A recent ruling by the Income Tax Appellate Tribunal (ITAT), Ahmedabad, in the case of Dharamdas Charitable Trust vs. CIT(Exemption) (ITA No. 73/Ahd/2025), provides significant clarity for charitable organizations regarding the intersection of religious activities and tax-exempt status.
Background of the Case
The Dharamdas Charitable Trust, a registered 12A entity, applied for approval under Section 80G(5) of the Income Tax Act. This approval allows donors to claim deductions on their contributions. However, the Commissioner of Income Tax (Exemption) rejected the application, asserting that one of the trust’s objects was “religious” in nature. Specifically, the CIT(E) pointed to an object that allowed the trust to organize programs like Ramkatha, Bhagwat Katha, and Yagnas.
Under Section 80G(5), approval may be denied if a trust’s objects are “wholly or substantially religious”.
The ITAT’s Landmark Observation
The ITAT Bench, comprising Shri Sanjay Garg (Judicial Member) and Shri Narendra Prasad Sinha (Accountant Member), overturned the rejection based on several key insights:
- Fundraising vs. Propagation: The Tribunal noted that the primary purpose of organizing events like Ramkatha and Bhagwat Katha was to raise funds for the trust’s other charitable activities, such as education, medical relief, and helping the poor.
- Public Benefit and Morality: The ITAT observed that these events are not necessarily for propagating a specific religion. Instead, they guide society toward leading moral, spiritual, and happy lives for the “peace, progress, and welfare of one and all,” regardless of the religion they profess.
- Holistic View of Objects: The trust’s other objects—ranging from establishing schools and blood banks to animal welfare (Panjrapole)—were clearly charitable. The Tribunal ruled that the inclusion of religious-themed programs for fundraising does not make the trust “wholly or substantially religious”.
The Verdict
The Tribunal set aside the CIT(E)’s order and directed the department to grant the Section 80G(5) approval from the date of the trust’s application.
Key Takeaway for The Assessee
This ruling is a welcome precedent for NGOs and Trusts. It affirms that if a religious activity is secondary and used as a tool for resource mobilization to fund core charitable goals (like healthcare and education), it should not disqualify the organization from receiving 80G benefits.