2023 (4) TMI 135 - AT - Income Tax

Registration u/s.80G denied - As expenditure for Religious activities are more than 5% the appellant has not satisfied conditions laid down in Section 80G(5) - assessee's main object is to construct and maintain Shri Sai baba temple - What is Religious? - HELD THAT - Dictionary meaning is that Religious means relating to or manifesting faithful devotion to an acknowledged ultimate reality or deity. Rituals and observances, ceremonies and modes of worship are regarded as integral parts of religion. Performing Rituals, Ceremonies, worships, Poojas are nothing but religious activities. For the Shri Saibaba Followers Shri Saibaba is a God Incarnate. In the case before us, the assessee have a Shri Saibaba Temple, the assessee has spend more than 5% of its income on the activities like Pooja, Prasad, Mandir Jirnodhar etc. In the light of the dictionary meaning of the word religious activity given above and the general understanding of the word religious activity, these activities are nothing but religious activities as all the members of the assessee are Shri Saibaba Devotees and the pooja, rituals performed are nothing but Religious activities. The main aim of the assessee trust is to construct and maintain the Shri Saibaba Memorial. Distinguishing Case law relied by Assessee - Assessee relied upon ARANYASHWAR DEVALAYA TRUST VERSUS CIT-1, PUNE 2015 (8) TMI 1083 - ITAT PUNE case wherein as held that the conditions prescribed in section 80G(5B) are satisfied as the expenses on religious activities i.e. pooja expenses are less than 5%. However, in the instant case the expenses incurred on religious activities are much higher than the 5% as discussed in the order of CIT(Exemptions) Legal Precedence - Hon ble SC in the case of Upper Ganges Sugar Mills Ltd 1997 (8) TMI 4 - SUPREME COURT held that even if one purpose or object of the trust is religious or substantially religious, the trust will not be eligible for benefit of Section 80G - assessee was not eligible for benefit u/s.80G as it supported prayer halls and places of worships, which is religious purpose. In the case of the assessee, Shri Sai Bhakta Seva Trust, the main object is to construct and maintain Shri Sai baba temple. This fact has not been disputed by the Ld.AR. The Assessee trust regularly performs Pooja, and other rituals. The expenditure on religious activities is more than 5% of the total income of the assessee. Thus, the assessee has violated provision of Section 80G(5B). ITAT Cochin Bench in the case of Nilackal St. Thomas Church Ecumenical Centre Trust 2014 (1) TMI 604 - ITAT COCHIN has held that the Trust was not eligible for registration u/s.80G as it had spend more than 5% of its income on religious activities. We uphold the order of the Commissioner of Income Tax (exemption) rejecting the application for registration u/s.80G of the Act. Decided against assessee.

Summary

Issues Involved:
1. Rejection of application under Section 80G(5)(vi) of the Income Tax Act, 1961.
2. Compliance with conditions provided in the Act for approval under Section 80G.
3. Expenditure on religious activities exceeding the permissible limit under Section 80G(5B).

Issue-wise Detailed Analysis:

1. Rejection of Application under Section 80G(5)(vi):
The primary issue revolves around the rejection of the application filed by the Assessee under Section 80G(5)(vi) of the Income Tax Act, 1961. The Commissioner of Income Tax (Exemption) denied the approval on the grounds that the Assessee incurred expenditure on religious activities exceeding 5% of its total income in the preceding financial years (FY 2015-16, 2016-17, and 2017-18). The expenditures included Utsav Expenses, Prasad Expenses, and Pooja Expenses, which were deemed purely religious in nature. The detailed expenditure was as follows:
- FY 2015-16: 12.80%
- FY 2016-17: 6.65%
- FY 2017-18: 16.71%

2. Compliance with Conditions Provided in the Act for Approval under Section 80G:
The Assessee argued that it complied with all conditions for approval under Section 80G. The Assessee, a public charitable trust registered under the Bombay Public Trust Act and also under Section 12A(a) of the Income Tax Act, claimed to have carried out charitable activities like Blood Donation camps, distribution of food for the poor, and running a Goshala. However, the Assessee did not provide evidence for these activities. The Revenue contended that the Assessee's activities were predominantly religious, and the expenditures on religious activities exceeded the permissible limit, thus failing to satisfy the conditions under Section 80G(5) and 80G(5B).

3. Expenditure on Religious Activities Exceeding the Permissible Limit under Section 80G(5B):
The crux of the dispute was whether the Assessee's expenditure on religious activities exceeded the permissible 5% limit under Section 80G(5B). The Tribunal examined the nature of the expenditures and concluded that the Assessee's activities, including Pooja, Prasad, and Mandir Jirnodhar, were religious. The Tribunal referenced the dictionary meaning of "religious activity" and the general understanding that rituals, ceremonies, and worships are integral parts of religion. The Tribunal noted:
- The main object of the Assessee trust was to construct and maintain the Shri Sai Baba Temple.
- The expenditures on religious activities were significantly higher than the 5% limit in the relevant financial years.

Legal Precedents and Findings:
The Tribunal cited several legal precedents to support its decision:
- Upper Ganges Sugar Mills Ltd vs CIT [1997] 227 ITR 578 (SC): The Supreme Court held that if any one of the objects of a trust is wholly or substantially religious, the trust falls outside the scope of Section 80G.
- Kirti Chand Tarawati Ch. Trust vs DIT [1998] 232 ITR 11 (Delhi): Emphasized that donations utilized for religious purposes do not qualify for benefits under Section 80G.
- CIT vs Rama Education Society [2017] 396 ITR 16 (Allahabad): Highlighted the necessity of maintaining regular accounts of receipts and expenditures for approval under Section 80G.

The Tribunal concluded that the Assessee trust did not meet the conditions laid down in Section 80G(5) and 80G(5B) due to its predominant religious activities and expenditures exceeding the 5% limit. Consequently, the appeal of the Assessee was dismissed. The order was pronounced in the open Court on 20th February 2023.