The Income Tax Appellate Tribunal has set aside the rejection of a charitable trust’s registration application under Section 12AB of the Income Tax Act, affirming that the absence of an express irrevocability or dissolution clause in the trust deed cannot justify denial of registration. This decision, grounded in a binding precedent from the Bombay High Court, clarifies a long-standing ambiguity in the administration of charitable trust exemptions and reinforces statutory limits on revenue authorities.
Background & Facts
The Dispute
The appellant, Shree Narayan Rathi Foundation, filed an application in Form No. 10AB seeking registration/renewal under Section 12AB of the Income Tax Act, 1961, for its charitable trust. The Commissioner of Income Tax (Exemptions), Mumbai, rejected the application on two grounds: first, that the Trust Deed lacked an explicit clause providing for the irrevocability of the trust and its dissolution upon termination; and second, that the appellant had answered "Yes" to the query in Form 10AB asking whether the trust deed contained an irrevocability clause, despite the absence of such a clause in the deed. The CIT(E) treated this as a "specified violation" under Explanation (g) to Section 12AB(4), rendering the application ineligible for registration.
Key Facts
- The trust was established under a Trust Deed dated 10.04.2015, registered under the Maharashtra Public Trusts Act, 1950
- The Trust Deed specified charitable objectives including education, healthcare, and relief to the underprivileged
- The Trust Deed contained clauses on management, administration, and utilization of funds for charitable purposes
- No clause explicitly stated that the trust was "irrevocable" or provided for dissolution and disposal of assets upon termination
- The online Form 10AB portal required applicants to answer "Yes" or "No" to the question: "Does the Trust Deed contain a clause that the trust is irrevocable?"
- The appellant selected "Yes" to proceed with filing, as the form did not permit submission without a response
- The CIT(E) relied on Sections 60 to 63 of the Income Tax Act to argue that absence of an irrevocability clause rendered the trust revocable and thus ineligible for exemption under Section 11
Procedural History
- 15.02.2026: Application in Form No. 10AB filed by the appellant
- 20.03.2026: Notice issued by CIT(E) seeking clarification on irrevocability and dissolution clauses
- 05.04.2026: Appellant submitted response with excerpts from Trust Deed and legal arguments
- 10.04.2026: CIT(E) issued order rejecting application on grounds of non-compliance and furnishing false information
- 15.05.2026: Appeal filed before the Income Tax Appellate Tribunal (ITA No. 2579/Mum/2026)
- 20.05.2026: Hearing held before the Tribunal
- 27.05.2026: Judgment pronounced
The Parties' Positions
For the Appellant
The appellant argued that:
- The Trust Deed, though silent on irrevocability, was registered under the Maharashtra Public Trusts Act, which by operation of law renders public charitable trusts irrevocable
- Section 12AB does not mandate an express irrevocability clause
- The online form’s design forced the "Yes" response, making it a procedural necessity, not a misrepresentation
- The CIT(E)’s interpretation contradicted judicial precedents and the legislative intent behind Section 12AB
For the Respondent (Revenue)
The Revenue contended that:
- Section 11 exemption is available only to irrevocable trusts, as inferred from Sections 60 to 63
- Absence of an irrevocability clause in the deed implies revocability
- Answering "Yes" to a factual question in Form 10AB when the deed lacked such a clause constituted furnishing false information under Explanation (g) to Section 12AB(4)
- The trust’s assets could potentially revert to the settlor without a dissolution clause
Relief Sought
The appellant sought:
- Setting aside of the CIT(E)’s order dated 10.04.2026
- Restoration of the application for fresh consideration under Section 12AB
- Direction to the CIT(E) to grant registration without requiring an express irrevocability or dissolution clause
The Legal Issue
The central question was whether the absence of an express irrevocability or dissolution clause in a trust deed registered under the Maharashtra Public Trusts Act constitutes a valid ground for rejection of registration under Section 12AB of the Income Tax Act, 1961, and whether answering "Yes" to the online form’s query, due to its mandatory nature, amounts to furnishing false information under Explanation (g) to Section 12AB(4).
