The Chamber of Tax Consultants v. The Commissioner of Income Tax

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The Chamber Of Tax Consultants vs The Commissioner Of Income Tax ... on 9 March, 2026

Author: B. P. Colabawalla

Bench: B. P. Colabawalla

2026:BHC-OS:6814-DB

                                                                                             1-wpl-7587-2026.doc

                                              IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                                   ORDINARY ORIGINAL CIVIL JURISDICTION

                                                         WRIT PETITION (L)NO.7587 OF 2026

                          1            The Chamber of Tax Consultants,                         ]
                                       through its President Mr. Jayant Gokhale                ]
                                       having its office at 3, Rewa Chambers, Ground           ]
                                       Floor, 31, New Marine Lines, Mumbai 400 020.            ]
       Digitally signed
       by SMITA

SMITA

JOSHI
RAJNIKANT
RAJNIKANT JOSHI
Date:
2 Bombay Chartered Accountants' Society ]
2026.03.18
15:45:16 +0530 through it Secretary Mrinal Mehta, having its ]
office at 7, Jolly Bhavn No.2, Ground Floor, ]
New Marine Lines, 7, New Marine Lines, ]
Mumbai 400 020. ]

                          3            Mahesh J. Parikh Charitable Trust, a                    ]
                                       Public Charitable Trust, having its office at 1/3       ]
                                       Shilpa, Vrindavan Society, N S Mankikar Marg,           ]
                                       Sion Chunabhatti, Mumbai 400 022.                       ]

                          4            Dadar Bhagini Samaj, a Public Charitable Trust, ]
                                       having its office at Hindu Colony 3rd Land,     ]
                                       Dadar, Mumbai 400 014.                          ]

                          5            Dr. Y N Ajinkya East Bombay Lion's Hospital             ]
                                       Society Trust, a Public Charitable Trust, having        ]
                                       its office at 32 Pandita Ramabai Road,                  ]
                                       Mumbai 400 007.                                         ]

                          6            Dilasa Medical Trust and Rehabilitation Centre,         ]
                                       a Public Charitable Trust, having its office at         ]
                                       201, Happy Home Plot No.551, Tps Iii 8th Road           ]
                                       Old Khar, Khar (W), Mumbai 400 052.                     ]

                          7            Gaud Brahman Samaj, a Public Charitable Trust ]
                                       having its office at 24, Madhunam Premises    ]
                                       Co.op. Society Ltd. S. V. Road, Goregaon (W), ]
                                       Mumbai 400 062.                               ]

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8 Gavankar Education Trust Saraswati High School]
Yeshwant Sadan, Public Charitable Trust, having ]
its office at S M Jadhav Marg, Naigaum, ]
Dadar (E), Mumbai 400 014. ].. Petitioners.

                          Versus

1 The Commissioner of Income Tax (Exemptions) ]
having his office at Room No.601, 6th Floor, ]
Cumballa Hill MTNL TE Building ]
Peddar Road, Mumbai 400 026. ]

2 Principal Chief Commissioner of Income ]
Tax, Delhi, having his office at Room No. ]
2503, 25th Floor, E2 Block, Civic Centre, ]
Minto Road, New Delhi, Delhi 110 002. ]

3 The Central Board of Direct Taxes, ]
Department of Revenue, Ministry of ]
Finance, Government of India, North ]
Block, New Delhi 110 001. ]

4 Union of India, through the Secretary, ]
Department of Revenue, Ministry of ]
Finance, Government of India, North ]
Block, New Delhi 110 001. ].. Respondents.

Mr. Percy Pardiwalla, Sr. Advocate with Mr. Dharan Gandhi and Ms.
Aanchal Vyas, Advocates for the Petitioners.

Mr. Arjun Gupta, for the Respondents.

                                       CORAM:    B. P. COLABAWALLA &
                                                 FIRDOSH P. POONIWALLA, JJ. DATE:     MARCH 09, 2026 Page 2 of 48 MARCH 09, 2026

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ORAL JUDGEMENT:- 1. Rule. Rule made returnable forthwith. Respondents waive

service. By consent of the parties, the Writ Petition is taken up for final

disposal at this stage itself.

1. The Petitioners before us represent a cross-section of

charitable trusts and bodies representing the tax-practising community.

