80G approval for mixed charitable and religious activity remains available where community restriction is not substantive.

Approval under section 80G is discussed in the context of an managing Sikh gurdwaras while also carrying on educational, medical, welfare and relief activities for the public. The analysis turns on whether the institution is in substance confined to a particular religious community; it explains that corporate supervision of gurdwaras and related religious functions does not by itself displace charitable character. It also notes that section 80G(5B) protects approval where religious expenditure remains within the prescribed tolerance limit, here stated to be below 5%.

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Issues: Whether the assessee was entitled to approval under section 80G(5)(iii) of the Income-tax Act, 1961, notwithstanding that its objects and activities involved management of Sikh gurdwaras and associated religious functions, and whether section 80G(5B) protected the approval where religious expenditure was within the prescribed limit.

Analysis: The relevant inquiry was whether the institution was expressed to be for the benefit of a particular religious community and whether its activities, viewed in substance, were confined to that community. The statutory scheme of the Sikh Gurdwaras Act, 1925 showed that the Board had corporate status and supervisory functions, while the committees performed day-to-day religious observances; the assessee also carried on extensive educational, medical, welfare and relief activities open to the public at large. The finding was that the charitable character of the assessee was not displaced merely because it also managed gurdwaras or performed certain religious functions, especially when the religious expenditure was stated to be below the 5% threshold recognised by section 80G(5B).

Conclusion: The assessee was held entitled to approval under section 80G(5)(iii) and the objection that it was constituted for the benefit of a particular religious community was rejected.

Ratio Decidendi: For approval under section 80G, an is not disqualified merely because it has religious elements, if on a substantive appraisal its activities are not exclusively for a particular religious community and its religious expenditure remains within the statutory tolerance limit.

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