Exemption u/s 80G can’t be Granted if Expenditure of Religious Nature is more than 5% of Total Income: ITAT [Read Order]

Tax Exemption - 80G - Donation

Recently Kolkata Bench of Income Tax Appellate Tribunal (ITAT) in the case of Bhuvaneshwari Kali Thakuranir Seva Samity vs. Commissioner of Income Tax-(Exemptions), held that exemption to donations under Section 80G of the Income Tax Act, 1961 cannot be granted if the assessee spend more than 5% of its total income for religious purposes.

The assessee, Bhuvaneshwari Kali Thakuranir Seva Samity, perform puja and seva to Shri Kali Mata in a Mandir built and erected at village Thakdari. The other objects of the assessee include relief to poor, maintaining educational institutions keeping and maintaining the Mandir and the land and to make arrangements to continue seva and puja. It applied for approval under section 80G of the Act to the Commissioner of Income Tax (CIT) (Exemptions (E)). As per Section 80G, contributions made to certain relief funds and charitable institutions can be claimed as a deduction. Section 80G will come to effect only when the conditions mentioned in Section 80G (5) are fulfilled.  The CIT(E) rejected the case of the assessee on the ground that the assessee had failed to comply with the provisions of section 80G(5B) of the Income Tax Act,1961.

The Counsel for the Assessee argued that sub clause (5B) of S. 80G is an enabling clause by which it is provided that an entity, otherwise entitled to the benefit of s. 80G, shall not loose the benefit merely because a small percent of its total income (5%) is spent for religious nature. This enabling clause can not be used for refusing grant of registration to assessee. The Counsel also submitted that the two items of disbursement, namely priest honorarium and puja expenses, considered as outgoings for religious purposes are not for any religious purpose, either for a particular religion or otherwise. These expenses, according to him, are incurred for offering worship of any person who visits the temple and offers pranami/donation. He further contended that the charitable offerings or performing of customary practices are not religion but practice of one’s own consciousness.

The Departmental Representative of the Revenue pointed out that disallowance was made because the assessee has incurred expenditure in excess of 5% of this total income for religious purposes. He pointed out that the expression for the benefit of particular religious community or caste cannot be brought in or imported or relied upon while interpreting Section 80G(5B) of the Act, which is a separate section having different wording and purpose.

After going through a number of case laws and upholding the decision of the CIT(E), the bench comprising of Judicial Member J. Sudhakar Reddy and Accountant Member Aby T. Varkey observed “The ld. CIT(E), in his order u/s 80G(5B) of the Act, held that the assessee spent more than 5% of its income towards religious purposes. The religious expenditure in question is towards puja expenses and honarium paid to priests. In our view the judgement in the case of Umaid Charitable Trust (supra), does not come to the rescue of the assessee, because in that case a single charitable contribution was made to another trust, which carries out renovation of Lord Vishnu Temple. Such single contribution was not considered as a religious activity. In the case on hand, worship of Godess Kali Mata and expenditure incurred towards the same is definitely incurred for a particular religious purpose. The arguments of the assessee, that any person of any religion can perform the Puja to Goddess Kali and hence the expenditure in question is not restricted to a particular religion is not correct. The expenditure is of religious nature. Just because the expenditure is by persons of all categories, castes and creeds, does not cease to make the expenditure of religious nature. The requirement of the Section 80G(5)(iii) of the Act are not the basis on which approval u/s 80G of the Act, was denied and hence the arguments advanced based on this Section has no merit.”

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