SAWANI FOUNDATION TRUST,SURAT V. CIT(EXEMPTION), AHMEDABAD

ITA 1276/SRT/2024

AI Insights

The case involves two trusts, Shree Mahavideh Charitable Trust and Sawani Foundation Trust, which appealed against the orders of the Commissioner of Income-tax (Exemption), Ahmedabad. The CIT(E) had rejected their applications for approval under Section 80G(5) of the Income-tax Act, which pertains to the registration of charitable trusts. The primary issue was whether the trusts, which included some religious objects in their deeds, were exclusively for charitable purposes as required by Section 80G(5). The Tribunal noted that the CIT(E) had not adequately addressed the trusts' submissions or conducted a thorough investigation into the expenditures related to religious activities, leading to the decision to restore the matter for further examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315473 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Other Referred Cases: Shree Bhandari Gnyati Mandal, ITA No.1503/Ahd/2021
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISHRA
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Set aside; Principle of natural justice; Charitable institution
• Section: 80G

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1248/SRT/2024 (Physical Hearing) Shree Mahavideh Charitable Trust, 0/B/4, Tribhuvan Complex, Ghod Dod Road, Surat - 395007 Vs. The CIT(Exemption), Ahmedabad थायीलेखासं./जीआइआरसं./PAN/GIR No: ABDTS9848Q (अपीलाथ\u0007/Appellant) (\b थ\u0007 /Respondent) आयकर अपील सं./ITA No.1276/SRT/2024 Sawani Foundation Trust, Sawani Rehna Yasin, 804, Luxuria Trade Hub, Near V. R. Mall, Dumas Road, Surat – 395007 Vs. The CIT(Exemption), Ahmedabad थायीलेखासं./जीआइआरसं./PAN/GIR No: ABDTS3048Q (अपीलाथ\u0007/Appellant) (\b थ\u0007 /Respondent) Appellant by Shri Sapnesh Sheth, CA Respondent by Shri Ritesh Mishra, CIT-DR Date of Hearing 13/03/2025 Date of Pronouncement 13/05/2025 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: These appeals emanate from the separate orders, both dated 23.10.2024, passed by the learned Commissioner of Income-tax (Exemption), Ahmedabad [in short “the CIT(E)”], wherein the CIT(E) rejected assessee’s application filed in Form No.10AB u/s 80G(5)(iii) of the Income-tax Act (for short ‘the Act’) and cancelled the provisional registrations. Since the facts 2 ITA Nos.1248 & 1276/SRT/2024 Mahavideh Foundation Trust & Sawani Foundation Trust and the grounds of appeal are similar in both cases, with consent of both parties, these appeals are clubbed and heard together, and disposed of by a common order for the sake of convenience and brevity. ITA No. 1248/SRT/2024 is taken as the ‘lead case’. 2. The grounds of appeal raised by the assessee in ITA No. 1248/SRT/2024 are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the ld. Commissioner of Income Tax (Exemption) has erred in rejecting the application filed by the Appellant Trust in form 10AB for grant of approval under clause (iii) of first proviso to section 80G(5) of the I.T. Act. 2. It is therefore prayed that order of ld. Commissioner of Income-tax (Exemption) rejecting application of assessee may please be quashed. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 3. The grounds of appeal raised by the assessee in ITA No. 1276/SRT/2024 are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the ld. Commissioner of Income Tax (Exemption) has erred in rejecting the application filed by the Appellant Trust in form 10AB for grant of approval under clause (iii) of first proviso to section 80G(5) of the I.T. Act. 2. It is therefore prayed that order of ld. Commissioner of Income-tax (Exemption) rejecting application of assessee may please be quashed. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 4. The brief facts of the case are that the assessee-trust filed an application for approval under clause (iii) of first proviso to subsection (5) of section 80G of the Act in Form no.10AB electronically. The CIT(E) issued notices on 11.07.2024 and 03.10.2024. He has discussed legal background of 3 ITA Nos.1248 & 1276/SRT/2024 Mahavideh Foundation Trust & Sawani Foundation Trust Rule 11AA(1), 11AA(2), section 80G(5) along with Explanation – 3 and Provision of sub-section (5B) introduced w.e.f. 01.04.2000 and section 2(15) of the Act. He noted that the date of application for registration for approval in Form No.10AB was 27.04.2024 and the date of provisional approval was 24.06.2022 for the period from 24.06.2022 to AY.2025-26. Thereafter, the CIT(E) examined the objects of the trust and observed that some objects are religious in nature, which contravene the main condition of section 80G(5) of the Act. The appellant had also not given any clarification in respect of religious objects mentioned in the trust deed. The trust has also not furnished details of actual religious expenditure to enable the CIT(E) to verify the violation of sub-section (5B) of section 80G of the Act. Accordingly, he held that assessee trust is not established only for charitable purposes. Hence, the applicant is not entitled to get approval u/s 80G(5) of the Act. Therefore, application in Form No.10AB for approval under clause (iii) of the first proviso to section 80G(5) was rejected and provisional approval was also cancelled. 5. Aggrieved by the order of CIT(E), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted that the trust has been granted permanent registration u/s 12AB of the Act. However, permanent registration u/s 80G was rejected only after two months from the date of granting of permanent registration. He submitted that the expenses incurred for religious purpose was ‘Nil’. Further, 4 ITA Nos.1248 & 1276/SRT/2024 Mahavideh Foundation Trust & Sawani Foundation Trust the main object of the trust was to establish, run and maintain schools, colleges, research institutes and hostels for promotion of education and to assist other institutions engaged in such activities. He submitted that the constitution of the trust might have included the phrases such as religious knowledge, etc. in a broad sense along with other educational, social and medical objects. He submitted that no religious activity was conducted by the trust and the focus was on providing education, medical and social welfare. He also submitted that no expenditure was incurred for any religious purpose. He relied on various decisions of Co-ordinate Benches of ITAT. 6. On the other hand, learned Commission of Income-tax – Departmental Representative (ld. CIT-DR) for the revenue supported the order of CIT(E). 