Petitioner No. 1, i.e., The Chamber of Tax Consultants, is a society

established in 1926. It is one of the oldest voluntary non-profit

organisations of tax practitioners, and its members are advocates,

chartered accountants and tax practitioners. It is formed with the object

of spreading education in tax laws and making representations to

authorities on issues of public interest. Petitioner No. 2, i.e., the

Bombay Chartered Accountants' Society, was established in 1949, and is

a voluntary organisation of Chartered Accountants with over 11,500

members. It is actively involved in the dissemination of knowledge and

regularly makes representations on public interest issues concerning

tax laws. Petitioner Nos. 3 to 8 are public charitable trusts registered

under the Maharashtra Public Trusts Act, 1950 ("MPT Act"). These

trusts have been enjoying registration under sections 12A and 12AB of Page 3 of 48 MARCH 09, 2026
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the Income-tax Act, 1961 ("the Act") for several years and are the

aggrieved parties whose applications for renewal of registration are

rejected by Respondent No. 1.

1. This Writ Petition, filed under Article 226 of the

Constitution of India, basically challenges the action of Respondent

No.1, the Commissioner of Income Tax (Exemptions), in rejecting

applications for renewal of registration under section 12AB of the Act.

The Petitioners impugn the rejection orders passed against Petitioner

Nos. 3 to 8 and also seek broader reliefs for all similarly situated trusts.

1. The core issue arising for our determination revolves around

a view taken by Respondent No. 1 (which the Petitioners allege is

untenable) while processing renewal applications filed in Form 10AB

under the registration regime effective from 1st April 2021 in terms of section 12AB of the Act. Respondent No. 1 has rejected the applications

for renewal of registration of Petitioner Nos. 3 to 8, primarily, on two

grounds:

a. the trust deed or instrument constituting the
concerned entities does not contain an explicit
clause stating that the trust is "irrevocable"
and/or providing for the manner of dissolution;
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b. the applicants, in their online Form 10AB, were
compelled to answer "Yes" to the question in Row
6, viz., "Whether the trust deed contains clause
that the trust is irrevocable?". Since, the trust
deeds were silent on this aspect, Respondent No.
1 has treated this reply as furnishing "false or
incorrect information," which constitutes a
"specified violation" in terms of clause (g) of the
Explanation below section 12AB(4) of the Act.
5. Being aggrieved by the rejection orders and the systemic

issue affecting a large number of charitable trusts, the Petitioners have

approached this Court invoking its jurisdiction under Article 226 of the

Constitution of India.

1. Mr. Percy Pardiwalla, the learned Senior Advocate

appearing for the Petitioners, has made the following submissions in

support of the Petition:

a. Neither Section 12AA nor section 12AB of the Act
requires the presence of an explicit "irrevocability
clause" as a condition precedent for granting
registration. Section 12AB(1)(b) of the Act requires Page 5 of 48 MARCH 09, 2026
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the Principal Commissioner to call for such
documents or information from the concerned trust
or institution and make such inquiries in order to be
satisfied about the genuineness of activities of the
trust or institution, and compliance of such
requirements of any other law for the time being in
force by the trust or institution as are material for the
purpose of achieving its objects. The presence of a
clause relating to the dissolution or irrevocability is
not a condition precedent for grant of registration. By
insisting on such a clause, Respondent No. 1 is acting
without jurisdiction and imposing a condition not
found in the statute, which action is impermissible in
law.

b. The trusts were initially granted registration under
the earlier regime, i.e., (sections 12A/12AA) inspite of
such clauses not being present. The conditions for
grant of registration have not materially changed in
section 12AB, and hence, initially in 2021 the trusts
were also granted registration under section 12AB in
similar circumstances. There is no change in facts or
law to warrant this new interpretation adopted by
Respondent No. 1.

c. Reliance by Respondent No.1 on sections 60 to 63 in
support of his conclusion is misplaced. These sections
are anti-avoidance provisions and provide for the Page 6 of 48 MARCH 09, 2026
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inclusion of income in the hands of the transferor in a
case of a "revocable transfer." These sections do not
apply for the purpose of registration but are
applicable, if at all, only at the time of grant of
exemption under section 11 of the Act. Assuming the
provisions apply, the effect thereof is that pursuant to
a revocable transfer, the income arising from such
assets that were the subject of such transfer is
chargeable to tax in the hands of the transferor, and
consequently, the transferee to whom such income
arises is not taxable. Thus, the issue of claiming
exemption in the assessment of the trust/ institution
can never arise.

