2025 (5) TMI 1294 - AT - Income Tax

Rejection of application filed by the assessee trust for granting approval u/s. 80G(5)(vi) - Charitable activity u/s 2(15) or not? - HELD THAT - The assessee trust is not a religious trust since the temple is open to the public irrespective of the caste creed sex colour etc. Further the activity of doing annadanam to the public at large cannot be treated as a religious in nature based on the findings given by the Nagpur and Pune benches of the Tribunal. The order of the CIT cannot be sustained. CIT had also not furnished any specific instances in support of his allegation that the assessee is a religious trust. It is also not the case of the Revenue that the trust imposed various restrictions on the public to enter the temple and to have the annadhanam. When there is no specific instances of violations it cannot be simply alleged that the assessee trust is a religious trust. In these circumstances the denial of approval u/s 80G of the Act is not correct. We set aside the order of the CIT (E) and hold that the assessee is not a religious trust and therefore they are entitled for approval u/s. 80G(5)(vi) - Appeal filed by the assessee is allowed.

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the assessee trust managing temples and carrying out activities such as annadanam qualifies as a public charitable trust or a religious trust under the Income Tax Act.

2. Whether the trust is entitled to approval under section 80G(5)(vi) of the Income Tax Act, which requires that the institution or fund should not be for the benefit of any particular religious community or caste.

3. Whether the activities of the trust, including maintenance of temples and annadanam, are substantially of a religious nature so as to disqualify it from exemption under section 80G.

4. Whether the trust's objects and activities fall within the definition of charitable purposes under section 2(15) of the Income Tax Act, and whether the proviso to this section excluding objects wholly or substantially of a religious nature applies.

5. Whether the trust's registration under section 12A of the Act and compliance with conditions therein impact the eligibility for approval under section 80G.

6. The interpretation and application of relevant judicial precedents regarding the distinction between charitable and religious trusts, and the scope of exemption under sections 11, 12A, and 80G of the Income Tax Act.

Issue-wise Detailed Analysis:

Issue 1 and 2: Nature of the Trust and Eligibility for Approval under Section 80G(5)(vi)

The legal framework involves section 80G(5)(vi) of the Income Tax Act, which permits approval of donations to trusts engaged in charitable activities, provided the trust is not for the benefit of any particular religious community or caste. Section 2(15) defines "charitable purpose" inclusively, encompassing relief of the poor, education, medical relief, and advancement of any other object of general public utility, but excludes purposes wholly or substantially of a religious nature (Explanation 3 to section 80G(v)).

The Tribunal examined whether the trust's management of seven temples and provision of annadanam (free food) are religious activities that benefit a particular religious community, thereby disqualifying it from approval under section 80G.

Relevant precedents were heavily relied upon, notably the Nagpur Bench ITAT order dated 11/10/2012, which analyzed similar facts. That decision held that maintaining temples and incurring expenses for religious worship does not necessarily amount to advancement or propagation of a particular religion or sect. The Tribunal reasoned that Hinduism, often cited as the religion involved, is not a monolithic religion or community but a way of life encompassing diverse beliefs and practices without a uniform code of ethics or worship. Consequently, the trust's activities were not confined to a particular religious community or sect.

The Tribunal further noted that the trust deed did not restrict entry to the temples or access to annadanam to any particular group, and the income was fully applied towards public benefit without any private gain. These facts supported the contention that the trust is a public charitable trust rather than a private religious one.

The Tribunal also referred to the Pune Bench ITAT order dated 17/08/2015, which emphasized that expenditure on religious activities must not exceed 5% of total receipts to maintain approval under section 80G. It was held that honorarium paid to priests (Brahmins) constituted administrative expenses rather than pooja expenses, and thus the trust did not violate this threshold. The trust was found not to propagate any particular religion exclusively.

In addition, the Rajasthan High Court's decision in Umain Charitable Trust was cited, which clarified that expenditure on repair and renovation of temples does not automatically render a trust ineligible for exemption if the temple is open to all and benefits are not restricted to a particular community. The Court held that Hinduism is not a single religion or community but a broad faith system with multiple sects and castes, and thus the trust's activities were not sectarian.

Applying these principles, the Tribunal concluded that the trust's activities, including temple maintenance and annadanam, were charitable in nature and did not benefit any particular religious community exclusively. Therefore, the rejection of approval under section 80G(5)(vi) by the Commissioner of Income Tax (Exemption) was unsustainable.

