Digambar Jain Sammedachal Vikas Committee Vs CIT Exemption (ITAT Indore)
Summary: The Indore Bench of the Income Tax Appellate Tribunal set aside the order dated 29.03.2025 passed by the CIT (Exemptions), rejecting Digambar Jain Sammedachal Vikas Committee’s application in Form No. 10AB seeking approval under section 80G of the Income-tax Act, 1961. The assessee had filed the application on 29.08.2024 under section 80G(5)(iv)(B) and described the nature of its activities as “religious cum charitable”. The CIT(E), after examining the objects and activities of the society, considered objects Nos. 1, 2 and 3 to be religious in nature and rejected the application with reference to section 80G(5)(ii), section 80G(5)(iii) and Explanation 3 to section 80G. The CIT(E) reasoned that approval under section 80G(5) was available to an institution established for charitable purposes and that a trust established for religious-cum-charitable purposes fell outside its scope. Before the Tribunal, the assessee contended that it continued to enjoy registration under section 12AB, that its religious activities were merely incidental and ancillary to its principal charitable objects, and that section 80G(5B) permitted religious expenditure up to 5% of total income. It relied upon figures showing religious expenditure of 4.37% for 2021-22, 1.85% for 2022-23 and 2.36% for 2023-24, all below the stated 5% ceiling. The assessee also pointed to expenditure of Rs.8,960/- on “Mandir poojan expenses” and Rs.52,579/- on pilgrims and refreshment expenses and contended that no effective and reasonable personal hearing had been afforded before rejection. The Revenue maintained that only charitable purposes qualified for section 80G approval and that religious or religious-cum-charitable activities were not eligible. The Tribunal held that the CIT(E) had not analysed the nature of the religious activities or the amounts spent on them during the preceding three years. It observed that although an institution seeking approval must be established for charitable purposes, this did not ipso facto prohibit it from undertaking religious activities incidentally or as ancillary activities for achieving its charitable purposes. Such a contention required proper examination, due diligence and preliminary inquiry, including consideration of whether the religious activities were merely incidental or had become dominant over the charitable purposes. The Tribunal observed that expenditure on incidental religious activities up to 5% of the application of income would be one relevant yardstick. Without expressing any final view on the merits, it set aside the impugned order and restored the application to the CIT(E) for a de novo examination of the assessee’s objects, purposes, affairs and religious activities on the basis of material on record. The CIT(E) was directed to provide a personal hearing and pass a fresh speaking and reasoned order, while the assessee was directed to substantiate the charitable nature of its objects and the incidental or ancillary character of its religious activities with credible evidence. The appeal was accordingly allowed for statistical purposes.
Cases Discussed
- Upper Ganges Sugar Mills Ltd vs. Commissioner of Income-tax, [1997] 93 Taxman 645 (SC) / 227 ITR 578 (SC) — relied upon by the CIT(E), according to the assessee’s ground of appeal, while rejecting section 80G approval; the assessee contended that the decision pre-dated the relief introduced through section 80G(5B) by the Finance Act, 1999.
FULL TEXT OF THE ORDER OF ITAT INDORE
This is an Appeal filed by the Assessee under section 253 of the income tax Act 1961, [hereinafter referred to as the Act for the sake of brevity] before this tribunal as & by way of a second appeal. The Assessee is aggrieved by the order bearing No:-ITBA/ EXM/ F/ EXM 45/ 2024-25/ 1075254671(1) Page 1 of 14 dated 29.03.2025 passed by the Ld. CIT (E), which is hereinafter referred to as the “Impugned order”.
2. Factual Matrix
2.1 That on 29.08.2024 the assessee filed form no. 10 AB for the first time for seeking approval u/ s 80G (5) (iv)(B) of the act [PB pages 1 to 10]. The said application was however rejected by the Ld. CIT (E) by the Impugned Order. The relevant extracts of the “Impugned Order” of the Ld. CIT (E) is reproduced below:-
3. On examination of documents following observation are being drawn:-
3(1). The assessee has submitted the copy of registered trust deed/by-laws of the trust which includes five objects out of which objects at Sr. No. 1, 2 & 3 are religious in nature. The objects of the trust are depicted as under:-
It is seen that the essence of the objects of the trust is religious in nature. These objects being in the nature of religious purposes do not qualify the eligibility criteria of section 80G(5) of the Act and they are in violation to section 80G(5)(ii), 80G(5)(iii), Explanation 3 of section 80G of the Act.
3(2). On examination of application in Form 10AB filed for approval u/s 80G vide acknowledgment number 414341390310824 dated 31.08.2024, the assessee has mentioned nature of activities – Religious cum Charitable in row no. 3.
Hence, it is seen that the assessee itself has shown that the activities of the trust are religious cum charitable and applied in the category of “Religious cum Charitable”.
3(3). On examination of reply of the assessee submitted vide letter dated 22.01.2025, the assessee in its reply in respect of detailed note on activities carried out by the trust, stated that:
“Our society is a charitable cum religious entity. Our society owns Mandir & Dharamsala and its activities are to maintain it and to arrange for regular spiritual education of Pilgrims, the path by which they can live good life and attain Nirvana (Moksha).