d. In any event, section 63 itself defines a transfer as
"revocable" only if the instrument contains a
provision for re-transfer or gives the transferor a right
to re-assume power over the assets. Since, the trust
deeds are silent, they do not fall within this definition.

e. It is a settled principle of law that a trust (whether
private or charitable) is irrevocable unless the trust
deed expressly reserves a power of revocation. The
test to be applied is the presence of a revocation
clause, not the absence of an irrevocability clause.

f. The Petitioner trusts are registered under the Maharashtra Public Trusts Act, 1950 ("MPT Act").
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Sections 22(3A) and 22(3B) of the MPT Act provide a
specific mechanism for de-registration and transfer of
funds to the Public Trusts Administration Fund inter
alia in a case where the trust is revocable and is
specifically revoked. Further, Section 55 provides for
the application of the cy-pres doctrine upon
dissolution. The combined effect is that the assets of a
public charitable trust in Maharashtra can never
revert to the settlor and must be transferred to
another trust with similar objects. This makes them
inherently irrevocable by operation of law.

g. The utility that drives the submission of the online
form compels an applicant to make a declaration that
is not correct in order to upload its form, which, then,
is perversely used as a ground for rejection. In
response to the question in Row 6, "Whether the trust
deed contains clause that the trust is irrevocable?",
the trusts are forced to click on "Yes". Because if "No"
is clicked, then the form does not get uploaded and a
message appears "Approval/ Registration is not
allowed if the applicant being a trust does not have an
irrevocable clause" as was demonstrated to us in the
course of hearing. Where there is no irrevocability
clause, and if "Yes" is clicked in response to the query
in Row no. 6, Respondent No.1 has considered this as
a ground to deny registration. Respondent No. 1 has Page 8 of 48 MARCH 09, 2026
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considered the reply "Yes" as furnishing "false or
incorrect information," which constitutes a "specified
violation" in terms of clause (g) of the Explanation
below section 12AB(4) of the Act. This is a high-
handed and arbitrary approach, penalising assessees
for a flaw in the department's own system.

h. This Court in CIT vs. Tara Educational & Charitable
Trust (Income Tax Appeal No. 247 of 2015) vide its
judgment dated 31.07.2017 has held that the absence
of a dissolution clause is not a ground for rejecting
registration. In fact, the Ministry of Finance, in its
reply to the Public Accounts Committee regarding a
Comptroller and Auditor General of India ('CAG')
Report, had itself stated that in States like
Maharashtra and Gujarat, where specific legislation
bars reversion of assets, the inclusion of a dissolution
clause is "neither necessary nor legal." Thus, neither
the existence of a dissolution clause nor the
irrevocability clause are necessary ingredients for
grant of registration.

i. The Act already contains adequate safeguards in section 13 (viz., denial of exemption in case the
income is applied for the benefit of an interested
persons), section 115TD (exit tax on dissolution), and
the power to impose conditions in the registration
certificate, which prevents any misuse of assets. In Page 9 of 48 MARCH 09, 2026
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fact, while granting registration under section
12AB(1)(a) for the first time under the amended
regime, specific conditions were imposed, inter alia,
including one that prohibited a transfer of assets to
the founder/ settlor on a dissolution of the trust.
7. For the aforesaid reasons, Mr. Pardiwalla, submitted that

both grounds for rejection of registration under section 12AB of the Act

are incorrect, baseless and cannot be relevant grounds for grant/

rejection of registration. Consequently, he submitted that the reliefs

sought in the above Petition be granted.

