Logos Faith Foundation Vs CIT (Exemptions) (ITAT Chandigarh)
Chandigarh ITAT: Trust Cannot Be Branded “Religious” Without Examining Its Actual Activities-80G Rejection Also Requires 5% Religious Expenditure Test
The assessee-trust, enjoying registration since 2006, was granted registration u/s 12AB for AYs 2027-28 to 2036-37, but the CIT(E) classified it as a “Religious Entity” instead of accepting its claim that it was a religious-cum-charitable trust. The trust contended that its actual activities covered education, social welfare, skill development, health, women and child development and relief to poor and needy persons, benefiting the public irrespective of caste, creed, language, religion or gender. It had furnished activity reports, documentary evidence, FCRA returns and audited financial statements before the CIT(E).
The ITAT found that the proposal to classify the trust as a purely religious entity had never been confronted to the assessee. When financial statements and evidence regarding actual charitable activities were already on record, the CIT(E) could not classify the trust as religious without putting the specific issue to the assessee and granting an opportunity to explain. This amounted to a violation of principles of natural justice. The matter relating to 12AB registration was therefore restored to the CIT(E) for de novo consideration based upon the actual activities, financial statements and other evidence.
The connected appeal concerned denial of approval u/s 80G(5) on the ground that the objects in the trust’s Memorandum were spiritual and religious. The Tribunal noted that the CIT(E) had reached this conclusion without examining the financial statements or the actual expenditure incurred by the trust.
Importantly, the ITAT referred to Section 80G(5B) and observed that, notwithstanding the restriction relating to religious purposes, an institution is deemed to satisfy the requirements of Section 80G(5) where expenditure of a religious nature does not exceed 5% of its total income for that previous year. The CIT(E) had undertaken no such exercise and recorded no finding regarding the quantum of religious expenditure. The 80G issue was therefore also restored for fresh consideration.
Key takeaway: A trust cannot be denied 80G approval merely because some of its objects are spiritual or religious. The CIT(E) must examine its actual activities and expenditure and specifically apply the statutory 5% threshold under Section 80G(5B). Likewise, a trust cannot be classified as purely religious without confronting the issue and considering the evidence of its charitable activities.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. Aforesaid appeals by assessee are connected appeals. The registry has noted delay of 11 days in both the appeals which stand condoned. First, we take up ITA No.1274/Chandi/2026 which arises out of an order passed by Ld. Commissioner of Income Tax (Exemption), Chandigarh, [CIT(E)] on 18-02-2026 granting registration to the assessee-trust u/s 12AB(1)(b) for AYs 2027-28 to 2036-37. The only grievance of the assessee is that it has been accorded the status of Religious Entity as against the claim of the assessee that it was religious cum charitable trust.
2. During hearing, it is the contention of Ld. AR that the assessee is carrying out activities relating to education, social welfare, skill development, health, women, child development and relief of poor and needy persons. The assessee enjoys registration since the year 2006. It has been stated the assessee, in its reply dated 23.01.2026, had furnished detailed note on charitable activities and documentary evidences, activity report and photocopies along with FCRA returns for FYs 2022-23 to 2024-25. The assessee also filed its audited financial statements. The actual activities carried out by the assessee establish its charitable character. In this regard, various documents relating to assessee’s activities were furnished by the assessee. The perusal of the same would show that the assessee works for public at large irrespective of caste, creed, language, religion or gender. The audited financials as well as the documentary evidences establish that the funds were used for education, welfare, health, training and relief. The Ld. AR contended that the impugned orders do not identify any expenditure incurred on religious activity. Therefore, the conclusion of Ld. CIT(E) is against the facts and circumstances of the case. The Ld. AR also stated that no effective opportunity of hearing was granted by Ld. CIT(E) before holding the assessee-trust to be a religious entity and therefore, the stated facts could be considered again by Ld. CIT(E). The Ld. CIT-DR opposed any interference in the impugned order.
3. Finding substance in the argument of Ld. AR, we accept the plea of Ld. AR. Apparently the issue that the assessee was a religious entity was nowhere been confronted to the assessee which was in violation of the principles of natural justice. When the financial statements and other documents were duly been furnished by the assessee along with its nature of activities wherein the assessee claimed its status to be a charitable entity, Ld. CIT(E) could not have held the assessee to be religious entity without confronting specific issues to the assessee. Therefore, we set aside the impugned order for de novo consideration of Ld. CIT(E) in the light of assessee’s financial statements and other documents with a direction to the assessee to plead and prove its case forthwith. The appeal stand allowed for statistical purposes.
4. In ITA No.1275 /Chandi/2026, the assessee is aggrieved by denial of approval u/s 80G(5)(ii). The approval has been denied on the ground that assessee’s object clause of Memorandum of Association was spiritual and religious in nature. However, no factual examination of financial statements has been done and the conclusion is not based on actual facts. No doubt, Explanation-3 provides that charitable purpose does not include a purpose which is wholly or substantially wholly of a religious nature. However, sub-section (5B), which has non-obstante clause, deems an institution to continue to satisfy the requirement of Section 80G(5) wherein religious-nature expenditure in a previous year does not exceed five per cent of trust’s total income for that year. No such exercise has been carried out in the impugned order and no such findings have been brought on record. Under these circumstances, we set aside the impugned order and restore this appeal also back to Ld. CIT(E) on similar lines. The appeal stand allowed for statistical purposes.
5. Both the appeals stand allowed for statistical purposes.
Order pronounced on 10th August, 2026
