80G Deduction cannot be denied if Trust incurs only a small part of the income for religious purposes: ITAT

It is seen that the grievance of the assessee is that the department has rejected the claim of assessee for grant of recognition u/s 80G of the Income-tax Act, 1961 (hereinafter referred to as “the Act‟). In this regard an application was made by the assessee-trust in Form No. 10G on 13-11-2017. The assessee is also registered u/s 12AA of the Act vide order No. PN/CIT(Exemp)/Tech/12AA/PuneReg/721/251/2016-17/1375 dated 20-06-2016. The office of ld. CIT (Exemption) had directed the assessee-trust to furnish various information/clarification for the purpose of verification regarding genuineness of the charitable activities carried out for utilizing the receipts of the trust towards charitable objects of the trust. In response to the notices, the ld. A.R of the assessee attended on various dates and had furnished documents/evidences in compliance with the notices. These facts are not disputed. The assessee had applied for approval u/s 80G(5)(vi) of the Act and has given submissions dated 11-02-2019 wherein the assessee has given details of charitable and social welfare work that it undertakes such as school for poor children, gaushala, old-age home, upliftment of weaker section of the society etc. The assessee has further stated that since its inception the activities of the assessee were carried out by receiving donations for the fulfilment of the objects prescribed in the Memorandum & Articles of Association. Broadly, the reason for rejection for grant of exemption u/s 80G(5)(vi) of the Act by the ld. CIT (Exemption) was that the assessee received donations of Rs. 13,50,00,000/- from Shri Ganapati Devasthan Trust to be used inter-alia for construction and maintenance of temple of Gajanan Maharaj, but the construction and maintenance of temple is not included in the objects of the assessee trust and therefore, the assessee-trust has not carried out its activities as per its objects.

ITAT in matter of Santshreshtha Gajajan Maharaj Sevabhavi Sanstha vs The Commissioner of Income-tax (Exemption) Pune retreated that the expenditure for a religious nature if it does not exceed five per cent of the total income then the said trust or institution shall be deemed to be an institution to which the provision of section 80G would apply. In this context, the assessee has given an undertaking that whenever the construction of temple would take place and the maintenance fund for the said temple it shall be in accordance with section 80G (5B) of the Act. That, the assessee would even take necessary approval from the Charity Commissioner, Pune, before undertaking such activity. However, in the present context given the facts when the assessee is registered u/s 12AA of the Act and when the provision of section 80G(5)(vi) of the Act has been complied with, we do not see any reason for refusing the assessee the grant of exemption u/s 80G of the Act. The Department has also not brought out a case where they can prove through evidences that the assessee-trust has violated the stipulations contained in sec. 80G(5B) of the Act. In fact, the revenue authorities have not demonstrated anything showing substantial expenditures of the fund received in donation by the assessee for religious purposes and whether it is exceeding the permissible limit of 5%. It has also been mentioned by the ld. CIT (Exemption) that the assessee has not provided head-wise details of various expenditure as per para 4.3 of his order but all these details have been submitted before him and as annexed before us in the paper book. The ld. D.R did not refute these facts. In this scenario it will be also worth mentioning that while exercising the power to reject or accord approval u/s 80G(5) the Commissioner acts as a quasi-judicial authority. Therefore, the conclusion arrived at by him is expected to be supported by valid and cogent reasons. It is also expected that he should apply his mind to the facts of each case and give reasons either to grant or refuse recognition/approval. This requirement is very much imperative on the part of the Commissioner particularly having regard to the statutory provision under which he functions. This proposition has been observed and upheld by the Hon‟ble Andhra Pradesh High Court in the case of Tirumala Tirupati Devasthanam Vs. Chief C.I.T. (2001) 251 ITR 849 (AP). In the case of CIT Vs. Christian Medical College (2015) 274 ITR 17, it was observed and held by the Hon‟ble Punjab & Haryana High Court that in a case where the assessee has been running and maintaining the Christian Medical college, Christian College of Nursing, where medical care and training the professionals were provided by the assessee- society to everyone irrespective of their caste, creed, race, religion etc. the assessee was held to be entitled for grant of exemption/approval u/s 80G(5) of the Act. So therefore, if Trust/Institution incurs expenses for religious purposes which is inclusive and is only a small part of the income, and if the substantial work done by the trust is charitable in nature benefitting the public at large then the institution or trust has to be granted exemption u/s 80G of the Act. In the present case of the assessee, the department has not been able to make out a case through facts that the assessee is substantially a religious trust. That on examination of the facts and circumstances we set aside the order of the ld. CIT (Exemption) and direct him to grant exemption/ approval u/s 80G of the Act to the assessee-trust. Grounds of appeal are allowed.

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