Denial of Registration u/s 80G: ITAT remands Matter to CIT(E) for Fresh Adjudication on Misinterpretation of Trust Objects and 5% Limit u/s 80G(5B) [Read Order]

The Commissioner of Income Tax(Exemptions) [CIT(E)], passed an order rejecting the application filed by the assessee, Prayatna Charitable Trust, seeking registration under section 80G(5)(iii) of the Income Tax Act, 1961 (Act), and simultaneously cancelled its provisional registration.

The 2025 Edition Every Tax Professional Needs! Click here

The CIT (E) was of the view that specific objects of the trust deed were found to be religious in nature, and the assessee had failed to respond or seek adjournment in response to a specific show cause notice issued by him to the assessee in this regard.

Upon perusal of the trust deed, CIT(E) held that the assessee was involved in activities like Gyanyagna, Kirtan, and Parvachan, which are clearly religious in nature. As per section 80G(5) of the Act and the applicable legal framework, an institution or fund must be established solely

for charitable purposes to be eligible for approval under this provision.

Since the presence of even a single religious object renders the trust a religious- cum-charitable institution, CIT(E) held that the assessee trust was disqualified from availing registration under section 80G(5) of the Act.

In the order, CIT (E) also held that section 80G(5B) of the Act does not override the fundamental requirement that the trust must be established only for charitable purposes; it merely provides a limited concession to trusts already established for charitable purposes where incidental religious expenditure does not exceed 5% of total income.

Accordingly, the Commissioner held that the assessee trust violated the conditions laid down in section 80G(5)(ii) and Explanation 3, and was therefore not eligible for registration.

The 2025 Edition Every Tax Professional Needs! Click here

The assessee submitted that the CIT(E) had misinterpreted the object, which in fact pertained to organising knowledge camps, spiritual gatherings, and lectures aimed at inculcating high moral values and not at promoting any religious practices or beliefs. The term "Gyan Yagna" denoted “knowledge camps” and not religious rituals like "Havan" or other ceremonial yagnas.

In support of its position, the assessee placed reliance on the decision of the Bangalore Bench in the case of Shroutta Vinan Gurukulam vs. ITO wherein it was held that workshops disseminating Vedic knowledge and philosophy cannot be construed as religious activities.

as they are more aligned with lifestyle education and spiritual upliftment, not

tied to any specific religion.

The assessee further submitted that it had neither been established for religious purposes nor had applied any part of its income for religious activities. It was submitted that the trust fully satisfied the conditions of section 80G(5) of the Act, and hence, the denial of approval was unjustified.

The assessee also placed reliance on several ITAT decisions where approval under section 80G was granted despite the presence of religious objects, so long as the expenditure on religious activities did not exceed 5% of total income.

The two-member bench of Annapurna Gupta (Accountant Member) and Siddhartha Nautiyal (Judicial Member) set aside the impugned order passed by the CIT(E) and restored the matter for fresh adjudication.

The CIT(E) was asked to re-examine the nature of the impugned object in the light of the explanation provided by the assessee and relevant judicial precedents, including the decision of the Bangalore Bench in Shroutta Vinan Gurukulam vs. ITO, and determine whether the said object can be regarded as religious or merely spiritual and educational in nature.

Further, CIT(E) was asked to verify whether the assessee has incurred any expenditure on religious activities and, if so, whether such expenditure falls within the permissible limit of 5% as envisaged under section 80G(5B) of the Act.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates