Mandir Shree Bhairav Ji Trust vs CIT Exemption: ITAT Jaipur on Section 80G Registration for Religious-cum-Charitable Trusts

This case examines a recurring friction point in Indian tax-exempt organisation law: whether a trust whose deed contains religious objects — but whose actual activities are primarily charitable — qualifies for approval under Section 80G of the Income Tax Act, 1961. The Jaipur Bench of the Income Tax Appellate Tribunal heard ITA No. 427/JP/2023 filed by Mandir Shree Bhairav Ji Trust against an order of CIT (Exemption), Jaipur, which had rejected the Trust's application for Section 80G approval on the ground that it was essentially a religious institution. The Tribunal's decision to remand the matter for fresh consideration — with a direction to afford the assessee a proper opportunity of hearing — carries practical significance for similarly placed trusts seeking to convert provisional 80G registration into regular approval.

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The case at a glance

• Parties: Mandir Shree Bhairav Ji Trust, Jaipur vs CIT Exemption, Jaipur
• Bench: Income Tax Appellate Tribunal - Jaipur
• Date: 2 November 2023
• Court level: Tribunal (ITAT)
• Sections engaged: 80G, 80G(5)(ii)
• Outcome: Remanded for fresh consideration

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Facts of the case

Mandir Shree Bhairav Ji Trust, Jaipur (PAN: AADTM0426H) describes its work as promotion and advancement of education, providing relief to the poor, and extending medical relief to those in need. The Trust had already obtained registration under Section 12AA with effect from 24 September 2019, and separately registered with the Dev Sathan Vibhag, Government of Rajasthan. Following the amended registration framework, the Trust applied in Form 10A and was granted provisional registration under Section 80G on 26 November 2021 (unique registration number AADTM0426HF20216), valid through AY 2024-25. Regular registration under Section 12A (sub-clause (i) of clause (ac) of sub-section (1)) was also granted, valid from AY 2022-23 to AY 2026-27, bearing unique registration number AADTM0426HE20218.

On 25 November 2022, the Trust filed Form 10AB seeking regular approval under Section 80G(5)(ii). CIT (Exemption), Jaipur issued a notice dated 28 March 2023 calling for documents and explanations, with a compliance deadline of 12 April 2023. The assessee submitted a reply, but CIT(E) found discrepancies and issued a further notice on 12 May 2023 requiring compliance by 18 May 2023. According to the CIT(E)'s findings, no response was furnished to the second notice.

CIT(E) concluded, based on the assessee's own Form 10AB description of the trust's nature as "Religious cum Charitable" and on the fact that objects numbered 1, 2, 3, 4, 5, and 8 of the Trust Deed related to religious activities, that the Trust was primarily a religious institution. Relying on the Supreme Court's judgment in the matter of Upper Ganges Sugar Mills Ltd. Etc. vs Commissioner of Income Tax — which holds that even a single object of a wholly or substantially wholly religious character takes an institution outside the scope of Section 80G — CIT(E) passed an order in Form 10AD on 27 May 2023 rejecting the application for regular 80G approval.

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Issues raised

• Whether Mandir Shree Bhairav Ji Trust, whose trust deed contains religious objects but whose actual day-to-day activities are primarily charitable, satisfies the eligibility conditions under Section 80G(5)(ii) of the Income Tax Act, 1961.
• Whether the CIT(E) was correct in relying on the objects in the trust deed rather than examining the actual activities carried out by the Trust when determining eligibility under Section 80G.
• Whether a trust already holding provisional registration under Section 80G (valid through AY 2024-25) and regular registration under Section 12A was still obliged to respond to notices issued during the provisional registration period, and whether non-response alone justified rejection.
• Whether the expenditure on religious activities exceeded 5% of total expenditure as contemplated in the Section 80G(5) framework — a threshold the assessee contended was not met.

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What the court held

The Tribunal allowed the assessee's appeal for statistical purposes and remanded the matter to CIT (Exemption), Jaipur for fresh consideration, with a direction to afford the assessee a proper opportunity of being heard.

