Trust's Medical and Animal Welfare Expenses Not Mainly Religious; 80G(5B) Approval Depends on Expense Threshold

The ITAT Rajkot held that the Trust's primary activities, including medical assistance to the poor, animal welfare (Jivdaya), and common kitchen expenses, are not primarily religious in nature. The Trust did not incur expenditure on religious activities during the relevant year. Under section 80G(5B), if religious expenses do not exceed 5% of total income, the Trust qualifies for approval under section 80G(5)(iii). The Tribunal directed the CIT(E) to verify whether the Jivdaya expenses, treated as religious by the CIT(E), fall below this threshold. If so, approval under section 80G(5) must be granted. The matter was remitted to the CIT(E) for determination, and the appeal was allowed for statistical purposes.

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ISSUES:

Whether a trust with some objects of religious nature is entitled to approval under Section 80G(5) of the Income Tax Act, 1961.Whether expenditure incurred by the trust on religious activities exceeding or not exceeding 5% of its total income affects eligibility for approval under Section 80G(5)(iii) read with Section 80G(5B) of the Act.Whether the presence of religious objects in the trust deed disqualifies the trust from approval under Section 80G(5) if the actual expenditure on religious activities is minimal or below the statutory threshold.The extent of documentary and evidentiary requirements necessary to establish compliance with Section 80G(5) conditions.

RULINGS / HOLDINGS:

The trust is not entitled to approval under Section 80G(5) solely because the trust deed contains objects that are religious in nature, as Section 80G(5) applies only to institutions "established in India for a charitable purpose" and not for religious purposes.Under Section 80G(5B), if the expenditure of a trust on religious activities does not exceed 5% of its total income in a previous year, the trust "shall be deemed to be an institution or fund to which the provisions of this section apply."If the expenditure on religious activities, including expenses such as 'Jivdaya' (animal welfare), is below 5% of the total income, the trust is entitled to approval under Section 80G(5)(iii).The presence of religious objects in the trust deed does not automatically disqualify the trust if actual religious expenditure is within the permissible limit prescribed under Section 80G(5B).The trust complied with documentary requirements including registration certificate, provisional 12A order, income and expenditure accounts, trust deed, vouchers, bank statements, and trustee undertakings, which are relevant for assessing eligibility under Section 80G(5).

RATIONALE:

The Court applied the statutory framework of Section 80G(5) of the Income Tax Act, 1961, which restricts approval to trusts established for charitable purposes and prohibits application of income or assets for non-charitable purposes, including religious benefits to particular communities or castes.Section 80G(5B) provides a statutory exception allowing trusts incurring religious expenditure up to 5% of total income to still qualify for Section 80G benefits, reflecting a legislative balance between charitable and incidental religious activities.The Court emphasized the need to examine actual expenditure incurred rather than solely relying on the objects stated in the trust deed, thereby adopting a fact-based approach consistent with the statutory provisions.The Court remitted the matter back to the Commissioner of Income Tax (Exemption) to verify the percentage of religious expenditure relative to total income, directing adherence to the statutory threshold under Section 80G(5B).This approach aligns with precedent and statutory interpretation principles that require both compliance with the trust's stated objects and examination of actual activities and expenditures to determine eligibility for tax exemptions.

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