Shri. Sai Bhakta Seva Trust, Satara V. Commissioner of Income-Tax, Exemption, Pune

ITA 174/PUN/2020

AI Insights

The case involves the Shri Sai Bhakta Seva Trust, which appealed against the decision of the Commissioner of Income Tax (Exemption), Pune, who had rejected their application for approval under Section 80G(5)(vi) of the Income Tax Act, 1961. The primary issue was whether the Trust's expenditures on religious activities, which exceeded 5% of its total income, complied with the statutory requirements for recognition under Section 80G. The Tribunal examined the Trust's financial activities over several years and compared them with legal precedents and statutory provisions, ultimately deciding that the Trust did not meet the necessary conditions for approval under Section 80G.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134302 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-11-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 29-01-2020
• Other Referred Cases: Kirti Chand Tarawati Ch. Trust Vs DIT, CIT Vs. Rama Education Society, Upper Ganges Sugar Mills Ltd vs CIT, Nilackal St. Thomas Church & Ecumenical Centre Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 10(23C)

Judgement Text

आयकर अपीलीय अिधकरण “बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.174/PUN/2020 िनधाᭅरण वषᭅ / Assessment Year : 2019-20 Shri Sai Bhakta Seva Trust, 66, Shivaji Nagar, Saishama, Karad, Satara, Maharashtra. PAN: AACTS 4920 M V s The CIT(Exemption), Pune. Appellant/ Assessee Respondent /Revenue Assessee by Smt.Deepa Khare – AR Revenue by Shri Sardar Singh Meena – DR Date of hearing 24/11/2022 Date of pronouncement 20/02/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Exemption),Pune dated 17.10.2019 emanating from order under section 80G(5)(vi) of the I.T.Act, 1961. The Assessee has raised the following grounds of appeal: “1. The ld CIT erred in law and on facts in rejecting the application u/s 80G(5)(vi) and not granting the approval without appreciating the facts and circumstances of the case. 2. The learned CIT failed to appreciate that the appellant complies with all the conditions provided in the Act and prays that the approval may kindly be granted. ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 2 3. The appellant craves leave to add, alter, modify or substitute any ground of appeal at the time of hearing.” 2. The ld.CIT(Exemption) has held as under : “5. Even otherwise, it is seen that the applicant has incurred expenditure on religious activities in excess of 5% of its total income in the preceding financial years viz. F.Y. 2015-16, 2016-17 and 2017-18. The applicant has not shown any expenditure under the head religious expenses separately in the financial statements but it is seen that the expenditure on account of Pooja Expenses, Utsav Expenses, Prasad Expenses etc. are purely in the nature of religious" expenditure. The details of total expenditure On religious activities shown by the applicant are as under : F.Y 2015-16 2016-17 2017-18 Utsav Exp. 2,30,083/- 1,21,483/- 1,55,909/- Prasad Exp. 1,60,788/- 1,19,580/- 1,72,284/- Pooja Exp. 1,75,174/- 1,52,267/- 1,33,147/- Mandir Jirnodhar 0 0 2,88,065/- Total... 5,66,045/- 3,93,330/- 7,49,405/- In view of the above,_ the details of expenditure on religious activities and income of the applicant are as under: F.Y. Total income of the- trust Expenditure on religious activities % of expenses on religious objects other than establishment expenses 2015-16 44,22,137/- 5,66,045/- 12.80% 2016-17 59,10,459/- 3,93,330/- 6.65% 2017-18 44,84,112/- 7,49,405/- 16.71% ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 3 6. As per section 80G(5) of the IT Act wherein conditions are enumerated for the recognition of trust u/s 80G, the income of the trust as per the rules governing the trust shall be apply wholly for the charitable trust The charitable purpose does not include religious, purpose. However, section 80G(5B) permits application up to 5% of income in a year towards religious purposes. The relevant portion of section 80G(5) is reproduced as under: - 80G(5)....This section applies to donations to any institution of fund referred to In sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfills the following conditions, namely:- ....