Shri Vijay Raghav Sarkar Trust Vs ITO (ITAT Agra)
Religious Expenditure Within 5% Limit Does Not Bar Section 80G Approval: ITAT
Introduction
The Income Tax Appellate Tribunal, Agra Bench, held that religious expenditure does not automatically disqualify an institution from approval under Section 80G where the statutory exception in Section 80G(5B) applies.
The Tribunal rejected the CIT(E)’s approach that the exception need not be examined for a religious or religious-cum-charitable institution. It restored the application for verification of whether religious expenditure exceeded 5% of total income, as specified in the provision.
Approval was not granted outright. The CIT(E) was directed to grant renewal if the expenditure condition and other applicable requirements were satisfied.
Background of the Case
Shri Vijay Raghav Sarkar Trust sought renewal of approval under Section 80G. It had obtained Section 12AB registration for Assessment Years 2026-27 to 2030-31.
During examination of the renewal application, the CIT(E), Bhopal, issued a show-cause notice dated 12 March 2026. The notice stated that the trust appeared primarily engaged in maintaining a temple and conducting religious ceremonies and rituals.
The trust submitted its reply on 23 March 2026. However, the CIT(E) rejected the application, holding that its objects and activities did not satisfy Section 80G(5)(ii), Explanation 3 to Section 80G and Section 80G(5B).
Delay Before Tribunal Condoned
The appeal was delayed by 33 days.
The trust explained that its secretary and person in charge had suffered from fever and had been advised complete bed rest. The explanation was supported by an affidavit.
The Tribunal found that the affidavit remained uncontroverted and accepted that sufficient cause prevented timely filing. It therefore condoned the delay and proceeded to examine the appeal.
Nobody appeared for the trust at the hearing. The Tribunal considered the record after hearing the Departmental Representative.
CIT(E)’s Interpretation Rejected
The CIT(E) distinguished between charitable, religious and religious-cum-charitable trusts, taking the view that only the first category qualified under Section 80G.
He further held that examination of the 5% religious expenditure limit was unnecessary for purely religious or religious-cum-charitable institutions.
The Tribunal disagreed with that interpretation. It examined Section 80G(5B)’s overriding language, which operates notwithstanding Section 80G(5)(ii) and Explanation 3.
Although Explanation 3 excludes purposes wholly or substantially religious from “charitable purpose”, Section 80G(5B) creates a specific deeming exception where religious expenditure remains within the prescribed limit.
The Tribunal held that this exception had to receive effect when determining the trust’s eligibility.
Five Per Cent Test Required Verification
The CIT(E) had also stated that the trust violated Section 80G(5B), but the Tribunal found that no working supported that conclusion.
The trust’s grounds asserted that religious expenditure was below 5% of total receipts in earlier years. The statutory text reproduced by the Tribunal, however, refers to 5% of total income, and its operative direction applied that measure.
The Tribunal therefore considered factual verification necessary rather than accepting either side’s position without examination.
The absence of a calculation was material because the alleged breach formed part of the rejection’s reasoning.
Directions and Outcome
The Tribunal set aside the rejection order and restored the application to the CIT(E).
It directed that renewal be granted if religious expenditure did not exceed 5% of total income during the relevant previous year, subject to satisfaction of the other conditions and accordance with law.
The appeal was allowed for statistical purposes. The trust secured reconsideration under the correct statutory approach, while actual compliance with the expenditure ceiling remained open.
FULL TEXT OF THE ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated 27.03.2025 passed on Application No. CIT EXEMPTION, BHOPAL/2025-26/12AA/14262 by the ld. Commissioner of Income Tax (Exemption), Bhopal [hereinafter referred to as the “CIT(E)], wherein the ld. CIT(E) has rejected the application of the assesee filed u/s. 80G(5)(ii) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).
2. The present appeal has been filed beyond the period of limitation by 33 days. In the application for condonation of this delay, the assessee submitted that the secretary and person in charge of the Trust, Mr. Ravindra Kumar Gupta, was suffering from fever and advised complete bed rest, which led to file the appeal with aforesaid delay. Considering the reasons for delay stated in the delay condonation application supported by uncontroverted affidavit, we are satisfied that the assessee was prevented by sufficient cause for the delay caused in filing this appeal. We therefore, condone the delay of 33 days and take up the appeal for adjudication on merits.
3. Brief facts of the case: The assessee had obtained registration u/s. 12AB from CIT(E), Bhopal vide order dated 25.06.2025 for the period from A.Y. 2026-27 to 2030-31. Thereafter, the assessee filed an application seeking renewal of approval u/s. 80G of the Act before the learned CIT(E), Bhopal. The learned CIT(E) while considering the assessee’s application issued a show cause notice on 12.03.2026 requiring the assessee to clarify certain points. The relevant extract of the show cause notice is reproduced as under :
“1. The application and documents sübmitted by the assessee have been examined. On perusal of the trust deed, activity reports, financial statements and other materials placed on record, it is observed that the assessee is primarily engaged in activities related to running and maintenance of a temple and conducting religious ceremonies and rituals.
