2025 (7) TMI 1424 - AT - Income Tax

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, ... Non granting approval u/s 80G(5) - one of the objects in the Trust deed is of a religious nature - Jivdaya expenses - Assessee submitted that only one of the objects is religious in nature and the expenses on such religious object is not more than 5% of the total income HELD THAT:- We find that primary objectives of the Trust include, providing medical assistance to the poor and to help them cover medical expenses. Additionally, the Trust allocates funds for 'Jivdaya' (animal welfare and their treatment). The Trust has incurred expenses for providing food to poor and needy people and also incurred expenses for education. Therefore, from the above, it is clearly evident that the activity of the Trust is not intended for the benefit of any particular religious community or caste. It is stated by the ld Counsel for the assessee that the funds received by the assessee- trust, have been exclusively utilized for providing financial aid, medical assistance, Jivdaya (animal welfare) expenses and expenses related to the Bhojanalaya (common Kitchen). Trust has not incurred any expenditure on religious activities during the financial year 2023-24. The above facts were duly stated during the course of proceedings u/s 80G(5)(iii) of the Act and the assessee -trust has duly submitted the required documents to establish the genuineness of the activity of the Trust. We also note that as per the provisions of sub-section (5B) to section 80G of the Act, which states that a Trust which incurs expenditure during any previous year which is of a religious nature for an amount not exceeding 5% of its total income, shall be deemed to be an institution or fund to which the provisions of this section apply. We note that if the Jivdaya expenses, which has incurred by the assessee- trust to the tune of Rs. 20,460/-, ( which is incurred for the treatment of ill animals and welfare of animals) and if the CIT(E ) treated these expenses, as religious in nature, than in that circumstances, we direct the learned CIT (E) to work out the percentage, as compared to the total income, of the trust and to examine whether such expenses falls below 5% of the total income of the assessee- trust. If the Jivdaya expenses, falls below 5% of the total income of the assessee- trust, the assessee- trust deserve approval under section 80G (5) (iii) of the Act, hence for limited purpose, we remit this issue back to the file of the ld. CIT(E ) to examine the above stated facts and grant the approval under section 80G(5) of the Act in accordance with Law. For statistical purposes, the appeal of the assessee is treated to be allowed. 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.