Composite charitable-religious trust seeking s.80G approval-denial overturned since no spending on religious activities breached s.80G(5B) threshold

Approval under s.80G(5) was denied on the ground that the applicant was a composite trust and thus hit by s.80G(5)(ii). The ITAT held that a trust may validly be of composite character (charitable and religious) and is disqualified only if application of income to religious purposes exceeds the statutory threshold under s.80G(5B); mere presence of some religious objects is insufficient. As the revenue did not controvert the factual assertion that no expenditure was incurred on religious activities, the trust was not a "religious trust" within Explanation (3) to s.80G(5)(ii) read with s.80G(5B). The denial order was set aside and approval under s.80G(5) was directed to be granted, allowing the appeal.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether approval under Section 80G(5) can be denied solely because one of the stated objects permits organising "religious, social and cultural" programmes, thereby treating the institution as a religious-cum-charitable (composite) trust.

(ii) Whether Section 80G(5B) operates to permit approval under Section 80G(5) for a composite trust, subject to the statutory threshold regarding expenditure "of a religious nature", and whether the authority erred in treating "purely charitable" character as an absolute pre-condition independent of Section 80G(5B).

(iii) Whether, on the facts, the denial of approval could be sustained when the contention that no expenditure was incurred on religious activity was not controverted, and the denial rested on an incorrect legal approach to composite objects.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii): Eligibility of a composite (religious-cum-charitable) trust for Section 80G(5) approval and the role of Section 80G(5B)

Legal framework (as discussed by the Tribunal): The Tribunal examined the statutory scheme of Section 80G(5), including clause (ii) and Explanation (3), together with Section 80G(5B), and applied the judicial interpretation adopted in an earlier Tribunal decision referenced and followed in the present order.

Interpretation and reasoning: The Tribunal rejected the approach that a composite trust is automatically disqualified from approval under Section 80G(5). It held that Section 80G(5) cannot be read in isolation to impose an absolute "purely charitable" requirement where Section 80G(5B) expressly addresses situations involving expenditure of a religious nature and deems eligibility when such expenditure remains within the prescribed threshold. The Tribunal accepted that the statutory design permits composite objects and that the decisive consideration is whether religious expenditure crosses the statutory limit contemplated by Section 80G(5B). The Tribunal further distinguished the reliance placed by the authority on another Tribunal order by holding that it dealt with a different statutory clause and a different mischief, and therefore did not govern the present controversy.

Conclusion: Denial of approval merely because one object refers to organising religious programmes, thereby branding the institution as composite, was held to be not in accordance with law. Composite character by itself was not a valid ground to refuse Section 80G(5) approval, in view of the statutory reading adopted by the Tribunal applying Section 80G(5B).

Issue (iii): Application of the above interpretation to the facts-uncontroverted stand of no religious expenditure

Legal framework (as applied): The Tribunal applied Section 80G(5)(ii), Explanation (3), read with Section 80G(5B), as the governing basis to determine whether the institution could be treated as "religious" so as to disentitle approval.

Interpretation and reasoning: The Tribunal noted that it was specifically asserted before the authority that no amount was spent on religious activities in the relevant period, and this factual position was not controverted before the Tribunal. Having already held that composite objects do not automatically bar approval, the Tribunal treated the absence of religious expenditure (and, in any event, the relevance of the statutory threshold under Section 80G(5B)) as decisive against the denial.

Conclusion: The institution was held not to be a religious trust for purposes of Section 80G(5)(ii) and Explanation (3), read with Section 80G(5B). The authority was directed to grant approval under Section 80G(5).

---