Section 80G approval cannot be denied for incidental religious objects where the institution remains genuinely charitable.

Approval under section 80G cannot be denied merely because an institution has incidental religious objects or incurs religious expenditure, so long as it is not confined to a particular religious community or caste and its purposes are not wholly or substantially religious. The statute permits religious expenditure within the prescribed ceiling, and the assessee's dominant objects were educational, social and welfare in nature, with no material showing restricted benefit to any community. The rejection also relied on unverified internet material without confronting the assessee, offending natural justice. On these grounds, approval under section 80G was held to be sustainable.

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Issues: Whether approval under section 80G of the Income-tax Act, 1961 could be denied merely because the assessee had some religious objects or incurred incidental religious expenditure.

Analysis: On a harmonious reading of section 80G(5), Explanation 3 and section 80G(5B), approval cannot be refused where the institution is not confined to a particular religious community or caste and its purpose is not wholly or substantially religious. The statute specifically permits religious expenditure up to 5% of total income. The assessee's dominant objects were educational, social and welfare in nature, its registration under section 12AB remained in force, and there was no material to show restriction of benefits to any religious community. The rejection also relied on unverified internet material without confronting the assessee, which offended natural justice. The religious expenditure shown for the relevant years was below the statutory ceiling.

Conclusion: Approval under section 80G could not be denied on the stated grounds, and the assessee was entitled to approval.

Final Conclusion: The denial of approval was unsustainable, and the assessee's entitlement under section 80G stood restored on the basis that incidental religious elements within the statutory limit do not defeat an otherwise genuine charitable institution.

Ratio Decidendi: An institution is not disentitled to approval under section 80G merely because it has incidental religious objects or incurs religious expenditure, so long as it is not for a particular religious community or caste and such expenditure remains within the statutory limit under section 80G(5B).

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