Presence of Religious Objects Not a Bar to Section 80G Approval: ITAT Clarifies the 5% Rule
A recurring controversy in charitable taxation is whether a trust having religious objects can be denied approval under section 80G. In a welcome and legally sound ruling, the ITAT has reiterated that mere presence of religious objects in a trust deed does not automatically disentitle a trust from section 80G approval, so long as expenditure on religious activities remains within the statutory threshold.
Statutory Framework: Section 80G(5B)
Section 80G(5B) of the Income-tax Act provides a clear deeming fiction. It states that a trust or institution shall be deemed to be eligible for section 80G benefits if expenditure of a religious nature does not exceed 5% of its total income in any previous year. Thus, the law consciously permits a limited religious element and does not insist on absolute exclusion of religious objects.
Facts of the Case
The assessee, Umiya Mataji Ishver Ramji Annakshetra Trust, was a public trust registered under the Bombay Public Trust Act, 1950. It applied for approval under section 80G to enable donors to claim deduction for donations made to it.
The Commissioner (Exemptions), however, rejected the application solely on the ground that the trust deed contained one or more religious objects, without disputing the nature or quantum of actual expenditure incurred by the trust.
Tribunal’s Analysis
The Tribunal examined the actual conduct of the trust and its financial statements over the relevant years. A crucial factual finding emerged: the trust had not incurred expenditure on religious purposes exceeding 5% of its total income in any of the years under consideration.
The ITAT observed that the Commissioner (Exemptions) had focused only on the objects clause and completely ignored the mandate of section 80G(5B), which requires examination of actual expenditure, not merely the wording of objects.
Key Legal Findings
The Tribunal categorically held that:
Section 80G(5B) creates a statutory presumption in favour of the trust if religious expenditure is within 5% of income.
The law does not prohibit trusts having religious objects from obtaining section 80G approval.
What is relevant is quantitative compliance with the 5% limit, not qualitative exclusion of religious objects.
Since the assessee-trust satisfied this statutory condition, denial of section 80G approval was held to be legally unsustainable.
Decision
The ITAT allowed the appeal and directed grant of approval under section 80G, holding that the assessee-trust was fully eligible under the law.
Practical Significance
This ruling is of considerable importance for charitable trusts that carry out mixed activities-charitable with incidental religious elements. It reinforces that:
Authorities cannot mechanically reject section 80G applications merely due to religious objects in the trust deed.
Actual expenditure patterns must be examined year-wise.
Section 80G(5B) is a beneficial provision and must be applied purposively.
The decision brings much-needed clarity and prevents overreach by the authorities while processing section 80G applications.
Citation:
Income Tax Appellate Tribunal Rajkot
Umiya Mataji Ishver Ramji Annakshetra Trust vs. Commissioner of Income-tax (Exemption)
[2025] 176 taxmann.com 839 (Rajkot – Trib.) | Order dated 22-07-2025
The copy of the order is as under:
