Digambar Jain Sammedachal Vikas Committee Vs CIT Exemption (ITAT Indore)
Summary: The Indore Bench of the Income Tax Appellate Tribunal set aside the order dated 29.03.2025 passed by the CIT (Exemptions), rejecting Digambar Jain Sammedachal Vikas Committee’s application in Form No. 10AB seeking approval under section 80G of the Income-tax Act, 1961. The assessee had filed the application on 29.08.2024 under section 80G(5)(iv)(B) and described the nature of its activities as “religious cum charitable”. The CIT(E), after examining the objects and activities of the society, considered objects Nos. 1, 2 and 3 to be religious in nature and rejected the application with reference to section 80G(5)(ii), section 80G(5)(iii) and Explanation 3 to section 80G. The CIT(E) reasoned that approval under section 80G(5) was available to an institution established for charitable purposes and that a trust established for religious-cum-charitable purposes fell outside its scope. Before the Tribunal, the assessee contended that it continued to enjoy registration under section 12AB, that its religious activities were merely incidental and ancillary to its principal charitable objects, and that section 80G(5B) permitted religious expenditure up to 5% of total income. It relied upon figures showing religious expenditure of 4.37% for 2021-22, 1.85% for 2022-23 and 2.36% for 2023-24, all below the stated 5% ceiling. The assessee also pointed to expenditure of Rs.8,960/- on “Mandir poojan expenses” and Rs.52,579/- on pilgrims and refreshment expenses and contended that no effective and reasonable personal hearing had been afforded before rejection. The Revenue maintained that only charitable purposes qualified for section 80G approval and that religious or religious-cum-charitable activities were not eligible. The Tribunal held that the CIT(E) had not analysed the nature of the religious activities or the amounts spent on them during the preceding three years. It observed that although an institution seeking approval must be established for charitable purposes, this did not ipso facto prohibit it from undertaking religious activities incidentally or as ancillary activities for achieving its charitable purposes. Such a contention required proper examination, due diligence and preliminary inquiry, including consideration of whether the religious activities were merely incidental or had become dominant over the charitable purposes. The Tribunal observed that expenditure on incidental religious activities up to 5% of the application of income would be one relevant yardstick. Without expressing any final view on the merits, it set aside the impugned order and restored the application to the CIT(E) for a de novo examination of the assessee’s objects, purposes, affairs and religious activities on the basis of material on record. The CIT(E) was directed to provide a personal hearing and pass a fresh speaking and reasoned order, while the assessee was directed to substantiate the charitable nature of its objects and the incidental or ancillary character of its religious activities with credible evidence. The appeal was accordingly allowed for statistical purposes.
