80G Registration and Incidental Religious Activities: Analysis of ITAT Ahmedabad Ruling in Bhaktidham Seva Trust Vs CIT (Exemption)

Introduction

The decision of the Ahmedabad Bench of the ITAT in Bhaktidham Seva Trust Vs CIT (Exemption) offers important guidance on how Section 80G(5) should be applied to charitable trusts that carry on a mix of charitable and incidental religious activities. The Tribunal held that a trust engaged predominantly in charitable objects such as education, medical relief and relief to the poor cannot be denied approval under Section 80G(5) merely because some of its stated objects or activities contain a religious element that is only incidental to its primary charitable purpose.

At the same time, the ITAT emphasized that denial of Section 80G approval on the ground of excessive religious expenditure requires clear factual verification that such expenditure actually exceeds the ceiling of 5% prescribed under Section 80G(5B). Presumptive treatment of general expenditure as “religious” without detailed examination is not sufficient.

The matter was ultimately remanded to the CIT(E) for fresh adjudication on the limited issue of the nature and quantum of religious expenditure, with a direction that approval be granted if the religious spend is found to be within the statutory 5% limit.

Background of the Case

Application under Section 80G(5)

The assessee, Bhaktidham Seva Trust, is a public charitable trust engaged in:

  • running educational institutions
  • providing medical relief through camps and health services
  • offering assistance to economically weaker sections

The assessee filed an application seeking approval under Section 80G(5)(iii) of the Income Tax Act 1961. The trust also possessed a provisional 80G approval, which came under scrutiny during this proceeding.

Order of the CIT (Exemption)

The CIT(E) rejected the assessee’s application and also cancelled its provisional approval under Section 80G(5), primarily on two grounds:

  1. Characterization as a religious trust

    • Out of its 18 stated objects, the CIT(E) identified certain objects as being religious in nature.
    • On this basis, the trust was treated as a religious trust and therefore held to be ineligible for the benefit of Section 80G(5).

  2. Alleged excess religious expenditure

    • The CIT(E) concluded that the assessee had incurred religious expenses beyond the 5% threshold laid down in Section 80G(5B).
    • In doing so, the CIT(E) treated several heads of expenditure, such as celebration expenses, “Granth Mahotsav” printing expenditure and decoration costs, as religious in nature without detailed supporting analysis.

Consequently, the application for approval under Section 80G(5) was rejected vide order dated 16.12.2024.

Assessee’s Appeal before ITAT

The assessee challenged this order before the ITAT Ahmedabad, raising, inter alia, the following key contentions:

  • The trust is a composite charitable trust, not a purely religious trust.
  • The objects relating to satsang and facilities for Vaishnavs are not exclusively religious and are intended for broader public benefit without discrimination.
  • Even if minor religious elements exist, they are merely incidental to dominant charitable objects.
  • The conclusion that religious expenditure surpasses 5% was based on incorrect assumptions and without proper verification.
  • An opportunity should be granted to furnish complete details and break-up of religious and non-religious expenditure.

Arguments Presented

Submissions on Behalf of the Assessee

The learned Authorised Representative (AR) explained the nature of the trust and its activities in detail:

  1. Composite charitable nature

    • The trust is primarily engaged in:
      • education (including running an educational institution for girls, namely Shri Ballav Acharya International Girls School),
      • medical aid (health camps, medical assistance), and
      • relief to the poor and under-privileged.
    • These dominant objects are squarely charitable within the meaning of the Income Tax Act 1961.

  2. Objects alleged to be religious
    The CIT(E) had characterized the following two objects as religious: