C.L. Shah Charitable Trust Vs CIT (Exemption) (ITAT Ahmedabad)
Accounting Error in Classifying Charitable Donations as Religious Cannot Deny 80G Approval—Matter Remanded for Fresh Consideration ITAT Ahmedabad
Ahmedabad Tribunal dealt with rejection of a trust’s application for final approval u/s 80G(5) on the ground of excessive religious expenditure.
Assessee-trust had applied for approval u/s 80G(5). CIT(E), by order dated 28.12.2024, rejected the application observing that:
- The trust had incurred religious expenditure beyond the permissible 5% ceiling as per section 80G(5B).
- The trust had also advanced ₹10 lakh loan to Shri Pancheshwar Mahadev Trust without proper justification for the last three years.
On appeal, Assessee explained that the so-called “religious expenditure” was wrongly classified by its accountant. In fact, the donations were for charitable purposes, but had been mistakenly grouped under the “religious” head. It was pleaded that this was a mere accounting error, not a violation of law, and requested a remand to demonstrate the true nature of expenses and to clarify the purpose of the loan.
Tribunal’s Findings:
- The Tribunal noted that it was in the interest of justice to allow the assessee an opportunity to establish its claim that the expenditure was not for religious purposes.
- The assessee also needs to explain the purpose and nature of the loan advanced to Shri Pancheshwar Mahadev Trust.
- CIT(E) should re-examine the matter in detail on the basis of evidence to be furnished.
The order of CIT(E) was set aside. Tribunal remanded the matter to CIT(E) with direction to decide the application afresh on merits within six months after providing reasonable opportunity of hearing to the assessee.
