The CIT(E) must conduct a thorough analysis of the trust's activities and supporting documentation to determine eligibility for approval under section 80G, rather than relying solely on a literal reading of trust documents.

आदेश/ORDER

PER MAKARAND V. MAHADEOKAR, AM:

This appeal is filed by the assessee against the order dated 14.12.2024 passed by the Commissioner of Income Tax (Exemption), Ahmedabad [hereinafter referred to as “CIT(E)”], rejecting the assessee’s application in Form No. 10AB for approval under section 80G(5)(iii) of the Income-tax Act, 1961[hereinafter referred to as “the Act”].

Facts of the Case

2. The assessee is a public charitable trust created by a trust deed dated 26.05.1905. The trust filed an application in Form No. 10AB on 28.06.2024 seeking approval under section 80G(5)(iii) of the Act. The trust had already been granted provisional approval from 31.05.2021, which was valid up to A.Y. 2024–25. During the course of proceedings, the Learned CIT(Exemption) issued a letter dated 17.09.2024 calling for details, which were furnished by the assessee vide reply dated 02.10.2024. Subsequently, a show cause notice dated 25.11.2024 was issued, wherein it was observed that certain object clauses in the trust deed were indicative of a religious purpose. The assessee submitted a detailed written reply dated 27.11.2024, explaining that its activities were charitable, cultural, and educational in nature and did not involve any religious practice, ritual, or expenditure. However, the Learned CIT(Exemption), in the impugned order dated 14.12.2024, rejected the application for approval under section 80G(5), holding that the trust was not established solely for charitable purposes. The CIT(E) observed that the object clause evidenced a religious character. The CIT(E) also observed that Explanation 3 to section 80G(5) clearly excludes institutions having religious objects, and the 5% tolerance under section 80G(5B) is applicable only to trusts which are otherwise established solely for charitable purposes. To support his conclusion, the CIT(Exemption) relied upon some judicial precedents. Accordingly, the CIT(Exemption) held that the assessee violated the conditions of section 80G(5), particularly clause (ii) and Explanation 3, and was thus ineligible for approval. The provisional approval granted earlier was also cancelled.

3. Aggrieved by the above, the assessee has preferred the present appeal before us raising following grounds of appeal:

1. Rejection Order passed by the Ld. Commissioner of Income Tax (Exemption) Ahmedabad is bad in Law and against the natural justice.

2. The Ld. Commissioner of Income Tax (Exemption) Ahmedabad has eared in Law and on facts, in rejecting the application in form 10AB U/S 80G(5)(iii) of the Income Tax Act, 1961.

3. The Ld. Commissioner of Income Tax (Exemption) Ahmedabad has considered charitable objects and activities as the religious objects and rejected the application.

4. As Rejection order passed by the Ld. Commissioner of Income Tax (Exemption) Ahmedabad is against the provisions of procedure of approval and Explanation 3 of Section 80G (5). As per the procedure, the genuineness of the activities and conditions i to v are to be verified as mentioned in the rejection order also. The Ld. Commissioner of Income Tax (Exemption) Ahmedabad is not supposed to verify the objects clause of the trust deed while granting the approval U/s 80G(5), when the application has been is made under clause (ii) or clause (iii) [or sub-clause (B) of clause (iv)]. Hence, the rejection order is to be quashed and approval U/s 80G(5) to be granted.

5. Your appellant crave, leave to add, alter, & or to emend modify substitute all or any ground of appeal before final hearing if necessity so arise.

4. When the case was called for hearing, none appeared on behalf of the assessee. However, on perusal of the record, it is observed t