Section 80G Approval Cannot Be Denied Solely Due to Temple Maintenance: ITAT Delhi Remands Ayyappa Samithi Matter for Fresh Determination
Case Background
Case Name: Ayyappa Samithi Vs CIT (Exemption) (ITAT Delhi Bench)
Relevant Assessment Year: 2025-26
Forum: Income Tax Appellate Tribunal, Delhi Bench
Shree Ayyappa Samithi is a trust that operates across both charitable and religious domains. Among its various undertakings, the Trust is responsible for running and maintaining Shree Dharma Sastha Temple located in Delhi. Seeking to enable its donors to claim tax deductions on their contributions, the Trust submitted an application in Form No. 10AB on 30.09.2025, requesting approval under Section 80G of the Income Tax Act, 1961.
The Commissioner of Income Tax (Exemptions), Delhi, rejected this application vide order dated 08.03.2026. The basis for the rejection was the CIT(E)'s conclusion that the Trust was engaged in religious activities, that it operated and maintained a temple, and that the religious expenditure incurred by it exceeded 5% of its total receipts. On these grounds, the CIT(E) held that the Trust did not qualify for approval under Section 80G.
Aggrieved by this rejection, Shree Ayyappa Samithi carried the matter in appeal before the Delhi Bench of the Income Tax Appellate Tribunal.
The Trust's Submissions Before the Tribunal
The Trust did not dispute the factual position that it runs a temple or that some of its expenditure is religious in character. Its core contention was more nuanced: it argued that it operates a combination of charitable and religious activities, and crucially, that its religious expenditure had not breached the permissible 5% ceiling prescribed under the statute.
According to the Trust's counsel, the financial statements on record clearly reflected that religious expenditure during the relevant period remained within the statutory limit. The argument was that the CIT(E) failed to read and appreciate the accounts in the correct light before arriving at the contrary conclusion.
The Trust therefore maintained that rejection of its Section 80G application could not be sustained merely because one of its activities happens to involve maintenance of a place of worship. The proper enquiry under the law is a numerical and financial one: does the expenditure attributable to religious purposes exceed the threshold prescribed? That was the question the CIT(E) ought to have answered through a proper examination of the accounts, which it did not do.
Legal Framework: What Section 80G Actually Requires
The General Rule Under Section 80G(5)
An institution or fund seeking approval under Section 80G(5) of the Income Tax Act, 1961 must satisfy the conditions specified therein. As a general proposition, institutions that are wholly or substantially religious in character are not eligible for the donor-deduction approval that Section 80G provides. The rationale is straightforward — the legislative intent behind donor deductions is to incentivise contributions toward charitable causes of public benefit, not purely religious observance.