Issue 3 and 4: Charitable Purpose vs. Religious Purpose

The Tribunal analyzed the distinction between charitable and religious purposes, relying on section 2(15) and Explanation 3 to section 80G(v). It was emphasized that a trust's objects may be composite, involving both charitable and religious purposes, but exemption is denied only if the whole or substantially the whole of the objects are religious in nature.

The Tribunal referred to the Supreme Court's decision in CIT vs. Dawoodi Bohra Jamat, which clarified that trusts with composite objects can claim exemption if they do not benefit a particular religious community exclusively and if charitable activities predominate or coexist with religious activities.

The Tribunal found that the trust's objects included public charitable activities such as annadanam and maintenance of public temples open to all, which qualify as charitable purposes. No evidence was presented by the Revenue to prove that the trust's activities were exclusively or substantially religious or that benefits were confined to a particular sect or caste.

Therefore, the trust's activities fell within the ambit of charitable purposes under the Act, and the proviso excluding religious purposes did not apply to disqualify the trust.

Issue 5: Registration under Section 12A and its Impact

The trust's registration under section 12A of the Income Tax Act was acknowledged, with the trust having complied with conditions to maintain registration. The Tribunal noted that registration under section 12A is not barred for trusts with religious objects if such objects are also charitable and do not benefit a particular religious community exclusively.

The Pune Bench ITAT's decision in Diocese of Pune vs. CIT was cited, which held that trusts with both religious and charitable objects are eligible for registration under section 12A and exemption under section 11, provided they do not contravene section 13(1)(b) of the Act.

Applying this principle, the Tribunal held that the assessee trust, with its composite objects and inclusive public benefit, was entitled to registration and approval under the relevant provisions.

Issue 6: Treatment of Competing Arguments and Final Conclusions

The Revenue argued that maintenance of temples and religious activities were inherently religious and thus disqualified the trust from approval under section 80G. However, the Tribunal found these arguments unsubstantiated by evidence, especially since the trust did not restrict public access or benefits.

The Tribunal gave significant weight to precedents rejecting narrow or pedantic interpretations that equate temple maintenance and related activities with exclusive religious purposes benefiting a particular community.

It was also noted that the trust's income was fully applied to public benefit, with no private gain to trustees or restricted beneficiaries.

Consequently, the Tribunal set aside the order of the Commissioner of Income Tax (Exemption) and allowed the appeal, granting approval under section 80G(5)(vi).

Significant Holdings:

"The words 'religious community' means the group of people having a common religion or faith. The word 'religion' means the belief in and worship to a superhuman controlling power, specially the personal god or gods, a particular system of faith and worship. It means the trust should not be for the benefit of any particular group of persons having the common belief in worshiping of superhuman controlling power or having common system & faith and worship."

"Lord Shiva, Hanumanji, Goddess Durga does not represent any particular religion, they are merely regarded to be the super power of the universe."

"Hinduism is a way of life of a civilized society. It as such is not a religion. ... Therefore, Hindu is neither a religion nor a community. Technically Hindu is neither a religion nor a community."

"The line of distinction between religious purposes and charitable purposes is very thin and no watertight compartment between the two activities can be established. Unless the objective of the charitable trust in question itself is to spend its income for a particular religion and it is so found in the trust deed, the Income-tax Department cannot reject the renewal of the trust as charitable trust under section 80G of the Income-tax Act, 1961, merely because one particular expenditure is for an activity which may be termed as spending for a particular religion."

"The objects of the trust exhibited the dual tenor of religious and charitable purposes and activities. Section 11 of the Act allowed such trust with composite objects to claim exemption from tax as a religious and charitable trust subject to the provisions of section 13."

"There is no bar under the statute that religious trust cannot be granted registration u/s 12A of the Act."

"When there is no specific instances of violations it cannot be simply alleged that the assessee trust is a religious trust."

In conclusion, the Tribunal held that the assessee trust is not a religious trust within the meaning of section 80G(5)(vi) of the Income Tax Act, and its activities are charitable in nature, benefiting the public at large without restriction to any particular religious community or caste. The denial of approval under section 80G was therefore set aside, and approval was granted, allowing the appeal.

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