Distinction between religious & charitable purposes is determined by institution’s primary or dominant object

The distinction between religious and charitable purposes is determined by institution’s primary or dominant object and not merely by presence of religious practices or symbolism – ITAT

In a recent judgment, ITAT has held that in the context of the Income-tax Act, the distinction between religious and charitable purposes is determined by the institution’s primary or dominant object and not merely by the presence of religious practices or symbolism.

ABCAUS Case Law Citation:
5206 (2026) (08) abacus.in ITAT

In the instant cases, appeals were directed against orders passed by Commissioner of Income Tax (Exemption) denying approval to trusts u/s 80G on common ground that these trusts were engaged in religious activities.

Before the Tribunal the appellant(s) contended that CIT(E) denied approval by invoking Explanation-3 to Section 80G which provides that charitable purpose does not include a purpose which is wholly or substantially wholly of a religious nature.

It was submitted that no factual examination of financial statements had been carried out and the conclusion arrived at by CIT(E) was not based on actual facts.

It was further submitted that subsection (5B), which has non-obstante clause, deems an institution to continue to satisfy the requirement of Section 80G(5) wherein religious nature expenditure in a previous year does not exceed five per cent of trust’s total income for that year. No such exercise had been carried out in the impugned orders and no such findings had been brought on record.

It was also argued that various activities as carried out by the trusts could not be termed as religious in nature and the respective trust activities are not confined to a particular religious community or caste or a particular section of the society. Therefore, these activities would not fall within the mischief of Section 80G.

The Tribunal observed that admittedly, the Income Tax Act does not define the expression “religion”. The courts have, therefore, consistently relied upon constitutional jurisprudence while interpreting the provision.

The Tribunal went through catena of decisions of the Hon’ble Supreme Court to summarise legal position. First, the expression “religion” under Section 80G must receive the meaning assigned to it by constitutional jurisprudence, namely, a system of faith encompassing beliefs, doctrines, rituals, observances and practices regarded as integral by its followers. Secondly, only those activities which constitute essential or integral manifestations of religious faith qualify as religious activities in the strict legal sense. Thirdly, every activity undertaken by a religious institution cannot automatically be categorized as religious rather charitable and welfare activities retain their independent charitable character notwithstanding their religious inspiration. Fourthly, while considering eligibility under Section 80G(5), the competent authority is required to examine the dominant objects of the institution, the real nature of its activities, the beneficiaries thereof and the application of its income, rather than isolating individual activities or expressions occurring in the trust deed. Finally, unless the institution is found to be established or substantially operated for the benefit of a particular religious community or caste, or its predominant purpose is advancement of religion to the exclusion of charitable purposes, approval under Section 80G cannot be denied merely because certain incidental or ancillary religious activities are undertaken.

The Tribunal listed out the following principles that clearly emerges:

(i) A religious purpose is one that is intrinsically connected with the profession, practice and observance of religion itself. Such purposes include worship of the deity, performance of Puja, Archana, Yajna, Havan, Abhishek, recitation of scriptures, teachings of religious textbooks, observance of religious festivals, and other rituals prescribed by the tenets of the religion.

(ii) The fact that an activity is motivated by religion does not necessarily make the activity itself religious. The origin or inspiration of an activity is different from its legal character.

(iii) Activities such as providing food to the poor, imparting education, establishing hospitals, constructing dharamshalas, preserving rivers, planting trees, environmental conservation, distribution of clothes, organising marriages of indigent persons, and providing shelter undoubtedly find support in Hindu scriptures and are regarded as acts of Dharma. However, if these activities are examined independently, divorced from any act of worship or religious ritual, they predominantly serve public welfare and society at large. Their beneficiaries are not confined to adherents of any religion, nor are these activities indispensable for the performance of religious worship. Consequently, they cannot, merely because of their religious inspiration, be characterized as religious purposes per se.

(iv) The proper inquiry is not whether religion encourages the activity, but whether the activity itself constitutes an indispensable and intrinsic manifestation of religion. If the activity can exist independently of religious worship and continues to achieve a secular or charitable objective, it retains its secular or charitable character notwithstanding its religious origin.

The Tribunal observed that the jurisprudence of the Supreme Court consistently recognizes that the constitutional and legal conception of “religious purpose” is confined to those purposes that are core, essential, integral and inseparable from the observance of religion itself. Activities which merely emanate from religious philosophy, but whose dominant object is social welfare, charity, education, environmental protection or public benefit, cannot, when viewed in isolation, be regarded as religious purposes merely because their inspiration can be traced to religious teachings. This distinction preserves both the sanctity of religion and the autonomy of charitable activities, each within its own legal sphere.

The Tribunal opined that based on above guiding principles, the expression “religious purpose” would generally be understood to include activities such as construction or maintenance of temples, mosques, churches, gurudwaras, or other places of worship; performance of religious rituals, ceremonies and worship; propagation or promotion of a particular religion or its doctrines; reading & teachings of religious books; Activities intended primarily to advance the religious interests of a particular faith or denomination. However, an institution is not necessarily regarded as religious merely because it has some religious elements. Courts have repeatedly held that where the dominant or primary object is charitable such as education, medical relief, relief of poor or other public welfare then incidental religious activities do not automatically make the institution a religious one. Whether an institution is charitable or religious depends on its predominant purpose, as reflected in its founding documents and actual activities. It could be said that religion would mean a system of faith, beliefs, doctrines, and worship, together with the practices and observances regarded by its followers as integral to that faith.

The Tribunal held that in the context of the Income-tax Act, the distinction between religious and charitable purposes is determined by the institution’s primary or dominant object and not merely by the presence of religious practices or symbolism.

The Tribunal in the light of the above observations set aside the impugned orders and appeals were restored back to CIT(E) for de novo adjudication.

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