Predominant Charitable Activities Cannot Be Denied Exemption Merely Due to Religious Elements: ITAT

Case: Assistant Commissioner of Income-tax (Exemption) v. Shri Khodal Dham Trust

Court: ITAT Ahmedabad

ITA no.: 2330 (Ahd.) of 2025

Assessment Year: 2017-18

Date of Order: 23 April 2026

Brief Facts:

• The assessee was a public charitable trust registered under the Bombay Public Trust Act, 1950 and also registered under section 12A with approval under section 80G. 

• The trust was engaged in activities such as education, medical relief, financial assistance, food distribution and general public welfare.

• During the relevant assessment year, the trust constructed a structure described as a “prayer hall” and conducted rituals such as Pran Pratistha and Havan. 

• The Assessing Officer viewed the structure as a temple dedicated to Khodal Maa and concluded that the activities of the trust were predominantly religious and meant for the benefit of a particular community. 

• Consequently, exemption under sections 11 and 12 was denied.

• The Assessing Officer also treated corpus donations amounting to approximately ₹29.31 crore as taxable income and disallowed expenditure relating to activities such as Ann Kshetralay, Pran Pratistha and Havan Kund. On appeal, the CIT(A) deleted the additions by following earlier appellate orders in the assessee’s own case. 

• Aggrieved by the relief granted, the Revenue preferred an appeal before the ITAT.

Observations:

The Tribunal observed that:

• The assessee continued to hold valid registration under section 12A and its stated charitable objects included education, medical relief, financial assistance and activities of general public utility.

• The ITAT noted that the Assessing Officer had failed to bring any material on record demonstrating that the activities of the trust were confined to any particular religious community or caste. 

• The Tribunal emphasised that activities such as food distribution through Ann Kshetralay and other welfare initiatives were open to the public at large and aligned with the charitable objects of the trust.

• The Tribunal further held that the mere existence of a prayer hall or performance of certain religious rituals does not alter the charitable character of a trust, particularly where the predominant activities remain charitable in nature. There was no evidence showing that benefits were restricted to a specific community so as to attract section 13.

• A significant factor considered by the Tribunal was that on identical facts in the assessee’s own case for earlier years, the Coordinate Bench had already allowed exemption under sections 11 and 12. Since no distinguishing feature or change in facts or law was brought on record, the principle of judicial consistency required the same view to be followed.

• The Tribunal also observed that once exemption under section 11 was available, corpus donations received with specific directions under section 11(1)(d) could not be treated as taxable income. Similarly, the disallowance of expenditure relating to charitable activities such as Ann Kshetralay was unjustified in the absence of any finding that such expenditure was incurred for non-charitable purposes.
  

Accordingly, the ITAT held that exemption under sections 11 and 12 could not be denied merely because certain religious rituals or a prayer hall existed, where the trust’s dominant activities remained charitable and for public benefit. The Tribunal also held that corpus donations with specific directions were exempt under section 11(1)(d), and charitable expenditure could not be disallowed without evidence of non-charitable application. The Revenue’s appeal was therefore dismissed and the CIT(A)’s relief was upheld.