Badhamata Adhyatmik Evam Sanskrutik Seva Trust Vs Exemption Ward (ITAT Jaipur)
Religious Objects Alone Do Not Bar Section 80G Approval: The Five Per Cent Exception Must Be Examined
Background of the dispute
The assessee trust, situated at Kanankheda in Chittorgarh district, applied in Form 10AB on 30 September 2025 for section 80G approval. It stated that it had held registration and approval from time to time and was registered with the Devasthan Department.
Its objects combined religious activities with public welfare. They included worship, temples and festivals, alongside a hospital, goshala, dispensaries, diagnostic centres, literacy programmes, blood and eye donation, and de-addiction initiatives.
The CIT(E) rejected the application on 29 January 2026, citing religious objects, religious expenditure exceeding 5% of total income, and absence of valid section 12A registration.
The trust contested all three grounds before the Tribunal.
Section 80G expressly accommodates limited religious expenditure
The Tribunal explained that section 80G(5) applies to institutions established for a charitable purpose. Explanation 3 excludes a purpose wholly or substantially wholly religious.
However, section 80G(5B) contains a non obstante clause overriding section 80G(5)(ii) and Explanation 3. It protects an institution whose religious expenditure during a previous year does not exceed 5% of its total income for that year.
The CIT(E) had reproduced the provision incorrectly as referring to expenditure “exceeding five percent” and inferred that an approved institution should incur no religious expenditure.
The Tribunal rejected this reading. The statute expressly contemplates religious expenditure within the prescribed limit. The rejection therefore rested partly on an incorrect understanding of the statutory exception.
Upper Ganges Sugar Mills had to be read with the subsequent amendment
The Revenue relied on Upper Ganges Sugar Mills Ltd. v. CIT [1997] 227 ITR 578 (SC), which held that a wholly or substantially wholly religious object could take an institution outside section 80G.
The Tribunal acknowledged that the decision remained binding. Nevertheless, it was delivered on 4 August 1997, before section 80G(5B) was inserted with effect from 1 April 2000.
After that amendment, Explanation 3 and section 80G(5)(ii) must be read subject to section 80G(5B).
The character of the objects remained relevant, but the mere presence of a religious object was no longer decisive by itself. Where religious expenditure stayed within the statutory threshold, the deeming protection required consideration.
The Tribunal thus applied the subsequently amended framework without treating the Supreme Court decision as having been overruled.
The deed contained charitable as well as religious objects
The CIT(E) had characterised all objects as religious or connected with a particular community.
The Tribunal found this unsupported by the deed extract. Several objects expressly addressed healthcare, literacy, donations and de-addiction. Nothing in the extract restricted those benefits to a particular community.
Other objects were religious in part. The appropriate exercise was therefore individual examination of the objects, rather than an undifferentiated classification.
The assessee’s reply referred to ten clauses, whereas the extracted deed showed seven objects. The complete deed and explanation consequently required examination. The existing finding could not survive because it overlooked the mixed objects and misread section 80G(5B).
Religious expenditure required classification and yearly computation
The accounts contained expenditure under headings such as Adhyatmik Karyakaram, Navratri, Gopashtami and Satchandi Yadnya.
The trust argued that some grouped headings included charitable expenditure and that it had submitted a bifurcation showing religious expenditure within 5%.
The CIT(E) asserted that the limit was exceeded but did not quantify religious expenditure or identify the income base. Nor did the order address the claimed bifurcation.
The Tribunal held that the nature of individual items and total income for each relevant previous year had to be determined. Classification, supported by evidence, would be decisive.
It also rejected the trust’s allegation that the CIT(E) had applied a 50% threshold: the order referred to 5%, making that particular complaint factually incorrect.
Registration status remained relevant; approval was not directed
The trust stated that its earlier registration ran until 31 March 2024 and that it applied for renewal on 30 September 2025. The renewal outcome was unavailable.
The Tribunal held that registration status remained relevant under section 80G(5)(i) and required fresh examination.
It set aside the rejection and restored the application to the CIT(E), directing examination of the complete deed, expenditure bifurcation, supporting evidence and registration position. A reasonable hearing and speaking order were required.
