RAJA BALDEODAS BIRLA CHARITABLE TRUST,MUMBAI vs. COMMISSIONER OF INCOME TAX (EXEMPTIONS), MUMBAI

The brief facts of the case are that the applicant trust filed an application in Form No. 10AB on 27.06.2025 under section 12A(1)(ac)(ii) of the Income- tax Act (“the Act”) seeking regular registration under section 12AB of the Act by converting its provisional registration into regular registration. The application was examined by the Commissioner of Income Tax (Exemptions), Mumbai, who found that the application was incomplete and all the documents prescribed under Rule 17A(2) of the Income-tax Rules had not been furnished. Accordingly, CIT(Exemptions) issued a notice dated 07.10.2025 directing the applicant trust to furnish the requisite documents. After the trust filed certain documents in response, the CIT(Exemptions) formed a prima facie view that the trust deed did not contain an irrevocability clause or a dissolution/winding- up clause, despite the applicant having stated in Form No. 10AB that such a clause existed. The CIT(Exemptions) also noticed that Clause 5 of the trust deed permitted investment of trust funds in companies, firms, shares, stocks and debentures, which according to him was contrary to the permissible modes of investment prescribed under section 11(5) of the Act.

The CIT(Exemptions) examined the explanation furnished by the applicant regarding the absence of an irrevocability clause and dissolution clause in the trust deed. The applicant submitted that in order to remove any ambiguity, the Board of Trustees had passed a resolution incorporating an irrevocability clause and a dissolution clause providing that upon dissolution, the assets of the trust would be transferred only to another trust registered under section 12AB of the Act and not to the trustees or their relatives. However, the CIT(Exemptions) rejected this explanation by holding that incorporation of such clauses through a Board Resolution was not sufficient and the trust deed itself ought to have been amended through a proper resolution of the trustees and such amendment should have been duly filed before the office of the Charity Commissioner. According to the CIT(Exemptions), no amended trust deed, no special resolution of the trustees and no acknowledgment showing filing of the amendment before the Charity Commissioner had been produced. He therefore held that the deficiency in the trust deed remained unrectified and that the governing document itself did not contain the mandatory safeguards ensuring the trust would remain irrevocable and its assets would continue to be applied only for charitable purposes upon dissolution.

The CIT(Exemptions) further held that there was an inconsistency between the declaration made by the applicant in Form No. 10AB and the explanation subsequently furnished during the proceedings. According to him, while the applicant had declared in Form No. 10AB that the trust deed already contained an irrevocability clause, its subsequent explanation that the Board of Trustees had now passed a resolution incorporating such a clause clearly demonstrated that no such clause originally existed. On this basis, the CIT(Exemptions) held that the declaration made in Form No. 10AB was factually incorrect and amounted to furnishing false or incorrect information. He therefore held that the applicant had committed a "specified violation" within the meaning of Explanation (g) to section 12AB(4) of the Act, which provides that an application containing false or incorrect information constitutes a specified violation under the Act.

The CIT(Exemptions) also examined the investment clause contained in the trust deed. He observed that Clause 5 authorised the trustees to invest trust funds in securities, shares and debentures. According to him, such language indicated an intention on the part of the trust to make investments in modes other than those specifically permitted under section 11(5) of the Income-tax Act. Although the applicant submitted that the Board of Trustees had passed a resolution declaring that all future investments would strictly comply with section 11(5) of the Act and no investments would be made in impermissible modes, the CIT(Exemptions) was not satisfied with the explanation. He held that such a Board Resolution could not substitute an amendment to the trust deed itself and that no amended trust deed or evidence of filing such amendment before the Charity Commissioner had been produced. He therefore held that the investment clause in the trust deed continued to remain inconsistent with the statutory provisions contained in section 11(5) of the Act and consequently attracted the provisions relating to violation of section 13(1)(d) read with section 11(5).

After considering the entire material on record, the CIT(Exemptions) held that while granting registration under section 12AB of the Act, he was required to satisfy himself not only about the charitable objects and genuineness of the activities of the trust but also about compliance with the provisions of law governing charitable institutions. According to CIT(Exemptions), the applicant had failed to remove the defects noticed in the trust deed, had furnished incorrect information in Form No. 10AB regarding the existence of an irrevocability clause, and had continued to retain provisions permitting investments contrary to section 11(5) of the Act. On these grounds, the CIT(Exemptions) held that the applicant was not entitled to regular registration under section 12AB and accordingly rejected the application filed in Form No. 10AB. While rejecting the application, CIT(Exemptions) held that the rejection was based on three grounds being the absence of irrevocability and dissolution clauses in the trust deed, the existence of a specified violation under Explanation (g) to section 12AB(4) on account of furnishing incorrect information in Form No. 10AB, and the existence of provisions in the trust deed which, according to him, violated section 13(1)(d) read with section 11(5) of the Act.

