Section 80G Approval Cannot Be Withheld on Ground of Puja Expenditure Alone: ITAT Delhi's Ruling in Dwarka Kalibari Case
Background and Context
The Delhi Bench of the Income Tax Appellate Tribunal recently delivered a significant ruling concerning the eligibility of religious-cum-charitable societies for approval under Section 80G of the Income Tax Act, 1961. The case of Dwarka Kalibari Vs Assessing Officer arose from the rejection of a Form 10AB application filed by the assessee — a society engaged in charitable as well as devotional activities — seeking approval under Section 80G for Assessment Year 2026–27.
The case raises a recurring and consequential question: can an institution that also undertakes activities involving temple worship or seasonal puja be denied Section 80G approval solely on that basis? The Tribunal's answer was an unequivocal no.
The Order Under Challenge
The Commissioner of Income Tax (Exemptions), Delhi, passed an order dated 20.03.2026 rejecting Dwarka Kalibari's Form 10AB application for Section 80G approval. The basis of rejection was that the society had, during the preceding three financial years, spent more than 5% of its total income on daily puja expenses and Durga Puja expenses — expenditure that the Commissioner characterised as necessarily religious in nature and therefore incompatible with charitable status under the Income Tax Act, 1961.
Notably, the very same order dated 20.03.2026 granted the society registration under Section 12AB(1)(b), and in doing so, the Commissioner recorded the nature of the society's activities as charitable in Column 2A of Form 10AD. This internal inconsistency became a central point of challenge before the Tribunal.
Grounds of Appeal Raised by the Assessee
The assessee raised multiple grounds before the Tribunal, which can be broadly grouped as follows:
Inconsistency Between Section 12AB Grant and Section 80G Rejection
The same authority, on the same date, characterised the assessee's activities as charitable while granting registration under
Section 12AB, yet simultaneously deniedSection 80Gapproval on the ground that those very activities were religious. This contradiction, the assessee argued, rendered the rejection legally untenable.
Nature of Puja Activities — Open and Inclusive
The society contended that:
- Its mandir and place of worship imposed no restriction on the basis of caste, creed, or religion.
- The place of worship functioned more as a meditation and community centre accessible to all.
- The Calcutta High Court has held that Durga Puja is not confined to religious worship of a particular community but is a cultural celebration of inclusive and joyous character.
Dominant Purpose Test
The assessee relied on the ruling of the Supreme Court in Assistant Commissioner of Income Tax (Exemption) Vs. Ahmedabad Urban Development Authority (Civil Appeal No. 21762/2017), under which the Apex Court applied the dominant purpose test — holding that where the primary objective of an institution is charitable, incidental commercial or religious activity does not destroy its charitable character.
Expenditure Threshold to Be Examined at Assessment Stage
The assessee argued that even if expenditure on religious activities exceeded the permissible threshold, it was not the Commissioner's role to reject Section 80G approval on that ground. Such evaluation belongs exclusively to the Assessing Officer at the stage of assessment proceedings.
Relief in Natural Calamities
One of the stated objects of the society, as recorded in clause (3), sub-clause (3) of its Memorandum of Association, reads:
"to organize relief operations amongst people without distinction of caste, creed or religion in times of natural calamities etc."
The Commissioner had completely overlooked this objective while characterising the society as religious in nature.