Section 12AB Income Tax Act | Absence of Irrevocability Clause Not Fatal for Trust Registration : ITAT Mumbai Upholds Procedural Fairness

The Income Tax Appellate Tribunal has set aside the rejection of registration applications by charitable trusts solely on the ground of absence of an explicit irrevocability or dissolution clause in their Trust Deeds, affirming that such a requirement is not mandated by the Income-tax Act. This decision aligns with a binding precedent from the Bombay High Court and provides critical clarity for thousands of trusts navigating the post-2021 registration regime.

Background & Facts

The Dispute

The appellant, Amita Memorial Trust, applied for renewal of registration under Section 12AB of the Income-tax Act, 1961, and for approval under Section 80G(5)(ii), both filed via Form 10AB. The Commissioner of Income-tax (Exemptions), Mumbai, rejected both applications on two grounds: (1) the Trust Deed lacked an explicit clause on irrevocability and dissolution, and (2) the Trust’s response of "Yes" to Question 6 of Form 10AB - asking whether the Trust Deed contains a clause that the trust is irrevocable - constituted false or incorrect information under Explanation (g) to Section 12AB(4).

Key Facts

• The Trust was originally registered under Section 12A on 12.08.1987 with Registration No. TR.25822.
• It was granted approval under Section 80G on 15.10.1987 with Registration No. TC/80G/CH - 1104A (8).
• The Trust was created by a Trust Deed dated 29.04.1987, with objects of relief of the poor, education, and medical aid.
• The Trust is registered under the Maharashtra Public Trusts Act, 1950 (MPTA), with Registration No. E - 11304 (Mumbai).
• In compliance with the new regime effective from 01.04.2021, the Trust applied for provisional registration under Section 12AB via Form 10AC, which was granted on 31.08.2021 for the period A.Y. 2022-23 to 2026-27.
• The Trust then filed Form 10AB for regularization of provisional registration on or before the deadline.
• The Trust Deed contains no express clause on irrevocability or dissolution.
• In Form 10AB, Question 6 asked: "Whether the Trust Deed contains clause that the trust is irrevocable?" The Trust answered "Yes".
• The e-filing portal did not permit submission of Form 10AB if "No" was selected for Question 6, displaying an error: "Approval/registration is not allowed if the applicant being a trust does not have an irrevocable clause."

Procedural History

• 29.04.1987: Trust Deed executed.
• 12.08.1987: Initial registration granted under Section 12A.
• 15.10.1987: Approval granted under Section 80G.
• 31.08.2021: Provisional registration granted under Section 12AB via Form 10AC.
• 28.01.2026: Order issued by CIT(E) rejecting Form 10AB application.
• 17.03.2026: Hearing concluded before the Tribunal.
• 18.03.2026: Judgment of Bombay High Court in The Chamber of Tax Consultants v. CIT(E) (W.P.(L) No. 7587 of 2026) uploaded.
• 30.03.2026: Tribunal pronounced its order.

The Parties' Positions

For the Appellant

• The Trust Deed, though silent on irrevocability, does not contain any revocation clause, and under the MPTA, such trusts are deemed irrevocable by operation of law.
• Section 12AB does not mandate an explicit irrevocability clause; the requirement is not found in the statute.
• The answer "Yes" to Question 6 was given in good faith, based on the legal presumption of irrevocability under MPTA and judicial precedent.
• The e-filing portal’s technical constraint forced the Trust to select "Yes" - a procedural impossibility to answer truthfully otherwise.
• The rejection violates the binding judgment of the Bombay High Court in CIT(E) v. Tara Educational and Charitable Trust (2017).

For the Respondent

• Section 12AB requires the trust to be irrevocable as a condition precedent for registration.
• Absence of an explicit clause in the Trust Deed indicates revocability, creating risk of diversion of assets.
• The answer "Yes" to Question 6 constitutes false information under Explanation (g) to Section 12AB(4).
• The provisions of Section 11, read with Sections 60-63, imply that only irrevocable trusts qualify for exemption.

Relief Sought

The appellant sought:

• Setting aside of the CIT(E)’s order dated 28.01.2026 rejecting registration under Section 12AB.
• Grant of registration under Section 12AB.
• Grant of approval under Section 80G(5)(ii), which is consequential to Section 12AB registration.
• Direction to the Revenue to treat the answer "Yes" to Question 6 as valid and not as a specified violation.

The Legal Issue

The central question was whether the absence of an explicit irrevocability or dissolution clause in a public charitable trust’s Trust Deed constitutes a valid ground for rejecting registration under Section 12AB of the Income-tax Act, and whether answering "Yes" to Question 6 of Form 10AB - despite no such clause existing - amounts to furnishing false information under Explanation (g) to Section 12AB(4).

