Sthanakvasi Jain Sangh Jivrajpark Vs CIT (Exemption) (ITAT Ahmedabad)
80G Cannot Be Denied Merely Because One Object Seems Religious – ITAT Says Check 5% Rule & Facts Properly
Assessee Trust filed an application seeking final approval u/s 80G(5). CIT(E), Ahmedabad rejected the application & also cancelled the provisional 80G approval, holding that (i) the objects of the Trust were religious in nature, & (ii) expenditure on religious activities exceeded the 5% limit prescribed in Section 80G(5B). Assessee contended before Tribunal that it is a composite trust having charitable objects & only one incidental object could be considered religious. Further, Assessee argued that the alleged religious expenditure identified by CIT(E) was actually charitable in nature, since activities like “prabhavna”, “swamivatsalya”, community meals, networking & welfare events were open to all without discrimination & not confined to any religious ritual. It was also argued that total expenditure on any religious activity did not exceed 5% of income, hence in terms of Section 80G(5B), the Trust must be deemed charitable & eligible for 80G.
Assessee relied on the decision of ITAT Rajkot in Jay Mataji Charitable Trust vs. CIT(E), where it was held that even if one of the objects is religious, 80G cannot be denied if religious spending does not exceed 5% of income. CIT(E), however, relied on Om Tapovan Charitable Trust, but Tribunal noted that decision dealt with Section 80G(5)(iii) (benefit to particular caste/community), not 80G(5B). Tribunal clarified the legal position that Explanation 3 to Section 80G excludes trusts where “whole or substantially the whole” of the purpose is religious, but Section 80G(5B) is a non-obstante provision which allows composite trusts to qualify for 80G if religious expenditure does not exceed 5% of total income.
