Section 80G approval requires a finding on the 5% religious expenditure limit, not rejection based only on religious objects.

ITAT Ahmedabad held that approval under Section 80G cannot be denied merely because a trust has religious objects or is treated as a composite trust. The ative statutory inquiry is whether expenditure on religious activities exceeds the 5% limit prescribed under Section 80G(5B). As no specific finding was recorded on that threshold, the rejection lacked the necessary statutory basis. The matter was therefore remanded for limited reconsideration to determine whether the trust's religious expenditure crossed the permissible limit before deciding eligibility for approval under Section 80G(5).

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Issues: Whether approval under Section 80G(5) could be rejected merely on the basis that the trust's objects were religious in nature, without examining whether the expenditure on religious activities exceeded the statutory limit under Section 80G(5B).

Analysis: The rejection was founded only on the character of the objects as religious and on the trust being treated as a composite trust. No specific finding was recorded on whether the religious expenditure exceeded 5% of the total income, which is the relevant statutory threshold under Section 80G(5B). The proper inquiry was therefore whether the trust had crossed the permissible limit on religious expenditure before deciding eligibility for approval under Section 80G(5).

Conclusion: The matter required fresh examination on the limited issue of whether religious expenditure exceeded 5% of total income, and the rejection could not stand without such finding.

Final Conclusion: The appeal was disposed of by sending the matter back for limited reconsideration on the statutory limit applicable to religious expenditure.

Ratio Decidendi: Approval under Section 80G cannot be denied solely because a trust has religious objects if the decisive statutory question whether religious expenditure exceeds the prescribed 5% limit has not been examined.

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