Trust with Minor Religious Activities Eligible for 80G Registration Under Section 80G(5B) Benefits

The ITAT Rajkot held that the trust, primarily engaged in charitable activities such as running Annakshetra, Atithigruh, Gaushala, and providing medical relief, qualifies for registration under section 80G despite having some religious objects. Since the expenditure on religious activities was below 5% of total income, the trust meets the criteria under section 80G(5B) and is deemed eligible for the benefits of section 80G. The trust's funds were exclusively used for charitable purposes, and no excess religious expenditure was incurred in the relevant year. The appeal was allowed, granting the trust registration under section 80G.

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ISSUES:

Whether an institution or fund with objects that are partly religious and partly charitable can obtain approval under clause (iii) of the first proviso to Section 80G(5) of the Income-tax Act, 1961.Whether expenditure on religious activities exceeding or within 5% of total income affects eligibility for approval under Section 80G(5)(iii).Interpretation and applicability of sub-section (5B) of Section 80G in relation to Section 80G(5) and Explanation 3 regarding religious versus charitable objects.Whether the presence of religious objects in the trust deed automatically disqualifies the trust from approval under Section 80G(5)(iii).Whether the matter should be remitted for fresh consideration on the question of religious expenditure threshold.

RULINGS / HOLDINGS:

The Court held that Section 80G(5) applies only to institutions or funds established in India for a "Charitable purpose only" and "even not a single object can be religious in nature" as per Explanation 3 to Section 80G.Sub-section (5B) of Section 80G clarifies that an institution or fund incurring religious expenditure not exceeding 5% of its total income shall be deemed to be an institution or fund to which Section 80G applies; however, it does not permit religious objects in the trust deed.The Court rejected the argument that sub-section (5B) overrides or negates the main provisions of Section 80G(5) and Explanation 3, emphasizing that the exception cannot nullify the main enactment.The Court found that the assessee-trust's religious expenditure was below 5% of total income for the relevant years, thus meeting the threshold prescribed under Section 80G(5B).The Court directed the tax authority to examine whether the religious expenditure is within the 5% limit and if so, to grant approval under Section 80G(5)(iii), notwithstanding the presence of some religious objects in the trust deed.The appeal was allowed for statistical purposes with directions for fresh consideration of approval under Section 80G(5)(iii) based on expenditure limits.

RATIONALE:

The Court applied the statutory framework of Section 80G(5), its Explanation 3, and sub-section (5B) of Section 80G of the Income-tax Act, 1961.Explanation 3 to Section 80G(5) excludes trusts whose objects are "wholly or substantially of a religious nature" from approval under Section 80G(5).Sub-section (5B) was interpreted as a clarificatory provision allowing trusts to incur religious expenditure up to 5% of total income without losing eligibility, but it does not permit religious objects in the trust deed.The Court relied on precedent decisions holding that trusts with some religious objects but religious expenditure within 5% are eligible for Section 80G approval.The Court referred to the principle that an exception (Section 80G(5B)) cannot be interpreted to nullify the main enactment (Section 80G(5)) as upheld by the Supreme Court in Director of Secondary Education v. Pushpendra Kumar.The Court emphasized the need to balance the statutory prohibition on religious objects with the practical allowance for incidental religious expenditure within prescribed limits.The Court noted that the assessee-trust's main activities were charitable and that religious expenditure was incidental and within the statutory threshold, justifying approval under Section 80G(5)(iii).

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