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.

Summary

The core legal questions considered in this appeal revolve around the eligibility of the assessee trust for approval under section 80G(5)(vi) of the Income Tax Act, 1961. The principal issues examined include:

1. Whether the assessee trust, managing temples and conducting annadanam, qualifies as a public charitable trust or is a religious trust benefiting a particular religious community, thereby affecting its eligibility for approval under section 80G(5)(vi).

2. Whether the activities of the trust, including temple maintenance and annadanam, are substantially of a religious nature, thus disqualifying it from approval under section 80G(5)(vi).

3. The interpretation of the terms "charitable purpose" and "religious purpose" under the Act, particularly in the context of trusts managing places of worship open to the public without restrictions.

4. The applicability of section 13(1)(b) of the Act concerning trusts with both religious and charitable objects and whether such trusts can claim exemption and approval under sections 11, 12A, and 80G.

5. The evidentiary burden on the Revenue to prove that the trust is wholly or substantially for religious purposes benefiting a particular religious community.

Issue-wise Detailed Analysis

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

The legal framework centers on section 80G(5)(vi) of the Income Tax Act, which provides for the grant of approval to trusts engaged in charitable activities but excludes those whose objects are wholly or substantially religious in nature or benefit a particular religious community or caste. Section 2(15) defines "charitable purpose" inclusively, covering relief of the poor, education, medical relief, and advancement of any other object of general public utility. Explanation 3 to section 80G(v) excludes purposes wholly or substantially religious from charitable purposes.

Precedents from various ITAT benches, notably the Nagpur, Pune, and Hyderabad Benches, were extensively relied upon. The Nagpur Bench in a 2012 decision emphasized that maintenance of temples and related expenses, including free food (annadanam) and festival activities, do not necessarily constitute advancement or propagation of a particular religion. The Tribunal observed that Hinduism, often cited by the Revenue as the religion involved, is not a single religion or community but a way of life encompassing diverse beliefs and practices. Thus, expenses on worship of deities such as Lord Shiva or Goddess Durga do not automatically equate to religious purpose benefiting a particular community.

The Nagpur Bench further noted that the trust deed did not restrict entry or worship to any particular group, and the activities were open to the public at large. The Tribunal held that unless the trust's activities are wholly or substantially religious, the trust should not be disqualified from approval under section 80G(5)(vi).

The Pune Bench, in a later case, supported this approach, holding that expenditure on pooja or religious activities should be carefully examined, and administrative expenses such as honorarium to priests should not be automatically classified as pooja expenses. The Tribunal found merit in the assessee's argument that the trust did not propagate any particular religion and that the temple was open to all irrespective of caste, creed, or religion. It also relied on the Rajasthan High Court's decision in Umain Charitable Trust, which distinguished between religious and charitable purposes and emphasized the thin line separating them. The Court held that expenditure on temple maintenance or religious activities does not necessarily disqualify a trust from exemption if the trust's objects are not exclusively religious or benefiting a particular community.

The Tribunal also considered the absence of any restriction on public entry or benefits, reinforcing that the trust was not confined to a particular religious community. The activity of annadanam was held to be charitable and not religious in nature.

Issue 3 & 4: Interpretation of Charitable and Religious Purposes and Applicability of Section 13(1)(b)

The Supreme Court's decision in CIT vs. Dawoodi Bohra Jamat was pivotal in elucidating the distinction and coexistence of religious and charitable objects within a trust. The Court held that the nature of the trust is determined by the legal effect of the objects declared in the trust deed, not merely by factual findings. A trust may have both religious and charitable objects and still qualify for exemption under sections 11 and 12A, subject to the provisions of section 13.

The Court recognized that religious activities, such as providing food on religious occasions or establishing religious educational institutions, may also have charitable aspects and do not necessarily restrict benefits to a particular community. The legal effect is that such trusts are eligible for exemption unless they violate the conditions of section 13(1)(b), which applies only to charitable trusts and not to trusts with both religious and charitable purposes.

Subsequent High Court decisions, including those of Gujarat and Rajasthan, have echoed this interpretation, confirming that trusts with composite objects are entitled to registration and exemption, provided they do not exclusively benefit a particular religious community or sect.

Issue 5: Burden of Proof on the Revenue

The Tribunal emphasized that the onus lies on the Revenue to prove that the trust's objects are wholly or substantially religious and that it benefits a particular religious community. In the present case, the Revenue failed to provide specific instances or evidence demonstrating restrictions on public access or benefits limited to a particular community. The trust deed and operational facts indicated openness and inclusivity, with income spent for public benefit and no private gain to trustees.

The absence of any material to substantiate the claim that the trust is religious in the exclusive sense or benefits a particular community led the Tribunal to conclude that the Revenue's rejection of approval under section 80G(5)(vi) was unsustainable.

Application of Law to Facts and Treatment of Competing Arguments

The Tribunal carefully examined the trust deed, the nature of activities (temple management and annadanam), and the inclusivity of the trust's operations. It juxtaposed these facts with the legal principles and precedents, finding that the trust's activities were not exclusively religious nor confined to a particular religious community. The Revenue's argument that temple maintenance is inherently religious was countered by the Tribunal's reliance on authoritative decisions recognizing the charitable dimension of such activities when open to the public without discrimination.

The Tribunal also considered the assessee's compliance with registration requirements under section 12A and the absence of any evidence of violation of conditions for approval under section 80G. The competing arguments were addressed by distinguishing between religious activities and charitable purposes and by highlighting the inclusive nature of the trust's operations.

Conclusions

The Tribunal set aside the order of the Commissioner of Income Tax (Exemption) rejecting approval under section 80G(5)(vi) and held that the assessee trust is not a religious trust disqualified from approval. It directed the grant of approval under section 80G(5)(vi), recognizing the trust as a public charitable trust engaged in activities benefiting the public at large without religious exclusivity.

Significant Holdings

"The charitable purpose has been defined u/s. 2(15) of the Act. The definition of charitable purpose is inclusive one. It includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility."

"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."

"No material or evidence has been brought on record by the department which may prove that any person coming, worshipping and maintaining the temple has to follow a particular code of ethical rules and has to carry out the prescribed rituals and observances, ceremonies and modes of worship. The entry is not restricted to a particular group of persons. Anybody whether want to worship or not and want to maintain or not can come to the temple and avail of all the facilities available to the public at large. Therefore, these objects cannot be regarded to be the religious objects."

"Hinduism is a way of life of a civilized society. It as such is not a religion. ... Hinduism holds within its fold men of divergent views and traditions who have very little in common except a vague faith in what may be called the fundamentals of the Hinduism."

"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 as declared in the Trust Deed would govern its right of exemption under sections 11 and 12 of the Act. The determination of the nature of the trust as wholly religious or wholly charitable or both charitable and religious under the Act is not a question of fact. It is a question which requires examination of the legal effects of the proven facts and documents."

"Section 11 of the Act allows such trust with composite objects to claim exemption from tax as a religious and charitable trust, subject to provisions of section 13 of the Act."

"The onus, in our opinion, gets shifted on the Revenue to prove that the assessee-trust is wholly or substantially for the religious purpose."

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

In final determination, the Tribunal held that the assessee trust is a public charitable trust, not a religious trust benefiting a particular religious community, and is entitled to approval under section 80G(5)(vi) of the Income Tax Act. The order of the Commissioner of Income Tax (Exemption) rejecting approval was set aside accordingly.