The appeal was allowed for statistical purposes. No final opinion on eligibility was expressed.
Author’s comments
The important principle is that religious objects cannot be examined without the statutory protection in section 80G(5B). A pre-amendment decision must be applied alongside the later legislative exception.
Equally, the ruling does not approve every religious-cum-charitable trust. The 5% test requires reliable classification and year-specific figures, while the remaining section 80G conditions continue to matter.
A grouped expense heading cannot conclusively establish religious character, but an unsupported bifurcation cannot establish charitable character either. Evidence must explain the actual expenditure.
The trust obtained fresh consideration, not section 80G approval. Its expenditure records and registration status will determine the ultimate result
Cases Discussed
- Upper Ganges Sugar Mills Ltd. v. CIT, [1997] 227 ITR 578 (Supreme Court), decided on 04.08.1997 — Relied upon by the Revenue and considered by the Tribunal. The Supreme Court’s interpretation of religious objects under section 80G was read alongside the subsequently inserted section 80G(5B), without treating the precedent as overruled.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR
1. This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Exemption), Jaipur [hereinafter referred to as “the learned CIT(E)”] dated 29.01.2026 passed in Form No. 10AD, by which the application of the assessee in Form No. 10AB for approval under section 80G(5) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) has been rejected. The impugned order was received by the assessee on 30.01.2026 and the appeal was filed on 28.03.2026. It is within the time allowed by section 253(3) of the Act, as amended with effect from 01.10.2024.
2. The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 read as under:
“GROUND NO.1- Religious trust are not eligible u/s 80G (5) and explanation incurred for religious purposes:
1.1 The Learned Assessing Officer has ignored the fact that assessee is religious cum charitable trust enjoying approval u/s 80G since inception and not incurred any expenses for religious purpose beyond limit prescribed under the act and therefore eligibility needs to be considered accordingly.
1.2 The Learned Assessing Officer has erred in mentioning the object of trust in Para 2.4 which describe mainly for charitable trust and a religious part very limited and in view of the same assessee has took care to bifurcate the explanation incurred for religious purpose and charitable purposes in support of the claim of explanation on religious purpose within prescribed limit.
1.3 That expenditure clubbed under one head but includes expenses for charitable purposes and bifurcated figure has not been accepted and in para 3 stated that religious expenses must not exceed 50% , instead of 5% as prescribed under the law and assessee has complied all the legal procedure which needs to be considered under appeal.
GROUND NO.2- Approval u/s 80G without registration u/s 12AB
2.1 The Learned Assessing Officer has erred in stating about no registration u/s 12A, ignoring the fact that assessee is having 12A registration since inception and renewed time to time and lastly having registration upto 31.03.2024 vide order dated 31.12.2021 and further for renewal application has been submitted 30.09.2025 and therefore it cannot be said that trust is not having no registration u/s 12A.
Assessee reserves right to add, delete and amend any ground of appeal before finalisation of appeal.”
Though the grounds refer to “the Learned Assessing Officer”, the order under challenge has been passed by the learned CIT(E), and the grounds are understood accordingly.
3. Briefly stated, the facts of the case are that the assessee is a trust at Village Kanankheda, Tehsil Kapasan, District Chittorgarh. According to its statement of facts, it was registered with the Devasthan Department, Udaipur with effect from 11.05.2011 and held registration and approval under the Act from time to time. On 30.09.2025, it filed an application in Form No. 10AB seeking approval under section 80G(5) of the Act [described in the impugned order as section 80G(5)(iv)(B)]. The learned CIT(E) issued a questionnaire on 13.11.2025 and a show cause notice on 09.01.2026. The assessee replied to both. Clause 3 of the trust deed, extracted as an image in the impugned order, sets out the objects. In substance, they are: (1) management and growth of the movable and immovable property of the trust at Kanankheda, arranging the seva puja at the seva kendra, renovation and new construction, construction of a hospital, goshala, Veda research centre and spiritual school, and organising spiritual and cultural programmes and fairs; (2) religious, charitable and public utility work for all living beings; (3) construction, extension and maintenance of religious places, dharmashalas, bhojanshalas, guest houses, water huts and other buildings for public use; (4) propagation and publication of religious, social and public utility literature; (5) establishing temples and places of Shri Badhar Mata in India and organising the related festivals; (6) establishing and running dispensaries, diagnostic centres and first aid centres; and (7) programmes for literacy, eye donation, blood donation and de-addiction, and assistance in government schemes for the public.
