NIRAKAR TRUST,VADODARA V. THE CIT(EXEMPTION), AHMEDABAD

ITA 1083/AHD/2025

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Nirakar Trust, a registered public charitable trust, appealed against the decision of the Commissioner of Income Tax (Exemptions), which had rejected their application for approval under section 80G(5)(iii) and cancelled their provisional approval. The rejection was based on the ground that the Trust had incurred expenditure of a religious nature exceeding 5% of its total income, specifically for distributing floor mats to pilgrims undertaking Narmada Parikrama. The Trust argued that these activities were purely charitable, aimed at providing relief to poor pilgrims, and not religious in nature. The Tribunal examined the nature of the Trust's activities and the intent behind the expenditures, ultimately deciding in favor of the Trust.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778299 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 15-05-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALPESH PARMAR
• Assessee Lawyers: VIRANCH MODI
• Keywords: Condonation of delay; Gift; Charitable institution
• Section: 80G

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘A’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.1083/Ahd/2025 Asstt.Year : - Nirakar Trust 11, Anandsagar Apartment Anand Sagar Society Jetalpur Road Vadodara 390 007 PAN : AABTN 8200 G CIT(Exemption) Vejalpur Ahmedabad. (Applicant) (Responent) Assessee by : Shri Viranch Modi, CA Revenue by : Shri Alpesh Parmar, CIT-DR सुनवाई क तारीख/Date of Hearing : 07/10/2025 घोषणा क तारीख /Date of Pronouncement: 09/10/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: This appeal by the assessee is directed against the order dated 29.10.2024 passed by the Commissioner of Income Tax (Exemptions) [hereinafter referred to as “CIT(E)”], Ahmedabad, whereby the learned CIT(E) rejected the assessee’s application filed in Form No. 10AB for approval under section 80G(5)(iii) of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] and, in consequence, cancelled the earlier provisional approval granted. 2. Condonation of Delay 2.1 At the threshold, there is a delay of 135 days in filing the present appeal. The assessee moved a condonation application supported by Printed from counselvise.com ITA No.1083/Ahd/2025 2 an affidavit of Shri Divyesh Patel, Trustee of the assessee Trust. In the affidavit, it is explained that the impugned order was transmitted to the email account of the assessee’s erstwhile consultant who did not share or communicate the same to the trustees. The assessee remained under a bona fide belief that the matter concerning 80G approval was being attended to by the said consultant. Subsequently, upon an inquiry by a donor regarding the status of approval, the assessee approached a new consultant and handed over all records. On verification of the Income Tax Portal, the new consultant discovered the impugned order, updated the assessee’s contact details on the portal and advised immediate appellate action. The trustees then met, took a decision to file appeal, and the present appeal was prepared and lodged. The affidavit asserts that the delay occurred on account of the stated circumstances beyond the control of the assessee and that there was no mala fide or deliberate inaction. 2.2 During hearing on the condonation issue, the learned Departmental Representative did not raise any serious objection to the condonation of delay. Having considered the affidavit, the sequence of events and the absence of any contrary material, we are satisfied that the assessee has shown sufficient cause for the delay. In the interest of substantial justice, the delay of 135 days is condoned, and the appeal is admitted. 3. Facts of the Case 3.1 The assessee is a registered public charitable trust. The trust was earlier granted provisional approval under section 80G by Form No. 10AC dated 02.10.2021, effective for the period 02.10.2021 to Assessment Year 2024-25. For conversion of the provisional approval into regular approval, the assessee filed Form No. 10AB on Printed from counselvise.com ITA No.1083/Ahd/2025 3 25.04.2024 under clause (iii) of the first proviso to section 80G(5) together with annexures and documents. 3.2 On the assessee’s Form 10AB, the learned CIT(E) issued notices calling for information. The record reflects a sequence of notices and responses in the year 2024, namely a notice dated 11.07.2024, a reminder dated 13.08.2024, a further reminder dated 08.10.2024, and a final notice dated 18.10.2024. Replies were eventually placed on record including the assessee’s reply dated 22.10.2024. 3.3 The learned CIT(E) noted that, for Financial Year 2021-22, the assessee reported total income of Rs.77,239/- and, out of its charitable outgoings, it incurred Rs.20,000/- toward food preparation on various occasions and Rs.34,500/- toward floor mats distributed to persons undertaking Narmada Parikrama. According to the CIT(E), this activity constituted expenditure of a religious nature. The learned CIT(E) issued a show cause notice to the assessee questioning the allowability of its application. The notice further pointed out that, since this religious expenditure exceeded 5% of the assessee’s total receipts, it attracted the restriction contained in section 80G(5B) of the Act, which disqualifies a trust or institution from being treated as eligible for approval under section 80G if such a threshold is crossed. The assessee was therefore called upon to explain why its application should not be rejected for violation of section 80G(5B). 