Arguments Presented
For the Appellant
The appellant relied on the binding judgment in Chamber of Tax Consultants v. Commissioner of Income-tax (Exemptions) [2026] 184 taxmann.com 374 (Bom), which held that:
- Section 12AB does not prescribe any requirement for an express irrevocability or dissolution clause
- The statutory scheme under Sections 60 to 63 does not equate silence with revocability; rather, silence implies irrevocability
- Under the Maharashtra Public Trusts Act, once property is dedicated to public charitable purposes, it cannot revert to the settlor, even if the trust is dissolved
- The Revenue’s interpretation would nullify decades of established practice and penalize trusts for compliance with a flawed online form
- The action of treating a mandatory form response as false information is arbitrary and violative of administrative fairness
For the Respondent
The Revenue argued that:
- Section 11 exemption is contingent on the trust being irrevocable, and the absence of an express clause creates uncertainty
- The Trust Deed must contain explicit safeguards to ensure assets remain dedicated to charitable purposes
- The appellant’s affirmative response in Form 10AB was a deliberate misstatement, warranting rejection under Explanation (g)
- The Revenue has a duty to prevent misuse of tax exemptions by ensuring strict compliance with statutory conditions
The Court's Analysis
The Tribunal, in its analysis, emphasized that the CIT(E)’s order was premised on a legal misunderstanding of both the Income Tax Act and the Maharashtra Public Trusts Act. The Tribunal explicitly followed the authoritative ruling in Chamber of Tax Consultants, which undertook a comprehensive statutory interpretation of Sections 11, 12AB, and 60 to 63.
"The interpretation sought to be adopted by the Revenue virtually turns Section 63 on its head. Silence in the deed implies irrevocability and not revocability."
The Tribunal noted that Section 63 defines a revocable transfer only where the instrument contains a positive provision enabling re-transfer or re-assumption of control by the transferor. Absence of such a provision does not create revocability - it creates irrevocability by default. The Tribunal further held that the Maharashtra Public Trusts Act, which governs the trust’s registration, operates as a statutory safeguard: once property is dedicated to public charity, the settlor is permanently divested of ownership, and any dissolution triggers the doctrine of cy-près, ensuring assets remain devoted to charitable purposes.
The Tribunal rejected the Revenue’s contention that the "Yes" response in Form 10AB amounted to furnishing false information. It observed that the online portal did not permit submission without a response to the question, effectively forcing the assessee to select "Yes" to complete the filing. To penalize the assessee for complying with a defective procedural mechanism was held to be manifestly arbitrary and contrary to principles of natural justice.
The Tribunal concluded that the CIT(E)’s jurisdiction under Section 12AB is strictly limited to examining the genuineness of the trust’s objects and its compliance with laws relevant to achieving those objects. The introduction of an additional, judicially unrecognized condition - express irrevocability or dissolution clauses - was held to be ultra vires the statute.
The Verdict
The appeal was allowed. The Tribunal set aside the order dated 10.04.2026 passed by the CIT(E) rejecting the application for registration under Section 12AB. The matter was restored to the file of the CIT(E) with a direction to examine the application afresh, strictly in accordance with law and the principles laid down in Chamber of Tax Consultants. The CIT(E) was directed to consider registration solely on the basis of the trust’s objects and genuineness of activities, without regard to the absence of an express irrevocability or dissolution clause. Costs were not awarded.
What This Means For Similar Cases
Irrevocability Is Presumed by Law, Not by Deed
- Practitioners representing charitable trusts need not amend existing trust deeds to add express irrevocability clauses
- Registration under Section 12AB cannot be denied merely because the deed is silent on irrevocability
- The Maharashtra Public Trusts Act and similar state laws provide sufficient statutory protection against reversion of assets
- This applies to trusts registered under the Bombay Public Trusts Act, Gujarat Public Trusts Act, and other state-specific public trust legislation
Form 10AB Responses Cannot Be Weaponized
- Where online forms compel a binary response without a "Not Applicable" or "Silent" option, the assessee’s selection cannot be treated as false information
- Revenue authorities must distinguish between genuine misrepresentation and procedural compulsion
- Any penalty or rejection based on such responses is legally unsustainable and subject to quashing
- Tax professionals should document the form’s design limitations when filing appeals
Jurisdiction of CIT(E) Is Narrow and Statutorily Defined
- The CIT(E)’s role under Section 12AB is not that of a trust law auditor
- The focus must remain on the trust’s charitable purpose and operational genuineness
- Introduction of extraneous conditions - such as dissolution clauses, trustee qualifications, or asset management protocols - constitutes overreach
- Future applications must be evaluated against the statutory checklist in Section 12AB, not judicially invented criteria