The applicant trust is in appeal before us against the order passed by the CIT(Exemptions) rejecting its application for registration under section 12AB. The principal grievance of the applicant is that the CIT(Exemptions) erred in rejecting the application on the ground that the trust deed did not contain irrevocability and dissolution clauses despite the applicant having taken steps to cure the defects. The applicant has also challenged the finding that it had furnished false or incorrect information in Form No. 10AB so as to constitute a specified violation under Explanation (g) to section 12AB(4) of the Act. The Assessee has further challenged the finding that the investment clause contained in the trust deed violated section 11(5) read with section 13(1)(d) of the Act and such defect justified rejection of the application for registration.

We have heard the rival contentions and perused the material on record.

The applicant trust has challenged the order passed by the CIT(Exemptions) rejecting its application for regular registration under section 12AB of the Income-tax Act, 1961. The rejection is based principally on three grounds, namely, that the trust deed does not contain an express irrevocability clause and dissolution clause, the applicant furnished false or incorrect information in Form No.10AB by stating that the trust deed contains an irrevocability clause thereby attracting Explanation (g) to section 12AB(4) of the Act, and Clause 5 of the trust deed permits investment in modes contrary to section 11(5) of the Act. The learned Counsel for the applicant submitted that the rejection is without any adverse finding regarding the charitable objects or genuineness of the activities of the trust. It was further submitted that immediately upon the defects being pointed out, the Board of Trustees passed resolutions incorporating an irrevocability clause, a dissolution clause and also resolved that all investments of the trust would strictly conform to the modes prescribed under section 11(5) of the Act. The Counsel for the assessee submitted that if the CIT(Exemptions) was of the opinion that consequential amendments to the trust deed or compliance before the Charity Commissioner were required, reasonable opportunity ought to have been granted to complete the same instead of rejecting the application.

We find force in the submissions advanced on behalf of the applicant. The principal basis adopted by the CIT(Exemptions) for rejecting the application is the absence of an express irrevocability clause and dissolution clause in the trust deed and the consequential finding that the declaration made by the applicant in Row No.6 of Form No.10AB constituted furnishing of false or incorrect information amounting to a specified violation under Explanation (g) to section 12AB(4) of the Act. However, subsequent to the passing of the impugned order, the Hon'ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. Commissioner of Income-tax (Exemptions) & Ors., Writ Petition (L) No.7587 of 2026, decided on 09.03.2026, 2026:BHC-OS:6814-DB, has settled the controversy. The Hon'ble High Court has held that neither section 12AB nor any other provision of the Income-tax Act prescribes the existence of an express irrevocability clause or dissolution clause as a mandatory pre-condition for grant or renewal of registration. The Court further held that, in the case of public charitable trusts governed by the Maharashtra Public Trusts Act, the absence of such clauses does not render the trust revocable and applications for registration cannot be rejected solely on that ground. The Hon'ble High Court has also specifically held that the answer "Yes" furnished in Row No.6 of Form No.10AB, in the absence of an express irrevocability clause, cannot be treated as furnishing false or incorrect information constituting a violation under Explanation (g) to section 12AB(4) of the Act, particularly when the electronic utility itself compelled such declaration. Therefore, the very basis on which the CIT(Exemptions) rejected the application on the first two grounds no longer survives in view of the aforesaid binding decision.

In Amita Memorial Trust v. Commissioner of Income-tax (Exemptions) [2026] 185 taxmann.com 68 (Mumbai - Trib.), the Mumbai Bench of the Tribunal held that the CIT(Exemptions) was not justified in rejecting the assessee-trust's application for regular registration under section 12AB and approval under section 80G(5) merely because the Trust Deed did not contain an express irrevocability clause or dissolution clause and because the assessee had answered "Yes" to Row No. 6 of Form No. 10AB. Relying upon the judgment of the Hon'ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. CIT (Exemptions) [2026] 184 taxmann.com 374 (Bom.), the Tribunal held that neither section 12AB nor section 80G mandates the presence of an explicit irrevocability or dissolution clause in the Trust Deed as a condition precedent for grant of registration or approval. It was observed that where a public charitable trust is otherwise irrevocable in law, the mere absence of such clauses cannot constitute a valid ground for rejection. The Tribunal further held that the declaration made in Row No. 6 of Form No. 10AB could not be treated as furnishing false or incorrect information since the electronic filing utility itself compelled the applicant to answer "Yes" for successful filing of the application. Consequently, the Tribunal held that no specified violation could be held on that basis and set aside the orders of the CIT(Exemptions) rejecting registration under section 12AB and approval under section 80G(5), thereby allowing the assessee's appeal.