(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of income or assets of the institution of fund for any purpose other than a charitable purpose; .......... (5B) Notwithstanding anything contained in clause (ii) of subsection (5) and Explanation 3, an institution or fund which incurs expenditure, during anyprevious year, which is of a religious nature for an amount not exceeding five percent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply. 7. In view of facts of the case discussed above, the following facts of the case are observed : ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 4 (i) The trust is engaged mainly in administration and maintenance of a temple. (ii) The applicant trust has incurred expenditure on religious activities during the preceding years, exceeding 5% of total income of that year in contravention to the provisions of section 80G(5B) of the income Tax Act, 1961. Therefore, the trust does not satisfy the conditions laid down in section 80G(5)and 80G(5B) of the IT Act for recognition of trust u/s 80G.” Ld.AR’sSubmission : 3. Ld.AR submitted that the assessee has carried out charitable activities like Blood Donation camps, distribution of foods for poor, Goshala, etc. The assessee is a public charitable trust duly registered under Bombay Public Trust Act. The assessee is also registered u/s.12A(a) of the Income Tax Act. The Ld.AR relied on the order of ITAT Pune in the case of Aranyashwar Devalaya Trust ITA No.1489/Pune/2013. The ld.Departmental Representative(ld.DR) : 4. Ld.DR has filed written submission, relevant part is reproduced here as under : From the accounts of the appellant assessee it is seen that following are the expenditure for religious purposes : ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 5 FY Total Income %Religious expenditure 2015-16 15,65,678 11.18% 2016-17 12,58,635 12.09 % 2017-18 13,64,724 9.75 % Thus, the expenditure for Religious activities are more than 5%. Therefore, the appellant has not satisfied conditions laid down in Section 80G(5) of the Act. The Revenue relies on following case laws: “4.1 Kirti Chand Tarawati Ch. Trust Vs DIT [(1998) 232 ITR 11 (Delhi)] (enclosed as Annexure-5): In this case the Hon'ble High Court has quoted the relevant provisions of section 80G in para 7 and emphasis is given for the provisions of Explanation 3 which are reproduced as under: "Explanation 3 - In this section, 'charitable purpose' does not include any purpose the whole or substantially the whole of which is of a religious nature." [Emphasis supplied] The relevant paragraphs (16 & 17) of the decision are quoted here under: "16. Once a trust has approval from the Commissioner, the trust can persuade the donors into making donations. The donors would be persuaded to make such donations influenced by the approval unmindful of the fact that their donations were going to be utilised for religious purpose as distinguished from charitable purpose - the distinction which the Parliament has chosen to keep in view while framing section 80G. Purpose of establishment - the real purpose as distinguished from the ostensible purpose - is germane to the enquiry which the ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 6 Commissioner has to hold while granting approval under section 80G(5)(vi). 1/l/e are not prepared to place any such interpretation on the language implied in section 80G so as to uphold an obligation on the part of the Commissioner to grant an approval to a trust merely by looking at the instrument creating the trust and shutting its eyes towards the activities actually carried out by it. 17. The second contention of the learned counsel for the petitioner also deserves to be discarded. Having received donations for charitable purposes, instead of being spent on charity, are utilised for investing so as to earn the returns thereon and utilise the same for purposes other than charitable (religious in the case at hand). Obviously the donations are being utilised for purposes other than charity though indirectly." 4.2 CIT Vs. Rama Education Society [(2017) 396 ITR 16 (Allahabad)] (enclosed as Annexure-6): In this case the Hon'ble High Court of Allahabad has held that approval for registration u/s 80G cannot be granted until and unless institution or fund is found to be regularly maintaining accounts of its receipts and expenditure which is essential condition for getting approval u/s 80G(5). The Hon'ble court has held that fulfillment of conditions u/s 10(23C) [in the instant case it is u/s.12A] is only one of the conditions prescribed u/s 80G but besides the said condition other conditions are also necessary to be satisfied for claiming benefit of section 80G. The court held that in order to have the advantage of approval under u/s ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 7 80G, it is mandatory for it to fulfill the other essential conditions prescribed under sub-section 5 of section 80G which inter alia vide clause (iv) mandates for the maintenance of the regular accounts of the receipts and expenditure by such institution for the funds. 