The existence of religious elements or rituals within a trust does not negate its charitable character unless it is proven that the activities are restricted to a particular religious community. Judicial discipline requires consistency in decisions on identical facts in the assessee's own case.

O R D E R

PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

This appeal has been filed by the Department against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 11.09.2025 passed for A.Y. 2017-18.

The Department has raised the following grounds of appeal:

“1. Whether on the facts and in circumstances of the case, Ld. CIT(A), NFAC is justified in deleting the addition of Rs. 3,40,68,567/- (11529801 plus 22538766) made on account of expenditure being non charitable in nature for the year under consideration.”

The brief facts of the case are that the assessee is a public charitable trust registered under the Bombay Public Trust Act, 1950 and had been earlier granted registration under section 12A and approval under section 80G of the Income-tax Act, 1961 ("the Act"). The trust is stated to be engaged in activities such as education, medical relief, financial assistance and general public utility. For the assessment year 2017-18, the assessee filed its return of income declaring Nil income after claiming exemption under sections 11 and 12 of the Act, including exemption in respect of corpus donations and application of income towards its objects.

During the course of assessment proceedings, the Assessing Officer examined the activities carried out by the trust and mainly focused on the construction of a structure described by the assessee as a “prayer hall.” Based on the nature of the structure and the activities conducted therein, such as “Pran Pratistha” and “Havan,” the Assessing Officer was of the opinion that the said structure was in fact a temple dedicated to “Khodal Maa” and that the activities of the trust were predominantly religious in nature. The Assessing Officer further was of the view that such activities were not in line with the objects stated in the trust deed and could also be construed as being for the benefit of a particular religious community.

Proceeding on this basis, the Assessing Officer held that the assessee was not eligible for exemption under sections 11 and 12 of the Act. Accordingly, the Assessing Officer denied the exemption claimed in respect of corpus donations amounting to Rs. 29,31,60,032/- under section 11(1)(d) of the Act, treating the same as taxable income of the assessee. Further, while examining the expenditure claimed by the trust, the Assessing Officer allowed only a part of the total revenue expenditure and disallowed expenses relating to activities such as “Pran Pratistha,” “Havan Kund,” and “Ann Kshetralay,” on the ground that these were connected with religious activities and not in accordance with the charitable objects of the trust. The Assessing Officer thus assessed the total income at Rs. 31,26,13,761/- as against the returned income of Nil.

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals) and filed written submissions challenging the findings of the Assessing Officer. The assessee submitted that it is a duly registered charitable trust with objects that are broad and encompass activities for general public welfare. It was contended that the Assessing Officer had erred in characterizing the prayer hall as a temple and in concluding that the trust was engaged in religious activities which were beyond its objects. The assessee submitted that that its activities were open to the general public and not restricted to any particular community, and therefore the provisions of section 13 of the Act were not attracted. The assessee further submitted that the construction of the prayer hall and related activities were part of its overall socio-cultural and charitable functions and should not be viewed in isolation. The assessee also submitted that that even if certain activities have a religious element, the dominant purpose of the trust remained charitable. The assessee also contended that corpus donations recei