Trust Eligible For 80G Approval For Religious Activities If Expenditure Stays Within 5% Cap: ITAT Delhi

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 26 May held that authorities cannot deny approval under Section 80G of the Income Tax Act to a trust or institution merely because it undertakes religious activities, so long as its expenditure on such activities does not exceed five per cent of its total income in the relevant year.

Judicial Member Raj Kumar Chauhan and Accountant Member Brajesh Kumar Singh allowed the appeal filed by Shri 108 Gupti Sagar Dham Jain Trust and set aside the order of the Commissioner of Income Tax (Exemptions), Chandigarh, which had rejected the trust's application for approval under Section 80G. The Bench held:

"...an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply and the assessee will be entitled for grant of approval u/s 80G(5) of the Act..."

The Commissioner (Exemptions) rejected the application under Section 80G(5)(iv)(B) after holding that the trust engaged in religious activities. It relied on the trust's objects, which included construction of a Jain temple for worship, and on the trust's own submissions acknowledging its religious activities.

Shri 108 Gupti Sagar Dham Jain Trust contended before the Tribunal that it carried out activities for the benefit of the general public and kept its religious expenditure within the statutory limit under Section 80G(5B). It stated that it spent Rs. 18,500 on distribution of religious books and Rs. 3,02,300 on charitable camps during the relevant year.

The Tribunal noted that Section 80G(5B), inserted by the Finance Act, 1999, allows approval where religious expenditure does not exceed five per cent of total income. It found that the Commissioner (Exemptions) did not examine whether the trust crossed this threshold and instead rejected the application only on the basis of religious objects.

Accordingly, the ITAT set aside the order of the Commissioner (Exemptions) and remanded the matter for fresh adjudication. It directed the authority to verify whether the trust's religious expenditure exceeded five per cent of its total income and then decide the application afresh in accordance with law.

For Appellant: Shri Subodh Jain, Adv. and Shri Samyak Jain, CA

For Respondent: Ms. Nimisha Singh, CIT(DR)