4. The learned CIT(E) rejected the application for the following reasons:
| S. No. | Reason for rejection | Para of the impugned order |
|---|---|---|
| 1 | The objects of the trust are religious. Section 80G(5) applies only to institutions established for a charitable purpose. Reliance placed on Explanation 3 to section 80G and on a decision of the Hon’ble Supreme Court. | 2 |
| 2 | The Income and Expenditure accounts for F.Y. 2022-23 to 2024-25 show Adhyatmik Karyakaram, Navratri, Gopashtami and Satchandi Yadnya expenses, which are religious and “more than by 5% of total income”, in violation of section 80G(5B) of the Act. | 3 |
| 3 | The assessee holds only a provisional registration under section 12A(1)(ac)(vi) dated 31.12.2021 and has no valid registration under section 12A as on date. Registration is a precondition under Rule 11AA of the Income Tax Rules, 1962. | 4 |
5. At the hearing, the learned Authorised Representative (hereinafter referred to as “the learned AR”) submitted that the assessee is a religious cum charitable trust which has enjoyed approval under section 80G of the Act since inception. Its objects are mainly charitable and the religious part is limited. Some expenditure was grouped under one head though it includes charitable expenditure. The assessee had furnished the bifurcation, and the expenditure of a religious nature is within the limit of five per cent laid down in section 80G(5B) of the Act. The learned CIT(E) did not accept the bifurcation. As regards registration, the learned AR submitted that the assessee has held registration under section 12A since inception, the last order being dated 31.12.2021, and that an application for renewal was filed on 30.09.2025. It was prayed that approval be granted.
6. The learned Departmental Representative (hereinafter referred to as “the learned DR”) relied on the impugned order. It was submitted that the objects in the deed and the expenditure in the accounts are both religious, that the expenditure of a religious nature exceeds five per cent, and that the decision of the Hon’ble Supreme Court in Upper Ganges Sugar Mills Ltd. v. CIT [1997] 227 ITR 578 (SC) squarely applies. It was further submitted that the assessee did not hold a valid registration under section 12A of the Act on the date of the order.
7. We have heard both the parties and perused the material on record. Three questions arise: (i) whether the objects of the trust, by themselves, take it out of section 80G; (ii) whether the trust has incurred expenditure of a religious nature beyond the limit in section 80G(5B) of the Act; and (iii) the effect of the registration under section 12A of the Act on the application.
Religious objects: Ground No. 1.1 and 1.2
8. Section 80G(5) of the Act applies to donations to an institution or fund “only if it is established in India for a charitable purpose” and fulfils the conditions that follow. Explanation 3 to section 80G provides that “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature. Sub-section (5B) of section 80G, however, reads as under:
“(5B) Notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent 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.”
In paragraph 2.3 of the impugned order, this provision has been reproduced as applying to an institution which incurs religious expenditure “for an amount exceeding five percent”. On that reading, the learned CIT(E) inferred that a trust approved under section 80G(5) “should not lay any expenditure on religious activities”. The statute says the opposite. It expressly contemplates religious expenditure, and protects an institution whose expenditure of a religious nature does not exceed five per cent of its total income in the previous year. The non obstante clause overrides both clause (ii) of section 80G(5) and Explanation 3. The premise in paragraph 2.3 of the impugned order is, therefore, not correct.
