The Income Tax Appellate Tribunal, Kolkata, has clarified that the absence of the word 'irrevocable' in a trust deed does not disqualify a charitable trust from obtaining registration under Section 12AB or approval under Section 80G of the Income Tax Act, provided the deed unequivocally demonstrates permanent dedication of assets to charitable purposes. This ruling reinforces the legislative intent to support genuine philanthropic entities and corrects an overly technical interpretation by the revenue authorities.
Background & Facts
The Dispute
The appellant, Soch Foundation, a charitable trust registered under the Societies Registration Act, 1860, applied for regular registration under Section 12AB and approval under Section 80G(5) of the Income Tax Act, 1961, seeking to qualify for tax exemptions and enable donors to claim deductions under Section 80G. The trust had previously been granted provisional registration under Section 12A(1)(ac)(vi) and provisional approval under Section 80G(5)(iv) on 31.12.2021. On 07.03.2024, it filed Form 10AB seeking conversion to regular status.
Key Facts
- The trust’s deed, while not using the word 'irrevocable', contains clauses mandating permanent dedication of all assets to charitable purposes
- The dissolution clause explicitly prohibits distribution of assets to settlors, trustees, or their relatives
- It mandates transfer of remaining assets upon dissolution to another charitable institution with similar objectives
- The trust submitted documents including trust deed, annual accounts, bank statements, and activity reports on 13.05.2024 in response to notices issued by the CIT(Exemption) on 26.04.2024
- The CIT(Exemption) rejected the applications on 25.09.2024 (for Section 12AB) and 27.09.2024 (for Section 80G), citing two primary grounds: (i) failure to submit complete documents, and (ii) absence of the word 'irrevocable' in the trust deed
- The CIT(Exemption) also cancelled the provisional registrations without recording any finding of misuse, fraud, or violation of statutory conditions
- The trust had not received intimation of the rejection orders due to outdated contact details on the Income Tax e-filing portal, which were managed by a former tax consultant
Procedural History
- 31.12.2021: Provisional registration under Section 12A(1)(ac)(vi) and provisional approval under Section 80G(5)(iv) granted
- 07.03.2024: Application for regular registration under Section 12AB and approval under Section 80G(5)(iii) filed via Form 10AB
- 26.04.2024: Notices issued by CIT(Exemption) seeking details on activities, accounts, and bank statements
- 13.05.2024: Assessee submitted documents and replies to notices
- 25.09.2024: Order rejecting Section 12AB application issued
- 27.09.2024: Order rejecting Section 80G approval issued
- 20.05.2026: Hearing concluded before ITAT Kolkata
- 05.06.2026: Judgment pronounced
The Parties' Positions
For the Assessee
- Argued that the trust deed, though silent on the word 'irrevocable', clearly establishes permanent dedication of assets to charitable purposes
- Relied on the precedent in Kamla Nevatia Charitable Trust v. Director of Income Tax (Exemption), ITA No. 3574/Mum/2013, which held that absence of the word 'irrevocable' is not fatal if the intent and structure of the trust ensure irrevocability
- Contended that all documents were submitted on 13.05.2024 and the department acknowledged receipt
- Asserted that the CIT(Exemption) acted beyond the scope of inquiry under Section 12AB by presuming future misuse and conducting an assessment-like scrutiny
- Highlighted violation of natural justice, as adverse findings were made without confronting the trust with the basis of rejection
For the Department
- Maintained that the trust failed to submit complete documents, including beneficiary details, expenditure evidence, and bank ledgers
- Argued that the lack of the word 'irrevocable' in the trust deed rendered it non-compliant with statutory requirements
- Did not dispute the submission of documents but insisted on strict compliance with procedural norms
- Opposed remand, urging confirmation of the rejection orders
Relief Sought
The appellant sought:
- Setting aside of the orders dated 25.09.2024 and 27.09.2024
- Grant of regular registration under Section 12AB
- Grant of approval under Section 80G(5)(iii)
- Alternatively, remand of the matter for fresh adjudication with proper opportunity to be heard
The Legal Issue
The central question was whether the absence of the word 'irrevocable' in a charitable trust’s deed is fatal to registration under Section 12AB and approval under Section 80G, where the deed otherwise demonstrates permanent dedication of assets to charitable purposes and prohibits reversion to the settlor or trustees.