7. We have heard both parties and perused the materials available on record. The CIT(E) observed that the appellant has not furnished complete details regarding the expenditure incurred for religious purpose. He also observed that the appellant has not clarified about the religious objects mentioned in the trust deed. The ld. AR submitted that the trust was for charitable purpose and no expenditure whatsoever was incurred for any religious purpose. We find that under similar facts, the matter has been restored to the file of CIT(E) in case of Shree Bhandari Gnyati Mandal, in ITA No.1503/Ahd/2021, dated 24.12.2024, for necessary verification and fresh 5 ITA Nos.1248 & 1276/SRT/2024 Mahavideh Foundation Trust & Sawani Foundation Trust adjudication. For ready reference, relevant part of the order is reproduced below: “5. On going through the records of the case, we observe that the word “religious” is only coming at one place in the objects of the assessee / applicant trust i.e., at Object No. 3, which is reproduced for ready reference: “3) To provide social, cultural, moral, professional, religious as well as Vedic support to caste members.” 6. Now on going through Section 80G(5) of the Act, it states that this section applies to donation to any institution or fund only if it is established in India for a “charitable purposes”. Further, Explanation 3 to Section 80G states that the term “charitable purpose” does not include any purpose the whole or substantially the whole of which is of a religious nature. Further, Section 80G(5B) states that notwithstanding Explanation 3, any institution or fund which incurs expenditure which is of a religious nature for an amount not exceeding 5% of it’s total income for that previous year shall be deemed to be an institution or fund to which the provisions of Section 80G shall apply. Now, from a combined reading of these provisions it is apparent that in case any trust applies or expends less than 5% of his income towards religious purposes, then it cannot be denied benefit of deduction under Section 80G of the Act on the ground that has been incorporated for religious purposes. Further, even in the definition of the term “charitable purposes” it has been stated that the purpose of Trust should not one which is wholly or substantially wholly which of a religious nature. Therefore, even as per Explanation 3 referred to above, in order to qualify as “charitable purpose” within the meaning of section 80G of the Act, the only qualification is that the activities should not be wholly or substantially wholly religious. Therefore, in view of the statutory provisions quoted above, we are of the considered view that the application for grant of deduction under Section 80G cannot be denied to the assessee only on the ground that one of the objects content the term “religious”. Further, we observe that the applicant / assessee trust had specifically submitted that the trust has not incurred any expenditure towards religious purposes. However, Ld. CIT(E), without carrying out any enquiry into this aspect, summarily rejected the application filed by the assessee / applicant trust. In fact, Ld. CIT(E), while rejecting the application for grant of registration under Section 80G of the Act has not dealt with any of the submissions / contentions of the assessee / applicant trust submitted during the course of hearing, which in our view is against the principles of natural justice. 7. In the result, the matter is restored to the file of Ld. CIT(E) to consider the grant of registration under Section 80G of the Act afresh and to carry out necessary verification whether the assessee / applicant trust has expended / utilized less than 5% of its total income towards religious purposes. If that 6 ITA Nos.1248 & 1276/SRT/2024 Mahavideh Foundation Trust & Sawani Foundation Trust be the case, the assessee / applicant trust may be granted registration, in accordance with law.” 8. The facts of the present case are similar to the facts of the case cited supra. The ld. AR submitted that the use of the words religious or religion in a few objects of the trust deed does not mean that the trust was not for charitable purpose but was for religious purpose. This is clear from the fact that the trust has not incurred any expenditure which was of religious nature. We find that the appellant has not given any details of actual religious expenditure to the CIT(E). Therefore, the matter is restored to the file of CIT(E) to carry out verification as to whether 5% of the total income of the assessee-trust was spent for religious purpose and thereafter to consider the grant of registration in accordance with law. The appellant should be granted adequate opportunity of hearing before deciding the issue. The appellant is directed to furnish all details needed by the CIT(E) during the fresh proceedings. For statistical purposes, the appeal of the assessee is allowed. 9. In the result, appeal filed by the assessee is allowed for statistical purposes. ITA No.1276/SRT/2024: 10. The facts of the case are similar to the facts of the case decided above. The grounds raised by the appellant are also similar. Hence, following the reasons given in the aforesaid order, the order of CIT(E) is also set aside 7 ITA Nos.1248 & 1276/SRT/2024 Mahavideh Foundation Trust & Sawani Foundation Trust and the matter is restored to CIT(E) for fresh adjudication in terms of the direction given above. For the statistical purpose, the appeal is allowed. 11. In the result, the appeal of the assessee is allowed for statistical purposes. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 13/05/2025. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat \u0001दनांक/ Date: 13/05/2025 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "