less than 5% of the total income has been incurred as expenditure by the applicant trust towards religious purposes, then benefit of Section 80G(5) of the Act may be granted to the assessee, in accordance with law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
The issues involved in this case are the denial of registration under Section 80G of the Income Tax Act based on the mention of religious objects in the trust deed and the interpretation of provisions related to charitable purposes and religious activities.

Issue 1: Denial of registration under Section 80G:
The appeal was filed against the order of the Ld. Commissioner of Income Tax (Exemption) rejecting the application for approval of Trust under Section 80G(5) of the Act due to the mention of religious objects in the trust deed. The CIT(E) observed that Section 80G does not allow the application of funds for purposes other than charitable ones and dismissed the application based on this ground.

Details:
The CIT(E) highlighted that the provisions of Section 80G(5) specify that funds should only be applied for charitable purposes and not for any other purposes, including religious ones. The rejection was based on the fact that the trust mentioned religious objects in the trust deed, which goes against the requirements of Section 80G.

Issue 2: Interpretation of provisions related to charitable purposes and religious activities:
The Counsel for the assessee argued that the trust had incurred less than 5% of its total income towards religious purposes, as allowed under Section 80G(5B) of the Act. They referred to a Pune ITAT decision that stated some part of the trust's activities could be of a religious nature and still be permitted under Section 80G. The Ld. D.R. contended that even if one object of the trust is religious, the benefits of Section 80G should be denied.

Details:
The ITAT observed that Explanation 3 to Section 80G allows for some part of the trust's activities to be of a religious nature, as long as it does not constitute the whole or substantially the whole of the trust's activities. Sub-Section (5B) of Section 80G permits institutions to incur expenditure on religious activities not exceeding 5% of their total income, thereby deeming them eligible for the benefits of the section.

Conclusion:
The ITAT allowed the appeal for statistical purposes and directed the matter to be reconsidered by the Ld. CIT(E) to analyze whether less than 5% of the total income had been spent by the trust on religious activities. If found compliant, the benefits of Section 80G(5) should be granted to the assessee in accordance with the law.

This summary provides a detailed overview of the issues involved in the legal judgment, including the reasons for denial of registration under Section 80G and the interpretation of provisions related to charitable purposes and religious activities.