2017 (10) TMI 241 - AT - Income Tax

Seeking approval u/s 80G rejected registration under section 80G is available to a charitable trust but not to a religious trust - whether organizing such melas are in the nature of religious activities or more in a form of a social gathering where people irrespective of their caste, creed, and religion gather and participate in various activities? - Held that - On perusal of the order of the ld CIT(E), we donot see any basis for arriving at the conclusion that the activities of the assessee trust are predominantly religious in nature except for few expenditure heads which are held to include expenditure incurred towards religious activities. Useful guidance can be drawn from the decision of the Hon ble Rajasthan High Court in case of Umaid Charitable Trust v. Union of India 2008 (5) TMI 232 - RAJASTHAN HIGH COURT wherein held Revenue is not allowed to take a narrow approach that character of charitable trust was lost if one particular expenditure was made for such/above purpose and that too by way of contribution to another trust - No clause in the trust deed in the present case which indicates that income of the petitioner-trust was to be applied wholly or substantially for any particular religion. It is the dominant object of the trust which is important and contribution and expenditure incurred by the petitioner-trust has to be viewed in light of the objects with which charitable trust in question was constituted. In light of above discussions, we are setting aside the matter to the file of the ld CIT(E) to examine the same a fresh taking into consideration the legal proposition as above - Decided in favour of assessee trust for statistical purposes.

Summary

Issues:
- Rejection of approval under section 80G for a charitable and religious trust based on expenses of religious nature exceeding 5% of total income.
- Dispute over whether the predominant activity of the trust is religious in nature.
- Interpretation of legal provisions under section 80G for approval eligibility.
- Comparison with a previous legal case regarding expenditure on religious activities.

Analysis:
1. The appeal concerned the rejection of approval under section 80G for a charitable and religious trust due to expenses of religious nature exceeding 5% of total income. The trust, registered under section 12AA, applied for approval under section 80G, which was denied based on the nature of expenses incurred on religious activities, constituting a significant portion of total receipts.

2. The main issue revolved around determining whether the predominant activity of the trust was religious in nature. The trust argued that besides maintaining a temple, it also operated schools, hospitals, and other charitable activities. The contention was that expenses on religious activities were misinterpreted, as they included maintenance and staff costs, not solely religious expenditures.

3. The interpretation of legal provisions under section 80G was crucial in deciding the eligibility for approval. The law stipulates that if expenses of religious nature exceed 5% of total income, approval cannot be granted. The trust's compliance with this provision was a focal point in the dispute, emphasizing the need to differentiate between charitable and religious activities.

4. Reference to a previous legal case highlighted the importance of the trust's dominant object and the nature of expenditures in determining eligibility for approval under section 80G. The case emphasized that expenditure on religious activities should not automatically disqualify a trust if its primary objective is charitable, even if some expenses are related to religious practices.

5. Ultimately, the tribunal set aside the matter for reevaluation, instructing the authorities to consider the legal principles established in the referenced case. The decision underscored the need for a comprehensive assessment of the trust's activities to determine whether the predominant nature was religious or charitable, ensuring a fair and accurate judgment based on legal precedents.