We provide free / subsidised lodging at Dharamsala to pilgrims visiting the sacred
place Sri Summed Shikарji every day and provide free Kadha to pilgrims & lodging facility to saints at Chopra Kunde at Prasanth Hill.
Pavan Dham Mandir and Bharat Kusum Modi Jain Bhavan was constructed in 2011.”
Hence, it is seen that the assessee itself has stated that the activities of the trust are religious cum charitable.
4. The relevant Provisions of section 80G of the Act are as under –
80G(5)— This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely:–
(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10:
Provided that …………..
(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;
(iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste;
(iv) the institution or fund maintains regular accounts of its receipts and expenditure;
(v) the institution or fund is either constituted as a public charitable trust;
(vi) in relation to donations …………..
(vii) where any institution …………..
(viii) the institution or fund prepares such statement …………..
(ix) the institution or fund furnishes to the donor, a certificate …………..
Explanation 3.—In this section, “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature.
From the above-mentioned provisions of section 80G, it is clear that the assessee may be registered U/s 80G(5) of the Act only if it is established in India for a charitable purpose and the instrument under which the institution or fund is constituted or the rules governing the institution or fund do not, contain any provision for application of income for any purpose other than a charitable purpose. Further Explanation 3 clarifies that “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature.
Section 11 of the Act allows the exemption for income derived from property held under trust wholly for charitable or religious purposes, whereas in section 80G(5) of the Act it is allowed only for charitable purposes and the trust which is also established for religious purposes is out of scope of section 80G(5) of the Act.
It is undisputed fact that Public Charitable trusts have three categories i.e. “Charitable Purposes”, “Religious Purposes” and “Religious cum Charitable purposes”. Out of all three categories only first category is eligible for registration U/s 80G(5) of the Act.
6. Considering the facts of the case and reasons mentioned above, the application of the assessee filed in Form 10AB u/s 80G(5)(iv)(B) for grant of approval u/s 80G(5)(iii) of the Act is hereby rejected on the above findings.
2.2 That the assessee being aggrieved by the Impugned Order of the Ld. CIT (E) has preferred the instant appeal before this tribunal and has raised the following grounds of appeal in the form no. 36 against the “Impugned Order” which are as under:-
1. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in rejecting the application made by the appellant under sub- clause (B) of clause (iv) of the first proviso to sub-section (5) of section 80G of the Income-tax Act is unlawful as the same has been passed by him beyond the time of six month (i.e. upto 28-02-2025) allowed under the provisions of the said section.
2. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in concluding that the object no. 1, 2& 3 as mentioned in the trust deed are of religious nature.
3. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in not properly appreciating the provisions contained under sub- section (5B) to Section 80G of the I.T. Act which resulted in rejection of application of registration of appellant trust u/ s 80G(5)(ii) of the I.T. Act.
4.On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in rejecting the application made by the appellant under sub- clause (B) of clause (iv) of the first proviso to sub-section (5) of section 80G of the Income-tax Act, the contention of the Ld. CIT Exemption Bhopal that none of the objects of the appellant should have been religious in nature is wrong, w hen, the provisions contained in Section 80G(5B) allowed incurring of expenditure of religious nature to the appellant upto five percent of its total income for the previous year and this is not possible unless some of its objects had tenets of religious nature.
5. on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in rejecting the application of the appellant for grant of approval u/ s 80G (5), w as not justified in arbitrarily alleging that the appellant Society is expressed to be for the benefit of a particular religious community or caste, w hen, he himself granted registration u/ s 12AB (1)(b) to the appellant Society after being fully satisfied that it w as not expressed to be for the benefit of any particular religious community or caste.
6. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in rejecting the application made by the appellant for grant of approval u/ s 80G (5) by relying on the decision in the case of Upper Ganges Sugar Mills Ltd vs. Commissioner of Income-tax [1997] 93 Taxman 645 (SC), w hen, this decision, being very old, did not take into account the effect of relief provided to a charitable institution or fund by the Finance Act, 1999 by inserting sub-section (5B) in Section 80G with an over-riding effect over Section 80G(5)(ii) and Explanation 3 to the said section.
7.On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in rejecting the application made by the appellant for grant of approval u/ s 80G(5) of the Income-tax Act without properly considering the submissions made to him by the appellant in response to his notices, which adequately refuted his contentions and also provided necessary clarifications regarding the activities and expenditure actually incurred, within the permissible ceiling of 5% of the total income for the year, by the appellant Trust in the preceding years.
8. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Exemptions), Bhopal erred in rejecting the application made by the appellant under sub- clause (B) of clause (iv) of the first proviso to sub-section (5) of section 80G of the Income-tax Act is unwarranted and unsustainable in law, w hen, the appellant ‘Trust meets the criteria prescribed for grant of approval under Section 80G (5) of the Income-tax Act.
9. That the appropriate order for granting justice and relief be passed.
10. That the appellant craves leave to add, amend, alter, delete all or to modify any of above grounds and to pursue any other or further grounds as may be required.
