Ayyappa Samithi Vs CIT (Exemption) (ITAT Delhi Bench)
A Temple Does Not Automatically Ring the Death Bell for Approval u/s 80G: Five-Per-Cent Test Requires Proper Arithmetic
Summary:
Background
Shree Ayyappa Samithi was a trust carrying on charitable as well as religious activities. One of its activities involved running & maintaining Shree Dharma Sastha Temple at Delhi.
The Trust filed an application in Form No. 10AB on 30.09.2025 seeking approval u/s 80G. Such approval would enable eligible donors to claim deduction in respect of donations made to the institution, subject to the applicable statutory conditions.
The CIT (Exemption), Delhi rejected the application by order dated 08.03.2026. According to him, the Trust was engaged in religious activities, maintained a temple & had incurred religious expenditure exceeding 5% of its total receipts.
On that basis, the CIT(E) concluded that the institution was not eligible for approval u/s 80G.
The Trust challenged the rejection before the Delhi Tribunal.
Trust Disputes the Five-Per-Cent Finding
The Trust did not deny that it maintained a temple or incurred expenditure of a religious nature. Its case was that it undertook a combination of charitable & religious activities, & its religious expenditure did not cross the permissible 5% threshold.
According to the Trust, the financial statements demonstrated that the expenditure incurred for religious purposes during the relevant period was within the prescribed limit. The CIT(E) had failed to examine the accounts in their correct perspective before concluding otherwise.
The Trust therefore argued that approval could not be rejected merely because one of its activities involved maintenance of a temple. The decisive enquiry was whether the expenditure of a religious nature exceeded the statutory tolerance provided under the Act.
Section 80G Does Not Demand Complete Religious Sterility
An institution seeking approval u/s 80G(5) must ordinarily satisfy the conditions prescribed in s.80G(5). The scheme generally excludes an institution or fund which is wholly or substantially religious in character from donor-deduction approval.
However, the Act does not treat every incidental religious expenditure as fatal. Section 80G(5B) provides a limited tolerance where an institution incurs expenditure of a religious nature which does not exceed 5% of the relevant total.
Thus, the presence of some religious activity does not automatically disentitle an otherwise charitable institution. The statutory exercise requires identification of the expenditure genuinely attributable to religious purposes, determination of the relevant total & computation of the prescribed percentage.
Approval cannot be denied merely by attaching the label “temple” to the institution. Equally, an institution cannot secure approval merely by describing substantial religious expenditure as charitable. The nature, extent & financial proportion of the activities require examination from the records.
Financial Statements Required Proper Examination
Before the Tribunal, the Trust asserted that its financial statements contradicted the factual premise adopted by the CIT(E). It claimed that religious expenditure had not exceeded 5% & that the accounts supporting this position had not been properly appreciated.
The controversy was therefore substantially factual. It required verification of the Trust’s receipts or income, classification of the expenditure, identification of the amounts genuinely relating to maintenance of the temple & computation of the correct percentage.
The ITAT did not record a final finding that the religious expenditure was actually below 5%. Nor did it hold that the Trust was conclusively entitled to approval. Instead, it found that the matter deserved reconsideration after properly examining the existing evidence as well as any additional documents the Trust might furnish.
Matter Restored for Fresh Decision
Having considered the rival contentions, the Tribunal set aside the disputed issue to the CIT(E) for fresh adjudication.
The CIT(E) was directed to reconsider the Trust’s eligibility after examining the evidence already available on record. The Trust was also permitted to place further supporting evidence during the fresh proceedings.
The application must therefore be decided after verifying whether the expenditure of a religious nature remained within the permissible statutory limit & whether the Trust otherwise satisfies the conditions for approval u/s 80G.
The appeal was accordingly allowed for statistical purposes.
This expression is important. The Tribunal did not grant approval to the Trust. It merely annulled the existing rejection for the limited purpose of enabling a fresh, evidence-based determination by the CIT(E).
Maintenance of a Temple Is Relevant, but Not Conclusive
The order recognises that maintenance of Shree Dharma Sastha Temple is a relevant factor in deciding the application. However, the existence of a temple cannot, without further enquiry, decide the entire matter.
The authority must distinguish between the Trust’s religious expenditure & its broader charitable expenditure. Activities such as education, medical assistance, relief to the poor, community welfare or other objects of general public utility may retain their charitable character even where the same trust also incurs limited expenditure for religious purposes.
The accounts must therefore be examined activity-wise & expenditure-wise. The approval question turns not merely upon the institution’s name or the physical existence of a place of worship but upon the nature & proportion of its actual application of funds.
Author’s Comments
The ruling is brief but important for trusts having mixed charitable & religious objects. Section 80G does not impose a zero-tolerance rule against every rupee spent for a religious purpose. It contains a statutory breathing space, generally recognised through the 5% threshold.
At the same time, computation of that percentage should be supported by a clear reconciliation. The Trust should furnish its income & expenditure account, ledgers for temple expenses, activity reports, supporting vouchers & a separate working classifying charitable & religious expenditure.
The order uses “total receipts” while describing the 5% test, whereas s.80G(5B) uses the expression “total income” for the relevant previous year. The CIT(E), while adjudicating afresh, should apply the precise statutory language & explain the computational base adopted.
The Trust must also satisfy the remaining requirements of s.80G(5). Staying below 5% addresses the religious-expenditure objection; it does not dispense with examination of genuineness, proper maintenance of accounts, application of funds or other prescribed conditions.
The temple bell may be audible in the accounts, but approval u/s 80G cannot be denied until the CIT(E) first counts how loudly it rings in percentage terms.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, DELHI BENCH
The instant appeal filed by the assessee is directed against the order dated 08.03.2026 passed by the Ld. Commissioner of Income Tax (Exemptions), Delhi, whereby and whereunder the application dated 30.09.2025 made in Form No. 10AB for approval under Section 80G of the Income Tax Act, 1961, (hereinafter referred to as the ‘Act’) by the appellant trust stood rejected.
2. It is the case of the Revenue, that the assessee Trust has incurred religious expenditure exceeding 5% of its total receipt and since engaged in religious activities and running/maintaining a temple under the name of Shree Dharma Sastha Temple, not eligible for the grant of approval under Section 80G of the Act whereas the financial statements speaks otherwise as the case made out by the assessee which has not been considered by the Ld. CIT(E) in its proper perspective and particularly when the assessee is carrying out activities both religious and charitable and not exceeding expenditure for religious purposes during the year 5% of the total receipts necessary approval under Section 80G of the Act ought to have been granted to the assessee as argued by the Ld. Counsel appearing for the assessee.
3. Thus, having regard to the entire aspect of the matter, we dispose of this appeal by setting aside the issue to the file of the Ld. CIT(E) for consideration of the same afresh upon considering the evidence on record or any other evidence which the assessee may choose to file at the time of hearing of the matter. The assessee’s appeal is, thus, allowed for statistical purposes.
Order pronounced in the open court on 01/09/2026.
