Gurudwara Operation Does Not Automatically Disqualify Trust from Section 80G Approval: ITAT Cuttack Ruling

Background and Overview

The Income Tax Appellate Tribunal, Cuttack Bench, delivered a significant ruling in Sri Guru Nanak Devji Religious & Charitable Trust Vs CIT (Exemptions) (ITAT Cuttack), bearing ITA No. 384/CTK/2018, through its order dated 24/05/2021. The Tribunal set aside the rejection of Section 80G(5)(vi) approval and directed the Commissioner of Income Tax (Exemptions) to grant the same, holding that the mere fact of operating a Gurudwara and conducting Sikh religious rituals does not, by itself, constitute a bar under Section 80G(5)(iii) of the Income Tax Act, 1961.

This ruling carries considerable relevance for religious-charitable trusts that engage in community welfare alongside faith-based activities, and it clarifies the statutory threshold that must be crossed before an institution is disqualified from receiving Section 80G approval.

Facts of the Case

The assessee, Sri Guru Nanak Devji Religious & Charitable Trust, had been granted registration under Section 12A of the Income Tax Act, 1961, on 22.8.2017. Thereafter, the Trust filed an application in the prescribed Form 10G on 22.12.2017, seeking approval under Section 80G before the CIT (Exemptions), Hyderabad.

The CIT (Exemptions) rejected the application on the ground that the primary object of the Trust — namely, to establish, construct, maintain and run a Gurudwara at Puri and Nayagarh, and to provide for regular daily seva puja in accordance with Sikh religious custom and tradition — rendered the Trust's character essentially religious, thereby placing it in violation of Section 80G(5)(iii) of the Act.

The relevant portion of the CIT (Exemptions) order read as follows:

"The assessee is a religious trust. As seen from the Trust Deed, the main object i.e. to establish, construct, maintain and run a Gurudwara at Puri providing for regular daily seva puja according to the Sikh religious custom, tradition established in India. It is running a Gurudwara in village Nayagaon. The Trust's activities include religious activities and violating the provisions of section 80G(5)(iii) of the Act. Hence, the Trust is not eligible for approval u/s.80G(5)(vi) of the Act having regard to the provisions of sub-rule (2) to Rule 11AA of Income tax Rules, 1962."

Charitable Activities Demonstrated by the Trust

Before the Tribunal, the assessee placed substantial material on record to establish that its actual activities extended well beyond the religious sphere and benefited the public at large without any form of discrimination. These activities included:

  • Free distribution of food packets and drinking water every year during the Sri Jagannath Rath Yatra at Puri
  • Provision of free meals three times a day to hundreds of pilgrims and visitors to Puri
  • Maintenance of a children's park on approximately two acres of land, provided by the Puri Municipal Corporation, for free use by children and the general public
  • Relief and rehabilitation work during natural calamities, including assistance rendered during cyclone Fani
  • Plantation activities for the benefit of citizens and visitors of Puri

The assessee also produced agreements dated 24.12.2014 and 11.11.2016 entered into between Puri Municipality and the Trust for establishing the children's park and undertaking plantation for the all-round development of children of Puri city. Financial statements including the balance sheet, income and expenditure account, and receipt and payment account for the period 1st April to 31st March, 2019, along with the auditor's report, were also placed before the Tribunal.

Crucially, the Tribunal noted that all these activities were carried out without any discrimination based on gender, caste, creed, or religion, clearly demonstrating that the Trust was not functioning exclusively for the benefit of any particular religious community.

The Tribunal undertook a careful analysis of Section 80G(5)(iii) of the Income Tax Act, 1961, which stipulates:

"the institution or fund is not expressed to be for the benefit of any particular religious community or caste."