Arguments Presented
For the Appellant
The appellant relied on the binding precedent in Kamla Nevatia Charitable Trust v. Director of Income Tax (Exemption), which held that the statutory requirement under Section 11 read with Section 2(15) is satisfied if the trust deed ensures that the property is permanently dedicated to charitable purposes, irrespective of the absence of the word 'irrevocable'. The trust submitted that its dissolution clause, which mandates transfer of assets to another charitable institution, is functionally equivalent to irrevocability. It further argued that the CIT(Exemption) had ignored the documents submitted on 13.05.2024 and acted on surmises rather than evidence. The appellant invoked principles of natural justice and contended that the cancellation of provisional registration without any finding of misuse was impermissible under the statutory scheme.
For the Respondent
The Department did not contest the legal principle established in Kamla Nevatia but insisted that the trust had failed to comply with procedural requirements by not submitting complete documentation, including beneficiary details and bank ledgers. It argued that the absence of the word 'irrevocable' was a clear non-compliance with the literal requirements of the law and that the CIT(Exemption) was entitled to reject the application on this ground alone. The Department maintained that the rejection was justified due to incomplete submissions and that remand would cause unnecessary delay.
The Court's Analysis
The Tribunal examined the statutory framework under Section 12AB and Section 80G, noting that both provisions require the trust to be established 'wholly for charitable purposes' as defined under Section 2(15). The Bench observed that the legislative intent behind these provisions is to encourage genuine philanthropy, not to impose rigid formalities that defeat the spirit of the law.
"The absence of the word 'irrevocable' in the trust deed is not fatal where the trust deed unequivocally ensures that the trust property remains permanently earmarked for charitable purposes and does not revert to the settlor or trustees."
The Tribunal affirmed the principle laid down in Kamla Nevatia Charitable Trust, emphasizing that substance must prevail over form. It noted that the trust deed contained clear prohibitions against reversion of assets to the settlor or trustees and mandated transfer to another charitable entity upon dissolution - a structure that legally and practically ensures irrevocability.
The Bench further held that the CIT(Exemption) had erred in cancelling the provisional registration without recording any finding of misuse, fraud, or violation of statutory conditions. Such cancellation, without any adverse finding, was held to be contrary to the scheme of the Act, which contemplates provisional registration as a transitional measure pending final verification.
Regarding documentation, the Tribunal accepted the assessee’s submission that documents were filed on 13.05.2024 and acknowledged by the department. The CIT(Exemption)’s assertion of non-submission was found to be factually incorrect. The Tribunal also noted that the department had not provided any specific rebuttal evidence to challenge the genuineness of the trust’s activities.
The Bench concluded that the rejection was based on technicalities and misapprehension of law, and that justice required a fresh opportunity for the trust to substantiate its claim with full documentation and explanation.
The Verdict
The appeals were partly allowed. The Tribunal set aside the orders dated 25.09.2024 and 27.09.2024, and remanded the matter to the CIT(Exemption) for fresh adjudication. The CIT(Exemption) was directed to grant the assessee a reasonable opportunity to submit all relevant documents and to decide the applications for registration under Section 12AB and approval under Section 80G(5) in accordance with law, applying the principles laid down in Kamla Nevatia Charitable Trust. The matter must be decided within eight weeks from the date of receipt of this order.
What This Means For Similar Cases
Irrevocability Is a Substance, Not a Word
- Practitioners must now argue that the presence of the word 'irrevocable' is not mandatory if the trust deed’s structure ensures permanent dedication to charity
- Drafting of trust deeds should focus on clear clauses prohibiting reversion to settlors, trustees, or private beneficiaries, and mandating transfer to similar charitable entities upon dissolution
- Revenue authorities cannot reject applications solely on the absence of the word 'irrevocable' - they must examine the functional effect of the trust’s provisions
Provisional Registration Cannot Be Cancelled Without Cause
- Provisional registration under Section 12A(1)(ac)(vi) cannot be cancelled merely because the application for regular registration is pending
- Cancellation requires a specific finding of misuse, fraud, or violation of statutory conditions - mere non-compliance with procedural formalities is insufficient
- Practitioners should challenge cancellations of provisional registration where no adverse findings have been recorded
Procedural Compliance Must Be Verified, Not Assumed
- Assessee’s submission of documents must be verified through official receipts or portal acknowledgments, not assumed to be non-existent
- If documents are submitted physically or electronically, the department bears the burden of proving non-receipt
- Failure to update contact details on the e-filing portal does not absolve the department of its duty to ensure due process, especially when the assessee is a charitable trust with limited administrative capacity
