Trusts Claims Events Like Annadaanam and Pongala were Social-Cultural Gatherings Not Purely Religious: ITAT Directs CIT(E) to Recompute Expenditure [Read Order]
The trust submitted that while many members belonged to Kerala and Tamil Nadu, its community events, Annadaanam, Pongala, and others were organized as social-cultural occasions for community bonding and fundraising through donations and membership drives.
ITAT - CITE - Taxscan
ITAT - CITE - Taxscan
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, while noting that the trusts claims on events like annadanam and pongala were Social-Cultural gatherings and not purely religious, directed the Commissioner of Income Tax [CIT(E)] to recompute the expenditure for S. 80G purposes.
Shree Narayan Cultural Mission, a trust registered under the Mumbai Charitable Mission Act, 1950, has been engaged in social, cultural, and educational activities since 1982. It runs schools, libraries, and medical aid programs, apart from conducting community events.
The trust had been provisionally approved under section 80G(5) in November 2021, which was valid up to Assessment Year 2024-25. Upon expiry, it applied for renewal in June 2024.
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The CIT(E), however, rejected the application in December 2024 on the ground that the Mission had incurred expenditure on religious activities in excess of the 5% ceiling prescribed under section 80G(5B).
According to the CIT(E), in FY 2020-21 the trust had spent ₹28,119 out of total income of ₹3,85,237 (7.3%) on religious activities, thereby breaching the statutory limit. A similar pattern of alleged overspending on religious activities in earlier years was also noted.
Challenging the rejection, the Mission argued before the ITAT that the classification of expenses by the CIT(E) was erroneous. Expenditure on electricity, municipal taxes, stationery, security, calendars, cleaning, and postage were administrative in nature and not religious. Likewise, expenses incurred towards funeral aid, medical help, educational assistance, and cultural events were charitable, not religious.
The trust submitted that while many members belonged to Kerala and Tamil Nadu, its community events, Annadaanam, Pongala, and others were organized as social-cultural occasions for community bonding and fundraising through donations and membership drives.
These, it argued, were wrongly treated as religious functions. The trust stated that, except for FY 2020-21 where the figure marginally crossed 5%, religious expenditure in FY 2021-22 (1.92%) and FY 2022-23 (3.77%) remained within the statutory limit.
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The Tribunal noted that the rejection by CIT(E) was primarily based on treating certain social and administrative expenses as religious. However, the assessee had provided detailed clarifications before the ITAT that were not examined earlier because it did not respond to the show-cause notice issued by the CIT(E).
The Tribunal held that events like Annadaanam and Pongala were not to be automatically categorized as religious, as they also carried strong social and cultural dimensions. Since the trust’s explanations were not considered earlier, the ITAT directed the CIT(E) to recompute and re-examine the expenditure, distinguishing clearly between religious, cultural, and administrative outlays.
Accordingly, the tribunal set aside the rejection order. It remanded the matter back to the CIT(E) with instructions to reconsider the Mission’s application under section 80G after proper verification. The assessee has been directed to fully cooperate and provide necessary details.
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