SHREE NARAYAN RATHI FOUNDATION,MUMBAI vs. COMMISSIONER OF INCOME-TAX (EXEMPTIONS), MUMBAI

Briefly stated, the facts borne out from the impugned order are that the assessee trust had filed an application in Form No.10AB seeking registration/renewal under section 12AB of the Act. During the course of proceedings, the learned CIT(E) issued a notice requiring the assessee to furnish details and documents and, inter alia, to clarify whether the Trust Deed contains clauses relating to irrevocability and dissolution. In response thereto, the assessee pointed out the relevant clauses of the Trust Deed and submitted that the Trust Deed contained provisions relating to the functioning and continuance of the trust. However, on perusal of the Trust Deed, the learned CIT(E) came to the conclusion that there was no explicit clause relating to irrevocability and dissolution and therefore there existed no statutory safeguard to ensure that the assets of the trust would continue to remain dedicated to charitable purposes and would not revert back to the settlor or founder.

The learned CIT(E), thereafter referring to the expression “subject to the provisions of sections 60 to 63” occurring in section 11, held that exemption under section 11 is available only where the trust is irrevocable in nature and therefore existence of an irrevocability clause was mandatory for grant of registration under section 12AB. The learned CIT(E) further observed that in Form No.10AB, against the query whether the Trust Deed contains a clause that the trust is irrevocable, the assessee had answered “Yes”, whereas according to him, no such explicit clause existed in the Trust Deed. The learned CIT(E), therefore, treated the said response as furnishing false or incorrect information within the meaning of Explanation (g) to section 12AB(4) and consequently rejected the assessee’s application seeking registration under section 12AB.

After considering the aforesaid order of the learned CIT(E) and carefully examining the entire reasoning and foundation on which the impugned rejection has been premised, we find that the very edifice of the impugned action now stands completely dismantled and rendered legally unsustainable in view of the authoritative and exhaustive pronouncement of the Hon’ble Jurisdictional High Court in the case of Chamber of Tax Consultants v. Commissioner of Income-tax (Exemptions) reported in [2026] 184 taxmann.com 374 (Bom). The Hon’ble High Court, while dealing with an almost

The Hon’ble High Court further held that the entire interpretation sought to be canvassed by the Revenue on the strength of sections 60 to 63 proceeds on a complete misconception of the statutory provisions. The Hon’ble Court lucidly explained that under section 63, a transfer can be regarded as revocable only where the instrument itself contains a positive provision either enabling re-transfer of the assets or conferring upon the transferor a right to reassume control over such assets or income. The Court emphatically rejected the reasoning that absence of an irrevocability clause itself makes the trust revocable and made the significant observation that “silence in the deed implies irrevocability and not revocability.” The Hon’ble Court further observed that the interpretation sought to be adopted by the Revenue virtually “turns section 63 on its head”. The Hon’ble High Court thereafter elaborately analysed the provisions of the Maharashtra Public Trusts Act and reiterated the settled legal position that once a property is dedicated to a public charitable purpose, the dedication becomes complete and irrevocable and the settlor stands permanently divested of such property. Even in cases where a trust registered under the Maharashtra Public Trusts Act is revoked, the assets do not revert back to the settlor but remain under the statutory control of the Charity Commissioner and are required to be applied only for charitable purposes under the doctrine of cy-

The Hon’ble Jurisdictional High Court also took note of the fact that several trusts had been enjoying registration for decades under identical Trust Deeds and identical charitable objects and there being no change either in the statutory provisions or in the conditions governing registration under section 12AB vis-à-vis section 12AA, the Revenue could not suddenly invent a wholly new condition for denying registration. The Hon’ble Court observed that such an approach would virtually nullify the entire statutory scheme intended for charitable institutions. The Hon’ble Court further approved the earlier decision in CIT v. Tara Educational & Charitable Trust and reiterated that absence of a dissolution clause cannot constitute a valid ground for refusal of registration. The Court also referred to the stand taken by the Ministry of Finance itself before the Public Accounts Committee that in States like Maharashtra and Gujarat, where specific legislation prevents reversion of trust properties to the settlor, insistence upon a dissolution clause is “neither necessary nor legal”.

One of the most significant aspects of the judgment of the Hon’ble High Court is the severe disapproval expressed against the action of the Revenue in treating the response given in Form No.10AB as furnishing “false information”. The Hon’ble Court noticed that the online utility itself compelled the assessee to answer “Yes” to the query relating to irrevocability because otherwise the form itself could not be uploaded. The Hon’ble Court observed that a procedural utility designed by the Department cannot be used as an instrument to compel an assessee into making a declaration and thereafter penalise the assessee by treating the same as a “specified violation”. Such an approach was held to be manifestly arbitrary, contrary to settled legal principles and violative of administrative fairness. Ultimately, the Hon’ble Jurisdictional High Court authoritatively held that absence of an express irrevocability clause or dissolution clause can never constitute a valid ground for denial of registration under section 12AB and consequently quashed all such orders passed by the learned CIT(E).

In light of the aforesaid binding judgment of the Hon’ble Jurisdictional High Court, the entire basis on which the impugned order has been passed completely collapses. The learned CIT(E), while rejecting the assessee’s application on the alleged absence of irrevocability and dissolution clauses,

Accordingly, respectfully following the ratio and law laid down by the Hon’ble Bombay High Court in Chamber of Tax Consultants (supra), we set aside the impugned order passed by the learned CIT(E) rejecting the assessee’s application for registration/renewal under section 12AB on the ground of absence of irrevocability and dissolution clauses and alleged specified violation under Explanation (g) to section 12AB(4). The matter is restored back to the file of the learned CIT(E) with a direction to examine the assessee’s application afresh strictly in accordance with law and in the light of the principles laid down by the Hon’ble Jurisdictional High Court and to consider grant of registration under section 12AB after examining the objects of the trust and genuineness of its activities, without being influenced or guided by the issue relating to absence of irrevocability or dissolution clause in the Trust Deed, which issue now stands conclusively settled by the Hon’ble Jurisdictional High Court.

In the result, appeal of the assessee stands allowed for statistical purposes.