3. Record of Hearing
3.1 The hearing in the matter took place before this Tribunal on 10.06.2026 when the Ld. AR for & on behalf of the Assessee appeared before us & interilia contended that the “Impugned Order” is bad in law, illegal & not Proper. It is also in the violation of the principles of natural justice. It therefore deserves to be set aside. The Ld. AR has placed on the record of this tribunal a paper book containing pages 1 to 259. A synopsis containing 6 pages. An “argument s” containing 13 pages. The Ld. AR then contended that the assessee in the form 10 AB filed on 31.08.2024 (PB page 1 to 10) had in column no.- 2 had claimed the section 80G (5) (iv)(B). The nature of activity in column no.-3 was stated as “religious cum charitable”. The assessee is society registered with registrar of firms and societies MP, with incorporation no: – 03/ 27/03/ 08636/ 05 dated 18/ 08/ 2003 [PB page 37]. The object of the society is religious, relief of poor, education, medical relief and advancement of any other objects. The Ld. AR submitted that the benefit of 80G (5) (iv)(B) was rejected by the “Impugned Order”. 12A regd however is effective. It was contended that 5% of application towards religious activities are permissible. Out of 5% roughly about 1% is towards Pooja Expenses. The assessee society however was not heard in an effective and reasonable manner before t he Impugned Order was passed by the Ld. CIT (E). The Ld. AR then invited our attention to the fact that the religious expenses done by the assessee society was of Rs. 8960/ – which was expended as “Mandir poojan expenses”. Pilgrims and refreshment expenses were Rs. 52,579.00 only which too was meagre. In this regard our attention was invited to PB page 42 which was income & expenditure account for the year ending 31.03.2023. The Ld. AR then invited our attention to PB page 62 and basis that contended that the percentage of religious expenses for 2021-22 was 4.37%, for 2022-23 it was 1.85% and for 2023-24 it was 2.36% which were all below 5% [chart of percentage of religious activities expenses incurred with respect to total income] [page 62 of PAPER BOOK]. In the sum and substance it was submitted that the religious activities were carried out by the assessee are incidental and ancillary to main object and the amount expended is less than 5%. Per contra the Ld. DR appearing for and on the behalf of the revenue contended that only charitable purpose is required to be considered in law. Charitable cum religious activities and religious activities are not allowed for 80G (5) (iv)(B). The “Impugned Order” is therefore correctly passed and that the “Impugned Order” should be upheld. The hearing was over and closed.
4. Observations Findings & conclusions
4.1 We have to decide the legality, validity and proprietary of the “impugned order” basis records of the case & the rival submission canvassed before us.
4.2 We have carefully perused the records of the case and have heard the submissions.
4.3 We basis records of the case & after hearing & further upon examining the rival contentions of the Ld. AR & the Ld. DR canvassed before us, are of the considered opinion that the “Impugned Order” in the given facts and circumstances deserves to be set aside as there in no analysis is done by the Ld. CIT (E) about the nature of religious activities and amount expended for same during last three years as is demonstrated before us basis PB page 62. While it is true that only the society or body or trust established solely for purpose of charitable purpose is required to be granted registration for section 80G (iv)(B) but that ipso facto does not mean in law that such body or society or trust is prohibited to do any religious activities as and by way incidental and ancillary work in order to achieve purpose of charitable nature. If assessee has advanced contentions that they too are carrying out religious activities as and by way of incidental and ancillary object then there such contentions are required to be appreciated and considered sympathetically by carrying out due diligence and some prelim any inquiry in order to ascertain the gravity and nature and the purpose of such activities. It is required to be tested basis such an inquiry and/ or from the reports of the field officers whether such activities are incidental and ancillary to the main objects or not. However upon inquiry etc. If it is found basis material that such incidental and ancillary objects of religious activities are dominant over the charitable purpose then the authorities would be well within their rights to deny the registration. The amount expended on such activities of incidental and ancillary nature i.e. religious activities up to 5% of application of income would be one of the yard stick. Be that as it may without going into the merits of the case we set aside the Impugned Order as and by way of remand with direction to the Ld. CIT (E) to re-examine the above issue without being influenced by our observation and to re look the entire affairs, objects and purpose of assessee once again and then to pass a fresh and speaking order which should be a reasoned one. The Ld. CIT (E) is directed to give personal hearing to the assessee and assessee is directed to participate in such hearing as we notice that there is nothing in the Impugned Order with regard to opportunity of personal hearing being afforded to the assessee before the Impugned Order was passed. The assessee is directed to explain each and every charitable purpose with tangible material/ evidences worth credence to establish charitable nature of their society and so also other incidental and ancillary objects i.e. religious activities.
4.4 In the premises laid down by us we set aside the Impugned Order and direct the Ld. CIT (E) to decide the assessee application in form no. 10AB on merits on De novo basis, by passing a speaking and a well-reasoned order including on religious activities being carried out by the assessee basis material on record.
5 Order
5.1 In the result the “Impugned Order” is set aside as and by way of remand back to the file of Ld. CIT (E) with directions as aforesaid.
5.2 The appeal of Assessee allowed for statistical purpose.
Pronounced in open court on 30.06.2026.