We also notice that one of the reasons assigned by the CIT(Exemptions) is that the investment clause contained in the trust deed permits investment in shares, debentures and other securities, which according to CIT(Exemptions) is contrary to section 11(5) of the Act. The applicant had, however, specifically brought to the notice of the CIT(Exemptions) that the Board of Trustees had already resolved that all future investments would be made strictly in accordance with section 11(5) of the Act and had also expressed its willingness to carry out such amendments in the trust deed as may be required. In our considered opinion, when the alleged defects are curable and the applicant has expressed its willingness to remove them, the application ought not to be rejected without granting an effective opportunity to cure such defects.

In light of the totality of the facts and circumstances of the case, and particularly in view of the binding judgment of the Hon'ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. Commissioner of Income-tax (Exemptions) & Ors. andAmita Memorial Trust (supra), we are of the considered opinion that the matter may be restored to the file of CIT(Exemptions) for de novo adjudication. The CIT(Exemptions) shall examine the application afresh in accordance with law after taking into consideration the ratio laid down in the aforesaid judicial precedents, the amended documents, resolutions and any other material that may be produced by the applicant trust in support of its claim. The CIT(Exemptions) shall also afford adequate opportunity of hearing to the applicant and thereafter pass a speaking order in accordance with law. We make it clear that we have not expressed any opinion on the merits of the applicant's entitlement to registration under section 12AB and all contentions of both parties are kept open.

Accordingly, the grounds of appeal raised by the applicant trust are allowed for statistical purposes.

The brief facts of the case are that the applicant trust filed an application in Form No. 10AB on 13.08.2025 seeking approval under section 80G(5) of the Act. During the course of proceedings, the CIT(Exemptions) noted that the applicant had also filed a separate application for regular registration under section 12AB of the Act on 27.06.2025. The CIT(Exemptions) observed that the said application for registration under section 12AB had already been rejected vide order dated 29.12.2025. Proceeding on this basis, the CIT(Exemptions) held that approval under section 80G of the Act can be granted only to an institution or fund to which the provisions of sections 11 or 12 or clause (23AA) or clause (23C) of section 10 apply. Since the applicant was not granted registration under section 12AB of the Act, the CIT(Exemptions) held that the applicant failed to satisfy the statutory condition prescribed under section 80G(5)(i) of the Act. Accordingly, without independently examining the applicant's eligibility or the other conditions prescribed for grant of approval under section 80G, the CIT(Exemptions) rejected the application on the ground that the application for registration under section 12AB had been rejected.

We have heard the rival contentions and perused the material on record. The only reason assigned by the CIT(Exemptions) for rejecting the applicant's application for approval under section 80G(5) is that its application for registration under section 12AB of the Act had already been rejected and, therefore, the applicant did not satisfy the conditions prescribed under section 80G(5)(i) of the Act. We find from the record that while deciding the connected appeal against rejection of registration under section 12AB, being ITA No. 2439/Mum/2026, we have already set aside the order passed by the CIT(Exemptions) and restored the matter to his file for de novo considersation.

Since the rejection of the application under section 80G of the Act is consequential to the rejection of registration under section 12AB of the Act and is not based on any independent examination of the conditions prescribed under section 80G(5) of the Act, and the order rejecting registration under section 12AB of the Act has itself been set aside and restored to the file of the CIT(Exemptions) for fresh adjudication, the consequential order rejecting approval under section 80G cannot survive independently.

Accordingly, in the interest of justice and to avoid conflicting decisions, we set aside the impugned order passed by the CIT(Exemptions) rejecting the applicant's application under section 80G(5) and restore this matter also to his file for de novo consideration. The CIT(Exemptions) shall first adjudicate the applicant's application for registration under section 12AB in accordance with the directions contained in our order in ITA No. 2439/Mum/2026 and thereafter examine the applicant's eligibility for approval under section 80G(5) of the Act afresh in accordance with law. Needless to state, the applicant shall be afforded adequate opportunity of being heard and of furnishing such documents and explanations as may be considered necessary. We make it clear that we have not expressed any opinion on the merits of the applicant's claim for approval under section 80G(5), and all contentions of both parties are left open.

Accordingly, the grounds of appeal are allowed for statistical purposes. Order pronounced in the open court on 09.07.2026.