Background
The assessee-trust was established with the object of providing education and other charitable activities. The assessee applied for approval under section 80G(5) of the Income Tax Act to enable donors to claim deductions on contributions made to the trust.
On examining the trust deed, the Commissioner (Exemption) noted that one of the objects was religious in nature and accordingly treated the assessee as a composite religious-cum-charitable trust. The assessee countered that all its objects were charitable for the public at large without discrimination, and that no expenditure was incurred on religious activities during the relevant year — invoking the protection of section 80G(5B).
Order of the Commissioner (Exemption)
The Commissioner (Exemption) denied approval under section 80G(5) on the ground that the assessee was not a purely charitable trust. The reasoning was that since the trust deed contained a religious object, the trust qualified as a composite trust — i.e., religious-cum-charitable — and was therefore disqualified from receiving approval under section 80G(5), which in the Commissioner's view was available only to purely charitable trusts.
The Commissioner did not address or controvert the assessee's factual submission that no expenditure had been incurred on religious activities during the year.
Findings of the ITAT
The Tribunal disagreed with the Commissioner's reasoning. It held that the view that a composite trust is categorically disqualified from approval under section 80G(5) is not in accordance with law. The Tribunal observed that section 80G(5) cannot be read in isolation from section 80G(5B), which expressly permits composite trusts to receive approval subject to a cap on religious expenditure.
The Tribunal noted that in a series of coordinate bench decisions, it had consistently held that the law permits the existence of composite trusts, provided that expenditure on religious activity is limited to the extent specified in section 80G(5B). The Commissioner's order, which denied approval solely on the basis of the trust being composite, was therefore held to be not in accordance with law.
Further, the Tribunal noted that the assessee had specifically pointed out — as a matter of fact — that it had incurred no expenditure on religious activity whatsoever during the relevant year. This factual position was not controverted by the Commissioner in any manner.
In light of the above, the Tribunal held that the assessee trust was not a religious trust as per the provisions of section 80G(5)(ii), Explanation (3) read with section 80G(5B), and directed the Commissioner (Exemption) to grant approval under section 80G(5).
Key Legal Principles Laid Down
Composite trust not automatically disqualified
A trust with one religious object does not lose eligibility for section 80G(5) approval merely because it is classified as a composite religious-cum-charitable trust.
Section 80G(5) must be read with section 80G(5B)
Section 80G(5B) expressly permits composite trusts to receive approval, provided expenditure on religious activities does not exceed the prescribed limit. The two provisions must be read together.
Nil religious expenditure satisfies section 80G(5B)
Where the assessee incurs no expenditure on religious activities during the year, the condition under section 80G(5B) is clearly satisfied and approval cannot be denied.
Uncontroverted facts must be accepted
The Commissioner's failure to controvert the assessee's factual submission regarding nil religious expenditure was fatal to the denial of approval.
Outcome
The appeal was decided in favour of the assessee. The Tribunal held that the Commissioner (Exemption)'s order denying approval under section 80G(5) was not in accordance with law. The Commissioner was directed to grant approval under section 80G(5) to the assessee trust.
Rajesh Ravindran Charity Trust v. CIT (Exemption) [2026] 182 taxmann.com 206 (ITAT Ahmedabad)
Practical Takeaway for Trusts
- ▸Trusts with a mix of charitable and religious objects should not assume they are ineligible for section 80G(5) approval.
- ▸Maintain clear records showing that religious expenditure is nil or within the limits prescribed under section 80G(5B).
- ▸If approval is denied solely on the ground of being a composite trust, the denial is challengeable before the ITAT based on this and similar precedents.
- ▸Factual submissions made before the Commissioner that are not controverted carry significant weight at the appellate stage.