Rejection of 80G Approval Where Religious Expenditure Exceeds 5%- ITAT Ahmedabad

Case: Yuva Gayatri Pariwar Trust v. Commissioner of Income-tax (Exemption)

Court: ITAT Ahmedabad Bench ‘B’

ITA No.: 581/Ahd/2025

Date of Order: September 3, 2025

Brief Facts:

• The assessee was a charitable trust registered under the Bombay Public Trust Act, had been granted provisional registration and approval under section 80G on 23.06.2022 for AYs 2023-24 to 2025-26.

• It applied for continuation of approval under section 80G(5)(iii) through Form 10AB.

• The Commissioner (Exemptions) rejected the application and cancelled provisional registration on the ground that the assessee was a religious trust, as 38.53% of its total income was spent on religious activities (notably Yagna expenses), far exceeding the 5% limit prescribed under section 80G(5)(iii).

• Further, the assessee failed to produce evidence of charitable expenditure such as on education, health, or environmental institutions as claimed in its trust deed.

Observations of the Tribunal:

• The Tribunal noted that Section 80G(5)(iii) permits only up to 5% of total income to be applied towards religious purposes.

• The assessee had incurred ₹17.85 lakh out of total income of ₹46.33 lakh (i.e. 38.53%) on religious activities, as reflected in its audited accounts.

• The assessee admitted to conducting religious activities but could not provide any documentary proof of charitable activities like education, health, or welfare projects.

• Consequently, the claim that its objects were based on “seven foundational principles” was not substantiated by evidence showing implementation of these principles or operation of institutions beneficial to the public at large.

• Given these facts, the Tribunal upheld the Commissioner’s decision and held that rejection of approval was justified.

Hence, the ITAT held that since the assessee failed to demonstrate compliance with section 80G(5)(iii) and had incurred religious expenditure far in excess of the permissible limit, the Commissioner (Exemptions) rightly rejected its application and cancelled provisional registration. The appeal of the assessee was dismissed.