2. As per the provisions of Section 80G(5) of the Income-tax Act, 1961, read with the applicable rules, approval under Section 80G cannot be granted to institutions or funds if they are expressed to be for the benefit of any particular religious community or caste, or where the activities are predominantly religious in nature.
3. In the present case, the activities carried out by the assessee appear to be religious in nature, including but not limited to the management of temple premises, organization of religious events, and performance of rituals associated with the said temple. Accordingly, it appears that the assessee is engaged in religious activities which may not qualify for approval/renewal under Section 80G of the Income-tax Act, 1961.
4. In view of the above facts, it is proposed to reject the application for renewal of approval under Section 80G filed by the assessee.
5. You are hereby requested to show cause as to why the application for renewal of approval under Section 80G should not be rejected on the above-mentioned grounds. You may file your written submissions along with supporting documentary evidence, if any, to substantiate your claim that the activities of the institution are charitable in nature and are eligible for approval under Section 80G.”
3.1. The assessee filed its reply on 23.03.2026. The Ld. CIT (E) on perusal of reply noted that the objects and the activities of the assessee being in the nature of religious purposes do not qualify the eligibility criteria of section 80G (5) of the Act and they were in violation of section 80G (5) (ii) and Explanation 3 to section 80G of the Act. Thereafter, the Ld. CIT (E) quoted the relevant provisions of section 80 G and noted that section 11 of the Act allows exemption for income derived from property held under trust wholly for charitable or religious purposes whereas in section 80G (5) of the Act the deduction is allowable only for charitable purposes and the trust which is also established for religious purposes is out of scope of section 80G (5) of the Act. The Ld. CIT (E) further noted that section 80G (5) of the Act starts with the wordings only if it is established in India for a charitable purpose and also section 80G(5B) of the Act allows the benefit of religious expenditure up to 5% which is established for purely charitable in nature.
3.2 The Ld. CIT (E) also noted that it is an undisputed fact that public charitable trusts have 3 categories i.e. “charitable purposes”, “religious purposes” and “religious cum charitable purposes.” The Ld. CIT (E) further observed that out of the 3 categories, only the first category was eligible for registration u/s 80G (5) of the Act. It was further held that determination of religious expenditure up to 5% was not required in cases which are either purely religious in nature or religious cum charitable. The Ld. CIT (E) further noted that in this case, the assessee was also found in violation of section 80G (5B) of the Act. The Ld. CIT (E) finally held that the objects and activities of the trust being in the nature of religious purposes do not qualify the eligibility criteria of 80G(5) of the Act and they were in violation of section 80G (5)(ii) and Explanation 3 to section 80G of the Act and section 80G (5B) of the Act. Accordingly, the application of the assessee filed for renewal of approval u/s 80G (5)(ii) of the Act was rejected by the Ld. CIT (E).
4. Aggrieved with the said order, the assessee is in appeal before us on the following grounds of appeal:
“1. That the Ld. CIT (Exemption) has erred in law and fact to pass the order rejecting the registration u/s 80G without taking the proper cognizance of the provisions governed under section 80G of the Act.
2. That the Ld. CIT (Exemption) has erred in law and fact to pass the order rejecting the registration u/s 80G however the objectives of the appellant trust being charitable cum religious activity were undisputed even by the Ld. CIT (Exemption).
3. That the Ld. CIT (Exemption) has erred in law and fact to pass the order rejecting the registration u/s 80G however the appellant trust was duly granted the registration u/s 12A of the Act.
4. That the Ld. CIT (Exemption) has erred in law and fact to pass the order rejecting the registration u/s 80G however the appellant trust was carrying out the objectives duly authorised as per the provisions of Section 80G of the Act and the benefit of Section 80G of the Act was available.
5. That the Ld. CIT (Exemption) has erred in law and fact to pass the order rejecting the registration u/s 80G after taking the stand that the section 80G benefit is only available to the trust carrying out the charitable activity only and not to the trust carrying out the charitable cum religious activity which is incorrect.
6. The Ld. CIT (Exemption) has erred in law and fact to pass the order rejecting the registration u/s 80G however the provisions of section 80G(5B) was duly fulfilled by the appellant since the expenditure for religious purpose was less than 5% of total receipts in last various previous years.
7. That the order is bad in law and against the facts of the case.
8. That any other relief or reliefs deemed fit in the facts and circumstances of the case may be granted.
9. The appellant craves leave to add, alter or vary the grounds of appeal before or at the time of hearing.”
5. None was present on behalf of the assessee and the case was heard after hearing the Ld. CIT DR who supported the order of the ld. CIT (E).
