Chennai ITAT Sets Aside Section 80G Rejection — Directs CIT(E) to Re-Examine Expenditure Nature Before Denying Approval to Religious Trust

Overview of the Case

The Chennai Bench of the Income Tax Appellate Tribunal delivered a significant ruling in the matter of Anandavalli Kaingarya Sabha Vs CIT (ITAT Chennai), setting aside the rejection of an application for approval under Section 80G of the Income Tax Act, 1961. The Tribunal held that a trust having religious objects cannot be summarily denied Section 80G registration without conducting a thorough examination of the actual breakup of its expenditure and verifying whether religious spending exceeds the permissible threshold prescribed under Section 80G(5B).

The appeal, pertaining to Assessment Year 2025-26, was allowed for statistical purposes, with the matter being remanded back to the Commissioner of Income Tax (Exemptions) — referred to herein as CIT(E) — for fresh adjudication.

Background and Facts of the Case

Anandavalli Kaingarya Sabha is a charitable institution established through a trust deed dated 09.11.2016. The trust's primary mandate encompasses the promotion of spiritual well-being, social welfare, and community development, with its activities extending to the general public without any distinction based on caste, creed, gender, or religion.

On 07.01.2025, the assessee filed an application for approval under Section 80G of the Income Tax Act, 1961, using Form 10AB. During the course of processing the application, the CIT(E) called upon the assessee to furnish:

  • Details pertaining to the trust's activities
  • Financial statements and governing documents
  • Activity reports and photographic evidence
  • Other relevant supporting materials

After reviewing all submissions, the CIT(E) rejected the application on the ground that the assessee possessed religious objects and was engaged in religious activities — a basis the Tribunal ultimately found to be legally insufficient.

Objects of the Trust

A significant portion of the Tribunal's reasoning rested on a careful reading of the trust deed. Clause 4 of the trust deed sets out the following objects: