Case Law Details
Jay Bhawani Mandhani Charitable Trust Vs CIT (Exemption) (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT) Surat bench has overturned an order by the Commissioner of Income-tax (Exemption), Ahmedabad, granting Jay Bhawani Mandhani Charitable Trust approval under Section 80G(5)(iii) of the Income-tax Act. The CIT(E) had initially rejected the trust’s application, citing that its objects were religious in nature and thus violated the conditions for 80G approval.
The dispute centered on Clause 4(13) of the trust deed. The CIT(E) contended that this clause, which mentioned “building temples, maintaining them and performing all kinds of spiritual and religious activities,” indicated the trust was not solely established for charitable purposes. This, in the CIT(E)’s view, contravened the main conditions of Section 80G(5) of the Act, which mandates that a trust must be established exclusively for charitable purposes to qualify for approval. The CIT(E) also noted that the trust had not provided sufficient evidence of the removal or amendment of this religious object.
In support of his decision, the CIT(E) referenced judicial precedents, including the cases of Yug Chetna Parmarth Trust, 44 taxmann.com 446 (Agra – Trib.) and OM Tapovan Charitable Trust vs. CIT(E), ITA No.175/Ahd/2023 (Ahd – Trib.). He also cited the Supreme Court’s decision in Director of Secondary Education vs. Pushpendra Kumar, AIR 1998 SC 2230, to emphasize that the trust was deemed a “religious-cum-charitable” entity and thus ineligible for 80G approval.
The assessee-trust appealed the CIT(E)’s decision to the ITAT. The trust’s legal representative argued that the contentious portion of Clause 4(13) concerning the construction and maintenance of temples and spiritual activities had already been deleted by the Charity Commissioner. The representative presented the amended trust deed, along with its English translation, to the Tribunal as evidence. The effective portion of the clause, as amended, now read: “Celebrating national and religious festivals. To do all kinds of activities for the social moral and spiritual upliftment of the human race.”
Furthermore, the trust submitted its audited income and expenditure accounts and balance sheets for the financial years ending March 31, 2023, 2024, and 2025. These documents showed that the trust had incurred significant expenses on genuinely charitable activities, such as medical relief (Rs. 5,40,000 in FY 2022-23, Rs. 18,00,000 in FY 2023-24, and Rs. 12,78,000 in FY 2024-25), educational expenses (Rs. 81,000 in FY 2024-25), and donations to Goushalas (Rs. 22,000 in FY 2022-23 and Rs. 31,00,000 in FY 2024-25). Crucially, the accounts showed nil expenditure on religious activities.
After reviewing the submissions and hearing both sides, the ITAT observed that the CIT(E) had overlooked the fact that the specific religious portion of Clause 4(13) had been struck off by the Charity Commissioner. The Tribunal concluded that based on the amended trust deed, it could not be argued that the trust was religious in nature and not engaged in charitable purposes.
The ITAT emphasized that since the trust had not incurred any expenses on religious activities, it had not violated the 5% threshold limit specified in Section 80G(5B) of the Act, which allows a limited application of funds for religious purposes by charitable trusts.
Consequently, the ITAT set aside the CIT(E)’s order, allowing the appeal filed by Jay Bhawani Mandhani Charitable Trust. The Tribunal’s decision reaffirms that a trust’s eligibility for 80G approval hinges on its primary charitable objectives and the actual application of its funds, rather than solely on broad, unamended clauses in its founding documents. The judgment was pronounced on July 21, 2025.
FULL TEXT OF THE ORDER OF ITAT SURAT
This appeal by assessee emanates from the order dated 20.12.2024, passed by the Commissioner of Income-tax (Exemption), Ahmedabad [in short, ‘CIT(E)’], wherein the CIT(E) rejected the application filed in Form No.10AB for approval u/s 80G(5)(iii) of the Income-tax Act (in short, ‘the Act’).
2. The grounds of appeal raised by assessee are as under:
“1. The Ld CIT(E) was not just and proper on the facts of the case and in law in rejecting the application of the Trust for approval u/s 80G(5).
