2022 (5) TMI 687 - AT - Income Tax

Exemption u/s 11 - application for grant of recognition u/s.80G(5)(vi) rejected - HELD THAT - The objects talk of upliftment of all the sections of the society coming from any religion, caste or creed. Explanation 3 to section 80G simply states that charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature. This shows that at least some part of activities of a trust, which are of religious nature, are permitted. This fact is further fortified by sub-section (5B) of section 80G which provides that institution or fund which incurs expenditure during any previous year, which is of a religious nature for an amount not exceeding 5% of its total income in that previous year, shall be deemed to be an institution or fund to which the provisions of this section apply. From the break-up of Religious expenses furnished by the assessee, as incorporated in the impugned order, it is manifest that the religious expenditure is less than the prescribed percentage. The ld. DR could not controvert the narration of expenses given against them as tabulated in the impugned order. In view of the above statutory provisions and the factual panorama obtaining in the extant case, we are satisfied that the assessee deserves recognition u/s.80G(5)(vi) of the Act, which is hereby accorded. Assessee appeal allowed.

Summary

Issues:
1. Delay in filing the appeal before the Tribunal.
2. Denial of registration u/s.80G(5)(vi) of the Income-tax Act, 1961 based on religious expenses exceeding 50% of total income.
3. Interpretation of the term "charitable purpose" and religious nature of activities.
4. Application of sub-section (5B) of section 80G regarding expenditure of religious nature not exceeding 5% of total income.
5. Consideration of affidavits and objects of the trust in determining eligibility for recognition u/s.80G(5)(vi).

Issue 1: Delay in filing the appeal
The appeal by the assessee was time-barred by 108 days. However, the delay was condoned based on the Supreme Court's cognizance of challenges due to COVID-19 and the extension of time limits for filing appeals. The Tribunal admitted the appeal for disposal on merits.

Issue 2: Denial of registration u/s.80G(5)(vi)
The denial was based on the observation that more than 50% of the total income of the trust was spent on religious activities, exceeding the permissible limit. The assessee contended that the expenses under the "Religious expenses" head were for societal good and not restricted to any specific community or religion. The Tribunal found that the expenses were not for the benefit of a specific community or religion, leading to the overturning of the denial.

Issue 3: Interpretation of "charitable purpose" and religious nature
Explanation 3 to section 80G excludes purposes of wholly or substantially religious nature from charitable purposes. The Tribunal noted that some religious activities are permitted, as supported by sub-section (5B) of section 80G, which allows religious expenditure up to 5% of total income. The Tribunal found that the trust's activities aimed at uplifting all sections of society, irrespective of religion, caste, or creed.

Issue 4: Application of sub-section (5B) of section 80G
The Tribunal analyzed the breakdown of religious expenses provided by the assessee and found that the religious expenditure was within the prescribed 5% limit of total income. The factual analysis and statutory provisions led to the conclusion that the trust deserved recognition u/s.80G(5)(vi), overturning the initial denial.

Issue 5: Consideration of affidavits and trust objects
Affidavits from individuals attending trust events affirmed the inclusive nature of the programs, involving people from various religions. The trust's objects focused on societal upliftment without specific references to any religion, caste, or creed. These factors, combined with the statutory provisions, supported the Tribunal's decision to grant recognition u/s.80G(5)(vi).

In conclusion, the Tribunal allowed the appeal, recognizing the trust's eligibility for registration u/s.80G(5)(vi) based on the analysis of expenses, statutory provisions, affidavits, and trust objects. The decision highlighted the inclusive nature of the trust's activities and the compliance with the prescribed limits for religious expenditure, ultimately overturning the initial denial by the CIT(Exemptions), Pune.