3.4 In response, the assessee, by its reply dated 22.10.2024, submitted that it has no object of religious nature and that the expenditure incurred is toward charitable activity only, being relief to poor pilgrims, and not in relation to repair or renovation of any temple or for conducting any religious tour or ritual. It was asserted that the activity cannot be said to be of religious nature but purely charitable Printed from counselvise.com ITA No.1083/Ahd/2025 4 in character. The assessee also set out that its activities include relief of the poor by providing food, clothing and shelter to pilgrims, collection and distribution of old clothes and footwear to the poor, and other welfare activities without distinction of caste, creed or religion. 3.5 The learned CIT(E), after examining the assessee’s reply dated 22.10.2024, rejected its contention that the expenditure was charitable in nature. He held that distribution of floor mats to pilgrims amounted to a religious activity and therefore could not be accepted as charitable. He further noted that the judicial precedents relied upon by the assessee were distinguishable on facts, as they related to Gift Tax cases or trusts with specific community-based objects, and thus were not applicable to the assessee’s situation. Noting that in FY 2021-22 the assessee spent Rs.54,500/- in total, comprising Rs.20,000/- on food preparation and Rs.34,500/- on floor mats for Narmada Parikrama pilgrims, the CIT(E) concluded that the assessee had incurred religious expenditure exceeding 5% of total income, thereby violating section 80G(5B). On this reasoning, the CIT(E) held the assessee to be ineligible for approval under section 80G and ordered that the application in Form 10AB be rejected and the earlier provisional approval cancelled. 3.6 Aggrieved, the assessee is in appeal before us raising following revised grounds: 1.01 On the facts and circumstances of your appellant's case and in law, the Id. CIT(E) has grossly erred in passing order in Form 10AD, whereby rejecting application filed in form 10AB of Act by your appellant, on the erroneous plea that Your appellant had incurred expenditure of religious nature which is more than 5% of its total income and hence violated provisions of section 80G(5B) of Act without appreciating the fact that expenses incurred on distributing floor mats to people doing Narmada Printed from counselvise.com ITA No.1083/Ahd/2025 5 Parikrama does not form or results into incurring religious nature activity rather same is charitable activity only and hence there is no violation of provision of section 80G(5B) of Act. 1.02 Your appellant therefore prays Your Honor to hold so now and treat the expense incurred by your appellant towards Charitable purpose/activity only and not for religious purpose/activity and thereby direct Id. CIT(E) to accept application filed by your appellant in Form 10AB and grant registration u/s 80G of Act. 3.7 During the course of hearing before us, the Authorised Representative (AR) of the assessee, reiterated the facts and this expenditure was incurred solely to provide comfort and relief to poor pilgrims and was in the nature of charitable relief of the poor, not expenditure for religious purposes. The AR emphasised that the Trust Deed of the assessee does not contain any object of religious nature. The objects clearly provide that the trust will work for welfare of mankind without discrimination of caste, creed, or religion. The expenditure in question was not applied toward any temple, religious ritual, or propagation of religion, but rather to alleviate hardship of the poor during pilgrimage. The AR strongly contended that the learned CIT(E) erred in treating the distribution of mats as “religious activity” without properly appreciating the dominant charitable intent. 4. The learned Departmental Representative, on the other hand, relied upon the findings recorded by the learned CIT(E) in the impugned order. It was submitted that the assessee itself admitted to having incurred expenditure of Rs. 34,500/- on floor mats distributed to the persons undertaking Narmada Parikrama, which is directly connected with a religious activity. 5. We have carefully considered the rival submissions, perused the material available on record, and examined the reasoning adopted by Printed from counselvise.com ITA No.1083/Ahd/2025 6 the learned CIT(E) in the impugned order. The limited issue for our determination is whether the expenditure of Rs. 34,500/- incurred by the assessee trust during the Financial Year 2021-22, being the cost of floor mats distributed to persons undertaking Narmada Parikrama, is to be regarded as “expenditure of a religious nature” within the meaning of section 80G(5B) of the Act, thereby disentitling the assessee from approval under section 80G. 5.1 The facts are undisputed. The assessee reported total income of Rs.77,239/- during the year. Out of this, Rs.20,000/- was incurred for food preparation to serve the needy, and Rs.34,500/- was spent on distribution of mats to pilgrims. The contention of the assessee is that the expenditure on mats was purely for providing relief to poor pilgrims, in furtherance of its charitable objects, and did not constitute expenditure for religious purposes. The learned CIT(E), however, took the view that such outlay was inherently religious as it was linked to pilgrimage. 