4.3 In the instant case the appellant does not satisfy not only the conditions prescribed in clause (iv) in view of the fact that it failed to furnish the necessary information required by the CIT(Exemptions) as discussed in para 2 of the order dated 17/10/2019, but it had also failed to satisfy the conditions prescribed in clause (ii) of section 80G(5), section 80G(5B) and Explanation 3 of the section 80G as discussed in the order dated 17/10/2019. Thus, the ratio of the decision is squarely applicable in the instant case. Distinguishing Case law relied by Assessee: 5. The Ld. AR of the appellant has relied on the decision of the Hon'ble 'B' Bench Pune dated 17/08/2015 in the case of Aranyashwar Devalaya Trust in ITA No.1489/PN/2013. The Hon'ble ITAT has held in the above said case that the expenses incurred on religious activities / pooja etc. were below 5% as has been worked out in the table given at the end of the para 8 of the order dated 17/08/2015 and accordingly it was held that the conditions prescribed in section 80G(5B) are satisfied as the expenses on religious activities i.e. pooja expenses are less than 5%. ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 8 5.1 However, in the instant case the expenses incurred on religious activities are much higher than the 5% as discussed in the order of CIT(Exemptions) and here above in para 3 of the submissions. Thus, the appellant does not satisfy the conditions prescribed in section 80G(5B). Besides, the appellant also does not satisfy the conditions prescribed in other provisions of the section as discussed above. 5.2 In view of above, it is crystal clear that the facts of the appellant's case are totally different from that of the case relied upon by the Ld. AR and hence the reliance is misplaced. 5.3 In view of above, considering the facts of the case and provisions of section 80Gof the Income Tax Act, it is clear that the activities of the trust are predominantly of religious nature and the trust has failed to satisfy the conditions prescribed in the provisions of section 80G, particularly 80G(5B) which clearly prescribes a rider that the expenditure, which is of a religious nature, incurred during any previous year should not be exceeding 5% of its total income. In the instant case such expenditure incurred by the assessee during several years as discussed in para 3 above is much higher than the 5% limit prescribed in the statute and therefore the grounds raised by the appellant are non-maintainable. Thus, the prayer of the Revenue is to dismiss the appeal of the appellant.” ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 9 Findings and Discussion: 6. We have heard both the parties and studied the record. The assessee is a Public Charitable Trust registered under the Bombay Trust Act 1950. 6.1 On perusal of the Annual Accounts of the Assessee, the nature of expenditures are as under : FY Total Income Rs Pooja Expens es Prasad expense s Utsav Expense s Mandir Jirnodha r Interest 2017-18 49,10,921 133147 2.7% 172284 3.5% 155909 3.17% 2,88,065 5.8% 3261559 The assessee has a “Shri Sai baba Temple”. The assessee conducts regular “Pooja” in the temple. 6.2 Ld.AR claimed that assessee runs a “Goshala”, carried out charitable activities like Blood Donation, cultural activities, etc. However, the assessee has not filed any evidence for these activities claimed by the assessee. 6.3 It is observed that the expenditure on “Religious Activities” is 12% in F.Y.2015-16, 6.67% in F.Y. 2016-17 and 16.7% in 2017-18. What is Religious: We need to first answer what is “Religious activity”. The dictionary meaning is that Religious means relating to or manifesting faithful devotion to an acknowledged ultimate reality ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 10 or deity. Rituals and observances, ceremonies and modes of worship are regarded as integral parts of religion. Performing Rituals, Ceremonies, worships, Poojas are nothing but religious activities. 6.4 The main Shri Sai baba temple is in Shirdi, where Shri Saibaba had lived his life. The Official website of Shri Sai Sansthan Shirdi has mentioned as under : “Shri Saibaba is worshipped as a God incarnate. (SAI meaning Sakshaat Ishwar) - GOD THE ABSOLUTE – To his devotees, Baba is nothing less than a GOD. This has been a matter of experience and not imaginary.” 