ITAT Panaji Landmark Ruling: Imparting Vedic Education and Sanskrit Qualifies as Charitable Activity for Section 80G Approval, Not Religious

The distinction between "charitable purposes" and "religious purposes" has long been a subject of intense litigation under the framework of the Income Tax Act 1961. For non-profit organizations, trusts, and societies, securing tax exemptions is heavily dependent on how their core objectives are interpreted by the revenue authorities. A recent and highly significant judicial determination by the Income Tax Appellate Tribunal (ITAT) Panaji in the case of Prachya Viddya Samvardhan Vs CIT (Exemptions) has provided much-needed clarity on this subject.

The Tribunal decisively ruled that the propagation of Vedic knowledge, the teaching of ancient Indian Shastras, and the operation of Sanskrit Pathashalas constitute educational and charitable activities, rather than religious ones. Consequently, such organizations are fully eligible for regular approval under Section 80G(5) of the Income Tax Act 1961.

This comprehensive analysis delves into the factual background, the arguments presented by both the revenue and the assessee, the critical judicial precedents relied upon, and the ultimate verdict delivered by the ITAT Panaji.

The Factual Matrix of the Dispute

Formation and Initial Registrations

The assessee in this matter, Prachya Viddya Samvardhan, is a society formally incorporated under the Societies Registration Act on 27.03.2017. The primary vision behind the formation of the society was to contribute to the field of oriental studies, promote ancient Indian knowledge systems, and engage in broad-based welfare activities for the general public.

To facilitate its charitable endeavors, the assessee successfully obtained regular registration under Section 12A of the Income Tax Act 1961. This crucial registration was granted on 23.09.2021 and was valid for the period spanning from AY 2022-23 to AY 2026-27. Following this, the society applied for and was granted provisional approval under Section 80G via Form 10AC on 26.10.2022, which was applicable for AY 2025-26.

The Application for Regular Approval

As per the statutory requirements transitioning from provisional to regular status, the assessee submitted its application for regular approval under Section 80G(5) using Form No. 10AB on 25.10.2023. During the assessment proceedings, the Commissioner of Income Tax (Exemptions) [CIT(E)], Bangalore, requisitioned various details and documents to scrutinize the nature of the society's activities.

The Rejection by the Revenue Authorities

On 24.04.2024, the CIT(E) passed an adverse order, unequivocally rejecting the assessee's application for regular approval under Section 80G(5) and simultaneously cancelling the previously granted provisional approval dated 26.10.2022.