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Judgment
PER S. RIFAUR RAHMAN, AM:
The assessee has filed appeal against the order of the learned Commissioner of Income Tax (Exemptions), Chandigarh [“ld. CIT(E)”, for short] dated 09.02.2026 u/s 80G of the Income Tax Act, 1961 (for short ‘the Act’).
Brief facts of the case are that the assessee filed an application for approval u/s 80G(5)(ii) of the Act in Form 10AB along with the supporting documents. On perusal of the above, details and submissions, ld. CIT(E) observed that the assessee is engaged in religious activities. He observed from Form 10AB relating to clause No. 8 of the aims and objects provides for to open worship places, which is religious in nature. The relevant objects clause is as under:
“To open Community center, Dharamshala, place of worship/old age home for use of any member of the society belonging to any caste, creed or religion etc.”
Further he observed from the income expenditure account and notice that the assessee has incurred ‘Diwali Expenses’ of Rs. 83,696/- for the year under consideration and in the subsequent year it is incurred 71,194/- from the above observations, she came to the conclusion that the objects of the assessee are not confined exclusively to charitable purposes but expressly include religious objects and activities carried out are also found to be in furtherance of such relevant objects. Further she observed that the activities of the assessee are also religious in nature which cannot be considered as charitable purpose as per provisions of section 80G(5) of the Act, thus liable to be rejected. The ld. CIT(E) observed that as per Explanation 3 to section 80G of the Act clearly states that for the purpose of section 80G, charitable purpose doesn’t include a purpose, the whole or substantial the whole of which is all religious in nature. With above observations, she came to the conclusion that a trust cannot be said to be established for charitable purpose if it includes any purposes/objects, the whole or substantial, the whole of which is all religious in nature. By relying on certain decision she came to the conclusion that the present application filed in Form 10AB is rejected as assessee is clearly engaged in religious activities which cannot be considered to be for charitable purposes as per provisions of section 80G(5) of the Act.
Aggrieved with the above order, the assessee is in appeal before us raising the following grounds of appeal:
“1.On the facts and circumstances of the case, the order passed under by the learned Commissioner of Income Tax (Exemptions), Chandigarh ["CIT(E)"] rejecting the application for registration under section 80G of the Income Tax Act, 1961 (hereinafter referred as Act) is bad both in the eye of law and on facts.
2.On the facts and circumstances of the case, learned CIT(E) has been erred both on facts and in law in rejecting the application of the assessee for approval under section 80G of the Act, despite the fact that the assessee has filed the application within the prescribed time limit and fulfilled all the conditions as provided under the Act and thus, eligible for registration.
3.On the facts and in the circumstances of the case, learned CIT(E) has erred both on facts and in law in rejecting the application for registration under section 80G(5)(ii) of the Act, 1961 by holding that the activities of the assessee is wholly and substantially religious in nature.
4.On the facts and in the circumstances of the case, learned CIT(E) has erred both on facts and in law in rejecting the application for registration under section 80G(5)(ii) of the Act, 1961 despite the fact that the assessee has been granted registration under section 12AB(1)(b) of the Act vide order dated 06.02.2026 from AY 2027-28 to AY 2036-37
5.On the facts and in the circumstances of the case, learned CIT(E) has erred both on facts and in law in wrongly invoking the provisions of Explanation 3 to section 80G of the Income Tax Act.
6.On the facts and in the circumstances of the case, learned CIT(E) has erred in rejecting the application for registration under section 80G of the Act, 1961 despite the fact that there is no adverse finding regarding the aims, objects and genuineness of activities of the assessee and hence application for registration cannot be rejected.
7.On the facts and circumstances of the case, the learned CIT(E) has erred both on facts and in law in passing the order without providing reasonable opportunity of being heard in clear violation of the principle of natural justice.
8.The appellant craves leave to add, amend or alter any of the grounds of appeal.”
At the time of hearing the ld. AR of the assessee brought our notice detail finding of the ld. CIT(E) and further brought our notice, one of the objection of the society i.e., clause no. 8 referred by ld. CIT(E) is only to open Community, center, Dharamshala, place of worship/old age home for use of any member of the society belonging to any caste, creed or religion etc. He submitted that the above object is purely in charitable nature and it is not religious in nature. Further he brought our notice, income and expenditure account wherein assesse has incurred ‘Diwali Expenses’ of Rs. 83,696/- only which is a general celebration expenses which cannot be categorized as religious in nature, further the expenditure is not even point 0.20% of the total income. He submitted that as per the amended provisions, expenditure upto 5% of the total income or if the religious activities is minor and incidental to an overarching charitable activities is allowed therefore, he prayed that the denial of registration of u/s 80G is unlawful.
On the other hand, the ld. DR relied on the detail findings of the ld. CIT(E).
Considered the rival submissions and materials placed on record. We observed that the registration u/s 80G was denied to the assessee for the reason that the assesse as per clause no. 8 which states that to open Community Center, Dharamshal place of worship/old age home for use of any member of the society belonging to any caste, creed or religious etc. and further observed that the assessee has incurred certain expenditure on the occasions of Diwali to the expenditure of Rs. 83,696/- because of the above reasons, the registration was denied. After careful consideration, we observed that the clause no. 8 does not specify any religious activity, it is a general object of the society but ld. CIT(E) is not brought on record anything to state that the assessee has indulged in any religious activities based on the above said clause. However, in our considered view to open Community center, Dharamshala, place of worship/old age home for general public service is not a religious activity just because a place of worship is stated, it does not mean that it directly falls under the religious activities. Assessee is in the field of educational activity and in every educational society, there will be a place of worship it does not mean that the assessee is indulged in religious activities. Further, we observed that the assessee is incurred ‘Diwali Expenses’ to the extent of Rs. 83,696/-, it was wrongly observed that it is spent on religious activities, it is common that an institution celebrates special occasion like Diwali and incur some expenditure on that occasion, it is only a celebration and not a religious activity, therefore, the observations of the ld. CIT(E) is not as per law and also not as per the object clause of the society. Therefore, in our considered view the activities carried on by the assessee is not religious activity and this is very much in the activities of imparting of education. Therefore, we direct the ld. CIT(E) to grant registration u/s 80G.
In the result, the appeal filed by the assessee is allowed.