Tribunal orders registration under section 80G for society's charitable expenses

The Tribunal directed the CIT(E) to grant registration under section 80G to the assessee society, ruling that the expenses were charitable in nature and the CIT(E) misinterpreted section 80G(5B). The society's objectives did not include religious purposes, and the expenses were for maintaining a historical temple serving the community. The appeal was allowed, and registration under section 80G was ordered.

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Issues Involved:
1. Denial of approval under section 80G of the Income Tax Act.
2. Interpretation and application of section 80G(5B) of the Income Tax Act.
3. Nature of expenses incurred by the assessee society and their classification as religious or charitable.

Detailed Analysis:

1. Denial of Approval under Section 80G of the Income Tax Act:
The assessee society's application for approval under section 80G was denied by the CIT(E), Jaipur, on the grounds that the society incurred expenses of a religious nature exceeding 5% of its total income, thus not qualifying for approval under section 80G(5B). The CIT(E) found that the society spent Rs. 17,230 on "Mandir Pooja Expenses" in the financial year 2014-15, which was 5.73% of the total receipts of Rs. 3,00,627.

2. Interpretation and Application of Section 80G(5B) of the Income Tax Act:
Section 80G(5B) states that an institution or fund which incurs expenditure of a religious nature not exceeding 5% of its total income in any previous year shall be deemed eligible for approval under section 80G. The CIT(E) interpreted this to mean that if the expenses exceed 5%, the institution cannot be granted approval. The assessee argued that the term "total income" should include accumulated income, which would reduce the percentage of religious expenses below 5%.

3. Nature of Expenses Incurred by the Assessee Society:
The assessee contended that the "Mandir Pooja Expenses" were not purely religious but were for the preservation and promotion of a historical temple building, which serves as a common place for the village community irrespective of caste, creed, or gender. The society also used the temple premises for social activities like training local women and maintaining cleanliness under the "Swach Bharat Mission."

Judgment Analysis:

Denial of Approval under Section 80G:
The Tribunal found that the CIT(E) did not record any adverse findings regarding the charitable nature of the society's objects or activities. The society was registered under section 12AA, indicating its charitable status. The Tribunal noted that the CIT(E) denied approval solely based on one financial year's expenses exceeding 5% of total income.

Interpretation of Section 80G(5B):
The Tribunal clarified that section 80G(5B) is an enabling provision meant to grant benefits to institutions that are predominantly charitable but incur minimal religious expenses. The Tribunal emphasized that the provision should be read subservient to section 80G(5)(ii) and Explanation 3, which focus on the charitable nature of the institution's objectives. Since the assessee's objectives did not include any provision for religious purposes, section 80G(5B) should not be applied to deny approval.

Nature of Expenses:
The Tribunal agreed with the assessee that the expenses were for the upkeep and maintenance of a historical temple, which serves the community at large and not any particular religious group. The Tribunal cited various judgments, including those from the Rajasthan High Court and ITAT Nagpur, supporting the view that expenses for maintaining a temple with historical and community significance are charitable in nature.

Conclusion:
The Tribunal directed the CIT(E) to grant the necessary registration under section 80G to the assessee society, emphasizing that the expenses incurred were for charitable purposes and the provisions of section 80G(5B) were misinterpreted by the CIT(E). The appeal of the assessee was allowed.

Order:
The appeal of the assessee is allowed, and the CIT(E) is directed to grant the necessary registration under section 80G of the Income Tax Act.

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