9. The learned CIT(E) has relied on the decision in Upper Ganges Sugar Mills Ltd. (supra). The passage relied on, as extracted in paragraph 2.5 of the impugned order, reads as under:
“Section 80G applies to donations to any institution or fund established in India for a charitable purpose”. “Charitable purpose, for the purposes of the section, does not include any purpose the whole or substantially the whole of which is of a religious nature”. (Emphasis supplied.) Explanation 3, which uses this phraseology, takes note of the fact that an institution or funds established for a charitable prupose may have a number of objects. If any one of these objects is wholly, or substantially wholly, of a religious character, the institution or funds falls outside the scope of section 80G a donation to it does not secure the advantage of the deduction that it gives.”
The decision binds us, and nothing has been placed before us to show that it has been departed from. At the same time, it was rendered on 04.08.1997 on the law as it then stood, before sub-section (5B) was inserted in section 80G with effect from 01.04.2000. After that insertion, Explanation 3 and clause (ii) of section 80G(5) must be read subject to the non obstante clause in sub-section (5B). The two can be read harmoniously. The character of the objects remains relevant, but the presence of a religious object in the deed is no longer, by itself, decisive. Where the institution’s expenditure of a religious nature in a previous year stays within five per cent of its total income, the statute deems it to be an institution to which section 80G applies.
10. Against this background, the conclusion in paragraph 2.4 of the impugned order that “all objects of the trust are having religious nature or related to particular community” does not find support on the face of the deed as extracted. Objects (1), (6) and (7) include a hospital, goshala, dispensaries, diagnostic and first aid centres, literacy, eye and blood donation and de-addiction programmes. Nothing in the extract restricts the benefit to any particular community. Objects (3) and (5), on the other hand, are plainly religious in part. The reply of the assessee, extracted in the impugned order, also refers to clauses 3(1) to 3(10) of the deed, whereas the extract shows seven objects. The impugned order does not examine the objects individually, does not deal with the reply of the assessee, and proceeds on a misreading of section 80G(5B). The finding on Ground No. 1.1 and 1.2 cannot be sustained.
Religious expenditure: Ground No. 1.3
11. The learned CIT(E) has stated that the religious expenditure is “more than by 5% of total income”, but has neither quantified the expenditure nor identified the base. Section 80G(5B) speaks of expenditure of a religious nature measured against the “total income” of the institution in “that previous year”. Neither the total income of each year nor the nature of each head has been determined by the learned CIT(E). The assessee claims that some heads include charitable expenditure and that a bifurcation was furnished. The impugned order does not deal with this claim. The classification of individual items will be decisive. This exercise has to be carried out by the learned CIT(E) after examining the evidence.
12. One part of Ground No. 1.3 calls for a brief comment. The assessee has alleged that paragraph 3 of the impugned order adopts a limit of fifty per cent. The impugned order refers only to five per cent. This part of the ground is factually incorrect and is rejected.
Registration under section 12A: Ground No. 2.1
13. The learned CIT(E) has held that the assessee holds only a provisional registration under section 12A(1)(ac)(vi) of the Act dated 31.12.2021 and has no valid registration under section 12A on the date of the order. The assessee states that its registration was valid up to 31.03.2024 and that an application for renewal was filed on 30.09.2025. The outcome of that application is not on record. Clause (i) of section 80G(5) requires that the income of the institution should not be liable to inclusion in its total income under sections 11 and 12 of the Act. The status of the registration is, therefore, relevant to the application for approval. Since the position of the application for registration is not known, and the issue is closely linked with the two issues discussed above, it is appropriate that this aspect also be examined afresh by the learned CIT(E).
Conclusion
14. In view of the above, the impugned order dated 29.01.2026 is set aside and the application of the assessee in Form No. 10AB is restored to the file of the learned CIT(E) for a fresh decision in accordance with law. The learned CIT(E) will be free to examine all aspects of the application, including the objects, the nature of the expenditure in each year and the position of the registration under section 12A of the Act, and to call for such material as may be considered necessary. The assessee shall cooperate and furnish the complete trust deed, the bifurcation relied upon and supporting evidence. A reasonable opportunity of being heard shall be given to the assessee before a speaking order is passed. Nothing stated in this order shall be taken as an expression of opinion on the eligibility of the assessee for approval.
15. In the result, the appeal filed by the Assessee is allowed for statistical purposes.
Order pronounced in the open court on 08.10.2026
