Tribunal upholds denial of tax benefits for religious activities under Section 80G

The Tribunal dismissed the appeal of the Assessee in a case concerning the rejection of their application under Section 80G(5)(vi) of the Income Tax Act, 1961. The Assessee's expenditures on religious activities exceeded the permissible limit of 5% of total income, as detailed for financial years 2015-16, 2016-17, and 2017-18. Despite claiming charitable activities, the Assessee failed to provide evidence and was deemed to primarily engage in religious activities, leading to the rejection of their application for tax benefits under Section 80G. The Tribunal's decision was based on legal precedents and the nature of the Assessee's expenditures, ultimately upholding the denial of approval.

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Issues Involved:
1. Rejection of application under Section 80G(5)(vi) of the Income Tax Act, 1961.
2. Compliance with conditions provided in the Act for approval under Section 80G.
3. Expenditure on religious activities exceeding the permissible limit under Section 80G(5B).

Issue-wise Detailed Analysis:

1. Rejection of Application under Section 80G(5)(vi):
The primary issue revolves around the rejection of the application filed by the Assessee under Section 80G(5)(vi) of the Income Tax Act, 1961. The Commissioner of Income Tax (Exemption) denied the approval on the grounds that the Assessee incurred expenditure on religious activities exceeding 5% of its total income in the preceding financial years (FY 2015-16, 2016-17, and 2017-18). The expenditures included Utsav Expenses, Prasad Expenses, and Pooja Expenses, which were deemed purely religious in nature. The detailed expenditure was as follows:
- FY 2015-16: 12.80%
- FY 2016-17: 6.65%
- FY 2017-18: 16.71%

2. Compliance with Conditions Provided in the Act for Approval under Section 80G:
The Assessee argued that it complied with all conditions for approval under Section 80G. The Assessee, a public charitable trust registered under the Bombay Public Trust Act and also under Section 12A(a) of the Income Tax Act, claimed to have carried out charitable activities like Blood Donation camps, distribution of food for the poor, and running a Goshala. However, the Assessee did not provide evidence for these activities. The Revenue contended that the Assessee's activities were predominantly religious, and the expenditures on religious activities exceeded the permissible limit, thus failing to satisfy the conditions under Section 80G(5) and 80G(5B).

3. Expenditure on Religious Activities Exceeding the Permissible Limit under Section 80G(5B):
The crux of the dispute was whether the Assessee's expenditure on religious activities exceeded the permissible 5% limit under Section 80G(5B). The Tribunal examined the nature of the expenditures and concluded that the Assessee's activities, including Pooja, Prasad, and Mandir Jirnodhar, were religious. The Tribunal referenced the dictionary meaning of "religious activity" and the general understanding that rituals, ceremonies, and worships are integral parts of religion. The Tribunal noted:
- The main object of the Assessee trust was to construct and maintain the Shri Sai Baba Temple.
- The expenditures on religious activities were significantly higher than the 5% limit in the relevant financial years.

Legal Precedents and Findings:
The Tribunal cited several legal precedents to support its decision:
- Upper Ganges Sugar Mills Ltd vs CIT [1997] 227 ITR 578 (SC): The Supreme Court held that if any one of the objects of a trust is wholly or substantially religious, the trust falls outside the scope of Section 80G.
- Kirti Chand Tarawati Ch. Trust vs DIT [1998] 232 ITR 11 (Delhi): Emphasized that donations utilized for religious purposes do not qualify for benefits under Section 80G.
- CIT vs Rama Education Society [2017] 396 ITR 16 (Allahabad): Highlighted the necessity of maintaining regular accounts of receipts and expenditures for approval under Section 80G.

The Tribunal concluded that the Assessee trust did not meet the conditions laid down in Section 80G(5) and 80G(5B) due to its predominant religious activities and expenditures exceeding the 5% limit. Consequently, the appeal of the Assessee was dismissed. The order was pronounced in the open Court on 20th February 2023.

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