Charitable approval under section 80G(5) allowed where revenue activities further genuine objects and funds are not diverted.

An institution does not lose approval under section 80G(5) merely because it carries on revenue-generating activities, if those activities are intrinsically linked to its charitable objects. The ITAT found that the trust's publication work and natural dyeing centres furthered relief of the poor, women's and children's empowerment, skill development and employment generation, and that the financial records showed genuine charitable expenditure, including salary and wage outgo. As no adverse material showed diversion of funds or non-charitable use, the trust was held genuine and eligible for approval; the rejection was set aside and approval directed to be granted.

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Issues: Whether the assessee-trust was entitled to approval under section 80G(5) of the Income-tax Act, 1961.

Analysis: The trust was constituted with objects directed towards relief of the poor, empowerment of disadvantaged women and children, employment generation, training, village industries, publication and natural dyeing activities. The denial of approval was based on the view that no separate charitable expenditure was shown and that the activities were commercial in nature. The Tribunal held that this approach was too narrow. It found that the publication division and natural dyeing centres were carried on as means of achieving the stated charitable objects, particularly livelihood support, skill development and employment for weaker sections, and that the financial statements showed substantial salary and wage expenditure and, in some years, excess expenditure over income. The genuineness of the trust was not doubted and no adverse material showed diversion of funds or non-charitable use.

Conclusion: The assessee satisfied the conditions for approval under section 80G(5), and the rejection order was set aside with a direction to grant approval.

Ratio Decidendi: An institution does not lose eligibility for approval under section 80G merely because its charitable objects are pursued through revenue-generating activities, so long as those activities are intrinsically connected with and carried on in furtherance of the charitable objects and the institution remains genuine.

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