Logos Faith Foundation Vs CIT (Exemptions) (ITAT Chandigarh)
Chandigarh ITAT: Trust Cannot Be Branded “Religious” Without Examining Its Actual Activities-80G Rejection Also Requires 5% Religious Expenditure Test
The assessee-trust, enjoying registration since 2006, was granted registration u/s 12AB for AYs 2027-28 to 2036-37, but the CIT(E) classified it as a “Religious Entity” instead of accepting its claim that it was a religious-cum-charitable trust. The trust contended that its actual activities covered education, social welfare, skill development, health, women and child development and relief to poor and needy persons, benefiting the public irrespective of caste, creed, language, religion or gender. It had furnished activity reports, documentary evidence, FCRA returns and audited financial statements before the CIT(E).
The ITAT found that the proposal to classify the trust as a purely religious entity had never been confronted to the assessee. When financial statements and evidence regarding actual charitable activities were already on record, the CIT(E) could not classify the trust as religious without putting the specific issue to the assessee and granting an opportunity to explain. This amounted to a violation of principles of natural justice. The matter relating to 12AB registration was therefore restored to the CIT(E) for de novo consideration based upon the actual activities, financial statements and other evidence.
The connected appeal concerned denial of approval u/s 80G(5) on the ground that the objects in the trust’s Memorandum were spiritual and religious. The Tribunal noted that the CIT(E) had reached this conclusion without examining the financial statements or the actual expenditure incurred by the trust.
Importantly, the ITAT referred to Section 80G(5B) and observed that, notwithstanding the restriction relating to religious purposes, an institution is deemed to satisfy the requirements of Section 80G(5) where expenditure of a religious nature does not exceed 5% of its total income for that previous year. The CIT(E) had undertaken no such exercise and recorded no finding regarding the quantum of religious expenditure. The 80G issue was therefore also restored for fresh consideration.
Key takeaway: A trust cannot be denied 80G approval merely because some of its objects are spiritual or religious. The CIT(E) must examine its actual activities and expenditure and specifically apply the statutory 5% threshold under Section 80G(5B). Likewise, a trust cannot be classified as purely religious without confronting the issue and considering the evidence of its charitable activities.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
1. Aforesaid appeals by assessee are connected appeals. The registry has noted delay of 11 days in both the appeals which stand condoned. First, we take up ITA No.1274/Chandi/2026 which arises out of an order passed by Ld. Commissioner of Income Tax (Exemption), Chandigarh, [CIT(E)] on 18-02-2026 granting registration to the assessee-trust u/s 12AB(1)(b) for AYs 2027-28 to 2036-37. The only grievance of the assessee is that it has been accorded the status of Religious Entity as against the claim of the assessee that it was religious cum charitable trust.