6.5 Thus, for the Shri Saibaba Followers Shri Saibaba is a God Incarnate. In the case before us, the assessee have a Shri Saibaba Temple, the assessee has spend more than 5% of its income on the activities like Pooja, Prasad, Mandir Jirnodhar etc. In the light of the dictionary meaning of the word religious activity given above and the general understanding of the word religious activity, these activities are nothing but religious activities as all the members of the assessee are Shri Saibaba Devotees and the pooja, rituals performed are nothing but Religious activities. The main aim of the assessee trust is to construct and maintain the Shri Saibaba Memorial. Legal Precedence: Hon’ble SC in the case of Upper Ganges Sugar Mills Ltd vs CIT [1997]227 ITR 578(SC) has held as under : ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 11 Quote, “8. Section 80G applies to donations to any institution or fund established in India 'for a charitable purpose'.'Charitable purpose, for the purposes of the section, does not include any purpose the whole or substantially the whole of which is of a religious nature'. [Emphasis supplied] Explanation 3, which uses this phraseology, takes note of the fact that an institution or fund established for a charitable purpose may have a number of objects. If any one of these objects is wholly, or substantially wholly, of a religious character, the institution or fund falls outside the scope of section 80G and a donation to it does not secure the advantage of the deduction that it gives. 9. The judgment of this Court in Addl CIT v. Surat Art Silk Cloth Mfg. Association [1980] 121ITR 1/[1979] 2Taxman 501 , cited by the learned counsel for the assessee, was delivered with reference to the true meaning of the words 'not involving the carrying on of any activity for profit' occurring at the end of the definition of 'charitable purposes' in section 2(15) of the Act. This Court said that if the primary or dominant purpose of the trust was charitable, another object which by itself may not be charitable but which was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or the institution from being a valid charity. The judgment is of no assistance in construing Explanation 3 of section 80G. 10. To reiterate, 'Explanation 3 does not require the ascertainment of whether the whole or substantially the whole of the institution or fund's charitable purpose is of a religious nature. If it did, it would read differently. It requires the ascertainment of whether there is one purpose within the institution or fund's overall charitable purpose which is wholly, or substantially wholly, of a religious nature. There is little doubt that clause 2(h)of the trust deed which permits the trustees to support prayer halls and places of worship sets out a purpose the whole or substantially the whole of which is of a religious nature, and this has not been seriously disputed. Therefore, in our view, the Trust and the donation by the assessee to it fall outside the scope of section 80G.” Unquote. ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 12 6.6 Thus, Hon’ble SC has held that even if one purpose or object of the trust is religious or substantially religious, the trust will not be eligible for benefit of Section 80G of the Act. The Hon’ble SC in the case of Upper Ganges Sugar Mills (supra) held that the assessee was not eligible for benefit u/s.80G as it supported prayer halls and places of worships, which is religious purpose. 7. In the case of the assessee, Shri Sai Bhakta Seva Trust, the main object is to construct and maintain Shri Sai baba temple. This fact has not been disputed by the Ld.AR. The Assessee trust regularly performs Pooja, and other rituals. The expenditure on religious activities is more than 5% of the total income of the assessee. Thus, the assessee has violated provision of Section 80G(5B). 7.1 ITAT Cochin Bench in the case of Nilackal St. Thomas Church & Ecumenical Centre TrustIT APPEAL NO. 325 (COCH.) of 2013 has held that the Trust was not eligible for registration u/s.80G as it had spend more than 5% of its income on religious activities. 7.2 In these facts and circumstances of the case, respectfully following the Hon’ble Supreme Court in the case of Upper Ganges (supra) and ITAT Cochin(supra), we uphold the order of the ITA No.174/PUN/2020 Shri Sai Bhakta Seva Trust [A] 13 Commissioner of Income Tax (exemption) rejecting the application for registration u/s.80G of the Act. 8. In the result, appeal of the assessee is dismissed. Order pronounced in the open Court on 20 th February, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 20 th Feb, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.