2. PRAYER
2.1 The rejection order may be recalled and registration u/s 80G(5) may be directed to be allowed to the appellant.
2.2 Personal hearing may be granted.
2.3 Any other relief that your honours may deem fit may be granted.
3. The appellant craves leave to add, amend, alter or delete any or all of the above grounds of appeals.”
3. The brief facts of the case are that the assessee-trust filed an application for approval under clause (iii) of first proviso to sub-section (5) of section 80G of the Act in Form No.10AB electronically. The CIT(E) issued notices on 14.09.2024, 29.11.2024 and 10.12.2024. He has discussed legal background of Rule 11AA(1), 11AA(2) along with section 80G(5) of the Act. He noted that the date of application for registration for approval in Form No.10AB was 28.06.2024 and the date of provisional approval was 25.08.2022 for the period from 25.08.2022 to AY.2025-26. Thereafter, the CIT(E) examined the objects of the trust, which is at page 8 of the order and held that the objects of the trust are religious in nature and not only charitable in nature as per section 80G(5) of the Act. In response to the show cause notice dated 29.11.2024, the appellant submitted the religious object at clause 13 of the trust deed has already been deleted. But, the CIT(E) observed that Object No. 13 was religious in nature involving in celebration of religious festivals, which clearly contravenes main conditions u/s 80G(5) of the Act. The CIT(E) observed that activity of celebration of religious festivals had not been struck out. The appellant had also not filed any evidence establishing removal/amendment of the said religious object. The CIT(E) held that assessee-trust was not established only for charitable purposes. He referred the provisions of section 80G of the Act and held that appellant had to be established only for charitable purposes and there should not be transfer or application of funds for any purposes other than a charitable purpose, subject to concession granted u/s 80G(5) of the Act. The CIT(E) relied on the decisions of various Tribunals in cases of (i) Yug Chetna Parmarth Trust, 44 taxmann.com 446 (Agra – Trib.) and (ii) OM Tapovan Charitable Trust vs. CIT(E), ITA No.175/Ahd/2023 (Ahd – Trib.). He discussed the provisions of section 2(15), 80G(5) and 80G(5B) and 80G(5)(ii) of the Act and referred the decision of Hon’ble Supreme Court in case of Director of Secondary Education vs. Pushpendra Kumar, AIR 1998 SC 2230. It was observed that the appellant had violated existing main condition of sub-section (5) of section 80G, being a religious-cum-charitable trust and violated the conditions of section 80G(5)(ii) of the Act. Hence, the appellant was not entitled to get approval u/s 80G(5) of the Act. Therefore, application in Form No.10AB for approval under clause (iii) of first proviso to section 80G(5) of the Act was rejected and he also cancelled the provisional registration grated earlier.
4. Aggrieved by the order of CIT(E), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee filed a paper book containing 27 pages, including copy of registration/approval u/s 12AB(1)(b), copy of trust deed (both in Gujrati and English translation), audited income and expenditure account and balance sheet for the year ended on 31.03.2023, 31.03.2024 and 31.03.2025. He also submitted that the documents were also provided before the CIT(E). The ld. AR further contended that the first line of object No.13 has been deleted by the Charity Commissioner, and it is no more part of the objective. Further, the amount of religious and expenditure was Rs. Nil.
5. On the other hand, learned Commissioner of Income-tax – Departmental Representative (ld. CIT-DR) for the revenue supported the order of CIT(E).
6. We have heard both the parties and perused the materials available on record. The CIT(E) has treated the assessee-trust as a religious trust in view of the clause 4(13) of the trust deed. For the appreciation of fact, the same is reproduced below:
“To build temples, maintaining them and performing all kinds of spiritual and religious activities …………….”
6.1 The CIT(E) seems to have ignored the struck off portion of the clause and has wrongly held that it was for religious purpose but not for charitable purpose. However, it has clear from the trust deed submitted by the assessee-trust and its English translation that the said portion of the clause 4(13) have been struck off by the Charity Commissioner. The effective portion of point No. 4(13) is reproduced below for ready reference and clarity:
“…………… Celebrating national and religious festivals. To do all kinds of activities for the social moral and spiritual upliftment of the human race.”
6.2 Therefore, it cannot be said that the appellant is a religious trust and was not engaged for charitable purposes. The ld. AR has further submitted audited income and expenditure account and balance sheet for the years ended 31.03.2023, 31.03.2024 and 31.03.2025. It is seen therefrom that the appellant had spent Rs.5,40,000/- for medical relief, Rs.22,000/- for Goushala donation expenses in the FY.2022-23. The appellant had incurred Rs.18,00,000/- towards medical relief in FY.2023-24, and Rs.81,000/- for educational expenses, Rs.12,78,000/- for medical relief and Rs.31,00,000/- for Goushala donation expenses in the FY.2024-25. It is, therefore, clear that the assessee-trust has not incurred any expenses on religious activities. Therefore, the threshold limit of 5% as specified in section 80G(5B) of the Act has not been violated. In view of the above, the order of CIT(E) is set aside.
7. In the result, appeal of the assessee is allowed.
Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 21/07/2025.
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