The Tribunal's remand was premised on the view that the assessee's contention — that actual activities undertaken are primarily charitable in nature and that expenditure on religious activities does not exceed 5% of total expenditure — had not been adequately examined at the first authority level. The assessee had argued before the Tribunal, through its authorised representative Sh. Vikash Rajvanshi (CA), that the objectives stated in the Trust Deed might carry a religious character but that the factual position on ground was different. The Trust pointed to its long-standing registration under Section 12AA and its regular 12A registration as indicators that the competent authority had previously recognised the predominantly charitable nature of its activities.

The CIT(E)'s order had placed significant weight on the Supreme Court's ruling in Upper Ganges Sugar Mills Ltd. Etc. vs Commissioner of Income Tax to hold that any religious object — regardless of proportion — disqualifies an institution under Section 80G. The Tribunal's decision to remand, rather than dismiss or allow on merits, signals that the factual matrix regarding the proportion and nature of activities was not fully developed on the record before it, and that the assessee deserved an opportunity to place that material before CIT(E) in a proper hearing.

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Strategy observations

1. Bifurcation of deed objects versus actual activities: An additional ground raised before the Tribunal distinguished between the language of the Trust Deed (which contained religious objects) and the actual activities carried out by the Trust (described as primarily charitable). This distinction between constitutional objects and operational reality is the central factual question the remand leaves open for CIT(E) to re-examine.

2. Reliance on prior registrations as corroborative evidence: Before the Tribunal, the assessee pointed to its existing Section 12AA registration (from 2019) and its regular Section 12A registration (AY 2022-23 to AY 2026-27) as evidence that competent authorities had already recognised the Trust's charitable character. The Tribunal's remand preserves the opportunity to develop this line before CIT(E).

3. The 5% expenditure threshold argument: The assessee placed on record a specific quantitative contention — that expenditure on religious activities does not exceed 5% of total expenditure, as contemplated in the Section 80G(5) framework. This factual claim was not adjudicated on merits at the Tribunal stage; the remand directs CIT(E) to examine it with supporting material.

4. The provisional registration / notice-compliance ground: A separate ground was raised that a trust holding provisional registration is not obliged to respond to notices during that provisional period, and that CIT(E)'s adverse inference from non-response to the second notice was therefore erroneous. The Tribunal disposed of the appeal on the broader remand basis; this procedural ground remains available for CIT(E) to consider on remand.

5. Appeal allowed "for statistical purposes": The operative disposition — allowing the appeal for statistical purposes — is a standard ITAT formulation in remand orders, signifying that the appeal is treated as having been decided (for docket purposes) without conferring any final relief on the merits. The substantive question of 80G eligibility falls entirely to be decided afresh by CIT(E).

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Why this case matters

The case crystallises a recurring tension under Section 80G(5)(ii) between the strict "any religious object disqualifies" reading drawn from the Supreme Court's Upper Ganges Sugar Mills ruling — as applied by CIT(E) — and the factual-activities-based approach that many similarly placed religious-cum-charitable trusts seek to rely upon. Trusts organised around places of worship but also running education, relief, or medical programmes frequently face this classification problem, particularly when Form 10AB compels self-characterisation of activity type. The Tribunal's remand, by directing a fresh hearing focused on what the Trust actually does rather than what the deed says, keeps alive the question of whether the 5% religious-expenditure threshold can serve as a workable safe harbour for such institutions.

For researchers tracking the Section 80G registration landscape post the 2020-21 amendments to the registration framework (Form 10A / Form 10AB / Form 10AC / Form 10AD cycle), this order is also a data point on how ITAT Jaipur is handling first-round rejections where the evidentiary record before CIT(E) was incomplete. The remand, rather than outright allowance or dismissal, indicates the Tribunal's view that Section 80G eligibility in mixed-purpose trusts is a facts-and-circumstances determination that cannot be resolved on the face of the deed alone.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/106648676/