Arguments Presented

For the Appellant

The appellant relied on the Maharashtra Public Trusts Act, 1950, particularly Sections 22(3A), 22(3B), and 55, which provide that once property is dedicated to a public charitable trust, the settlor is divested of ownership and the trust cannot be revoked unless expressly permitted in the deed. The appellant cited CIT(E) v. Tara Educational and Charitable Trust (2017) and Radisson India Charitable Foundation v. ITO (Exemption) [2025] 171 taxmann.com 845 (Del), both holding that no statutory mandate exists for an explicit irrevocability clause. It further argued that the e-filing portal’s design forced a misleading response, rendering the "false information" allegation legally untenable.

For the Respondent

The Revenue contended that Section 12AB, being a condition for exemption under Section 11, requires the trust to be irrevocable, and the absence of an explicit clause creates uncertainty regarding the permanent application of assets to charitable purposes. It relied on the language of Section 11, read with Sections 60-63, to argue that revocable trusts are excluded from exemption benefits. The Revenue maintained that the answer "Yes" to Question 6 was objectively false and fell squarely within the definition of "specified violation" under Explanation (g) to Section 12AB(4).

The Court's Analysis

The Tribunal, while acknowledging the Revenue’s concerns regarding asset protection, held that the legal framework does not support the CIT(E)’s interpretation. The Tribunal emphasized that Section 12AB does not contain any express requirement for an irrevocability clause. The reference to Sections 60-63 by the Revenue pertains to the application of exemptions under Section 11, not the conditions for registration under Section 12AB.

"In summary, we hold that a public charitable trust is deemed irrevocable by operation of law unless the instrument of trust expressly provides a power of revocation. The absence of an explicit irrevocability clause is not a ground for rejecting an application for registration or renewal under section 12AB of the Act."

The Tribunal relied on the binding judgment of the Bombay High Court in The Chamber of Tax Consultants v. CIT(E), which had comprehensively examined the interplay between the Income-tax Act and the Maharashtra Public Trusts Act. The High Court held that under Section 22(3A) and (3B) of the MPTA, a trust cannot be revoked unless the power to revoke is expressly stated in the deed. Therefore, silence on revocability implies irrevocability by law.

The Tribunal further noted that the e-filing portal’s design compelled applicants to answer "Yes" to Question 6, even if no clause existed, because the system blocked submission if "No" was selected. This procedural coercion negated any allegation of fraudulent intent. The High Court had explicitly directed that such an answer cannot be treated as false information.

The Tribunal also observed that the Trust had been continuously registered since 1987 under the old regime without any such clause, and no material change in facts or law justified the sudden imposition of a new condition. The rejection, therefore, was arbitrary and contrary to established precedent.

The Verdict

The appeals of the assessee are allowed. The orders of the CIT(E) dated 28.01.2026 rejecting registration under Section 12AB and approval under Section 80G(5)(ii) are set aside and quashed. The CIT(E) is directed to grant registration under Section 12AB and consequential approval under Section 80G. The answer "Yes" to Question 6 of Form 10AB shall not be treated as furnishing false or incorrect information. The CIT(E) shall decide the applications afresh within six weeks from the date of this order, and such registration shall be deemed effective from 01.04.2026.

What This Means For Similar Cases

Irrevocability Is Presumed by Law, Not by Clause

• Practitioners representing charitable trusts may now confidently argue that silence on revocability in a Trust Deed does not imply revocability - especially under state public trust laws like the MPTA.
• The burden now shifts to the Revenue to prove express revocability, not to demand an explicit clause that the law does not require.

Form 10AB Responses Cannot Be Penalized for Systemic Constraints

• If an e-filing portal forces a misleading response due to technical design, the answer cannot be treated as "false information" under Explanation (g) to Section 12AB(4).
• Tax professionals must document and preserve screenshots of portal errors to support future appeals.

Registration Under Section 80G Is Consequential to Section 12AB

• Any rejection of Section 80G approval solely on the ground of Section 12AB rejection - based on absence of an irrevocability clause - is now legally unsustainable.
• Practitioners should immediately file applications for reconsideration of previously rejected Section 80G approvals where the sole ground was Section 12AB rejection.

Judicial Precedent Overrides Administrative Interpretation

• Revenue authorities cannot impose additional conditions beyond those prescribed by statute, even if motivated by administrative convenience.
• The Tara Educational and Chamber of Tax Consultants judgments are now binding precedents across India for trusts governed by similar public trust laws.

Procedural Compliance Must Align with Substantive Law

• The Income-tax Department must amend Form 10AB to replace Question 6 with: "Is the trust/institution revocable?" to allow truthful responses.
• Until such amendment, any applicant answering "No" to the current question must be permitted to submit a clarificatory affidavit.