6. We have perused the material on record. In this regard, we notice that the Ld. CIT (E) while discussing the various provisions relating to grant of registration u/s 80G (5) of the Act rejected the application of the assessee on the ground that the objects and activities being in the nature of religious purposes do not qualify the eligibility criteria of section 80G (5) of the Act and they were in violation of section 80G (5) (ii) and Explanation 3 to section 80G of the Act. The ld. CIT (E) further held that only public charitable trusts having “charitable purposes” was eligible for registration u/s 80G (5) of the Act and that determination of religious expenditure up to 5% was not required in cases which are either purely religious in nature or religious cum charitable as in the case of the assessee. The Ld. CIT (E) further noted that in this case, the assessee was also found to be in violation of section 80G (5B) of the Act.
6.1 In this regard, to appreciate the legal position regarding the requirement of charitable activities as per this section as noted by the Ld. CIT (E) and the exception carved out by way of section 80 G(5B) of the Act regarding the requirement of charitable activities in the case of an institution or fund which incurs expenditure during any previous year, which is of a religious nature for an amount not exceeding 5% of its total receipts in that previous year so as to become eligible for deduction u/s 80G of the Act, the relevant provisions of section 80G (1), clause (i) and (ii) of 80G (1), sub section 5 of 80G and sub clause (iv) of clause (a) of sub section 2 of 80G of the Act, 80G(5B) of the Act and the Explanation 3 to section 80G are reproduced as under:
“Deduction in respect of donations to certain funds, charitable institutions, etc.
80G. (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,—
(i) In a case where the aggregate of the sums specified in sub section (2) includes any sum or sums of the nature specified in ………; and
(ii) in any other case, an amount equal to fifty per cent of the aggregate of the sums specified in sub-section (2).
(2) The sums referred to in sub-section (1) shall be the following, namely :—
(a) any sums paid by the assessee in the previous year as donations to—
………
(iv) any other fund or any institution to which this section applies; or
(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :—
(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;
(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.
Explanation 3.—In this section, “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature.”
(emphasis supplied by us)
6.2 As per Explanation 3 to section 80G of the Act, “charitable purpose” does not include any purpose the whole or substantially the whole of which is religious in nature. However, section 80G(5B) referring to clause (ii) of sub section 5 and Explanation 3 to section 80G states that notwithstanding anything contained in clause (ii) of sub section 5 and Explanation 3 to section 80G wherein an institution or fund which incurred expenditure during any previous year, which is of a religious nature for an amount not exceeding 5% of its total income in that previous year shall be deemed to be in institution or fund to which the provision of the section apply i.e. it will be eligible for deduction u/s 80G of the Act. Thus, section 80G(5B) creates a deeming fiction that even in a case of an institution or fund which is engaged in activities of a religious nature but incurs expenditure for an amount not exceeding 5% of its total receipts in that previous year shall be deemed to be an institution or fund which will be eligible for deduction u/s 80G of the Act. Thus, the assessee will also be eligible for deduction u/s 80G of the Act provided it does not violate the provision of section 80G(5B) of the Act.
6.3 Therefore, in view of the above discussion we are of the considered view that the observation of the Ld. CIT (E) that only an institution or fund will be eligible for registration u/s 80G (5) of the Act if it was only for “charitable purposes” and it will not apply to an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding 5% of its total income in that previous year is not acceptable. At the cost of the repetition, we make it clear that an institution or fund will be eligible for registration u/s 80G (5) of the Act if its expenditure does not exceed 5% of the total income which is of a religious nature as provided in section 80G(5B) of the Act. However, as noted above, the Ld. CIT (E) has not given the working regarding his finding that the assessee in the present case is also found in violation of section 80G(5B) of the Act i.e. it has incurred expenditure during the previous year which is of a religious nature for an amount exceeding 5% of its total income. In this regard, the assessee submits in ground no. 6 that the provisions of section 80G(5B) was duly fulfilled by the appellant since the expenditure for religious purpose was less than 5% of total receipts in last various previous years. This factual position requires verification.
6.4 In view of the above factual position, we set aside the impugned order of the Ld. CIT (E) and restore the matter back to his file for fresh adjudication keeping in view the above observations with a direction that the Ld. CIT (E) will grant renewal of approval u/s 80G of the Act to the assessee, if he comes to a finding that the assessee has not incurred expenditure during the previous year which is of a religious nature for an amount exceeding 5% of its total income subject to satisfaction of other condition(s) and in accordance with law. Grounds nos. 1 to 8 of the appeal are allowed for statistical purposes.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 16/09/2026.