5.2 On a careful evaluation, we find merit in the submission of the assessee. The trust deed of the assessee does not contain any object of religious nature. The stated objects are to carry out activities for the welfare of mankind at large, without distinction of caste, creed or religion. There is no allegation or material on record to suggest that the assessee has engaged in religious propagation, performance of rituals, or application of its income for upkeep or maintenance of any temple or religious institution. The impugned expenditure was directed only to alleviate the hardship of pilgrims by providing mats, in the same way as it had incurred expenditure on food preparation for the needy. Both activities were in the nature of welfare and relief measures. Printed from counselvise.com ITA No.1083/Ahd/2025 7 5.3 The restrictive provision of section 80G(5B) has to be applied in its proper context. The embargo is attracted only where an institution itself applies its income for religious purposes. The mere fact that the beneficiaries of a charitable activity happen to be religious pilgrims does not, by itself, render the expenditure religious in character. What has to be seen is the dominant intent of the assessee in applying its funds. In the present case, the dominant intent was to provide comfort and relief to persons in need, which squarely falls within the scope of “charitable purpose” as defined under the Act. 5.4 We also note the distinction between expenditure incurred for promoting or propagating a religion, which is restricted, and expenditure incurred for the welfare of individuals, which may incidentally benefit persons engaged in religious practices but remains charitable in essence. The distribution of food and mats in the present case falls in the latter category. Such welfare measures, undertaken without discrimination and without association with any particular religious rite or ritual, cannot be branded as religious expenditure. 5.5 The consistent principle flowing from judicial interpretation of “charitable purpose” is that the dominant purpose test must be applied. If the primary and predominant object of an institution is charitable, then an incidental association with a religious or spiritual activity cannot, by itself, render it religious in character. What is material is the true nature of the activity undertaken. In this context, it is relevant to appreciate that Parikrama in the Indian tradition is often undertaken as a cultural and spiritual journey reflecting faith and endurance and not confined merely to a ritual of religion. Viewed Printed from counselvise.com ITA No.1083/Ahd/2025 8 in that spirit, the assessee’s act of distributing mats to participants was intended to provide comfort and relief to persons engaged in such a cultural-spiritual practice, and not to promote or propagate any religion. On application of the dominant purpose test, the expenditure, when seen in the larger perspective of the assessee’s declared objects and overall activities, clearly assumes the character of charitable relief and cannot be classified as religious. 5.6 In this background, we find that the learned CIT(E) erred in treating the expenditure of Rs.34,500/- as religious in nature and thereby holding that the assessee violated the limitation prescribed under section 80G(5B). The reasoning proceeds on a narrow interpretation and overlooks the charitable purpose underlying the activity. The authorities cited by the assessee, which enunciate the principle that charitable activity does not become religious merely because the beneficiaries are religious persons, were wrongly brushed aside. Applying the settled principle that provisions relating to charitable institutions deserve a liberal construction so as to advance their objects, we hold that the assessee has not incurred expenditure of religious nature within the meaning of section 80G(5B). 5.7 In the light of the above discussion, we hold that the expenditure incurred by the assessee on distribution of floor mats to pilgrims was in the nature of charitable relief and not religious expenditure. Consequently, the embargo contained in section 80G(5B) is not attracted. The assessee trust cannot be denied approval under section 80G merely on the basis of such expenditure. Accordingly, the order of the learned CIT(E) rejecting the assessee’s application in Form No. 10AB and cancelling the provisional approval earlier granted, is set Printed from counselvise.com ITA No.1083/Ahd/2025 9 aside. The learned CIT(E) is directed to grant approval to the assessee under section 80G(5) of the Act. 6. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 9th October, 2025 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 09/10/2025 Printed from counselvise.com "