1. Per contra, Mr. Gupta, the learned counsel for the

Respondents, first of all tendered an Affidavit in Reply affirmed by

Respondent No. 1 on 3rd March, 2026. He defended the impugned

orders by making the following submissions:

a. Section 12AB allows for examination of the issue of
revocability before granting registration. The
Commissioner has to be satisfied not only regards
the genuineness and objects of the trust but the
compliance of other laws as well such as the MPT
Act which envisages de-registration of a public trust Page 10 of 48 MARCH 09, 2026
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if it is revocable and is revoked. Hence, it is
incumbent upon the Commissioner to be satisfied
also about the revocability of a public trust before
he grants registration.

b. Sections 60 to 63 envisage revocable and deemed
revocable transfers and section 11 is made subject to
these provisions. Since public trust property is
public property, revocability has to be decided at the
time of grant of registration itself. Also, there is
nothing arbitrary in requiring revocability to be
considered during the process of grant of
registration if it is allowed under section 12AB.

c. An irrevocable trust is a condition precedent for
grant of registration and exemption. The property of
a public trust is public property once endowed and
row number 6 in Form No. 10AB simply seeks to
carry out or implement the law. There is a direct
nexus between the legal principle of not allowing
revocable trusts to claim exemption and how the
Revenue seeks to achieve that by obligating trusts to
have irrevocability clauses in their trust deeds.
Hence, there can be nothing arbitrary if only the law
is being upheld by virtue of row number 6 in Form
No. 10AB.
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d. Section 332 of the Income-tax Act, 2025 provides
that an exemption will be available only to an
irrevocable trust which means that only an
irrevocable trust can be considered for the purposes
of registration of a public trust.

e. Once the MPT Act envisages revocability of a public
trust, and the Act also makes the exemption under section 11 subject to sections 60 to 63, there is every
possibility, in view of these statutory provisions,
that public trusts may contain revocable clauses in
their trust deeds. To obviate such a situation, row
number 6 of Form No. 10AB requires every public
charity to have an express irrevocability clause.
Therefore, there is nothing arbitrary with this
requirement. In fact, it seeks to cure the mischief of
not allowing revocability clauses in public trust
deeds for grant of registration and exemption.

f. Several trusts have already submitted applications
to the Charity Commissioner for amendment of
their trust deeds to insert irrevocability clauses
therein. Registration has been granted and/or
renewed for such public charities.

g. The assertion made at paragraph 4.7 of the petition,
that for a trust to be considered as revocable, the
sine qua non is that the Trust Deed should contain a Page 12 of 48 MARCH 09, 2026
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provision for re-transfer or it in any way gives the
transferor a right to reassume power over the
income and assets, is also misconceived. Such an
assertion ignores the language used in section 63(a)

(ii) of the Act which states that a transfer shall be
deemed to be revocable if it, in any way, gives the
transferor a right to resume a power, directly or
indirectly, over the whole or any part of the income
or assets. Clearly the absence of a specific clause of
irrevocability in respect of even part of the assets,
indirectly gives the transferor a right to reassume
power (directly or indirectly) over the whole or part
of the income or assets of the trust. Accordingly,
the non obstante clause at the beginning of section
11 is a sufficient statutory requirement of having a
specific irrevocability clause in the trust deed, and
does not require the same to be stated in any other
way in the Act.
h. The Commissioner is duty-bound to satisfy himself
about the objects and genuineness of the trust.
Ensuring that the trust is irrevocably dedicated to
public purposes is a core part of this satisfaction. It
is not feasible for the Commissioner to examine the
various recitals of every trust deed to infer
irrevocability; an express clause is necessary for
administrative clarity and to prevent litigation. Page 13 of 48

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             i. The assertion in the petition that revocability of a
                  trust implies a dissolution of trust,            is entirely
                  misplaced and misleading. They are entirely two
                  different things. Whereas revocability of a trust can
                  be even partial with respect to the income or assets
                  of a trust, dissolution implies complete loss of
                  identity of the trust.

j. Insofar as the rule of consistency of approach to be
adopted in the light of the previous approval has
been canvassed, it was submitted that there is no
estoppel against a statute. A registration granted
incorrectly will not act as an estoppel, and
Respondent No.1 will be justified in acting in
consonance with the specific provisions of the Act.

             k. The assertion that Form No. 10AB was not getting
                  filed online in the absence of a "No" response is also
                  irrelevant to the issue, because even during the
                  registration proceedings, the applicants have falsely
                  specifically stated before Respondent No.1 that their
                  trust deeds contain a specific irrevocability clause,
                  whereas the deeds are silent on this issue.

1. He, accordingly, submitted that the Petition is without merit

and ought to be dismissed.

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1. We have heard the learned counsel for the parties and have

perused the papers and proceedings. The entire controversy in the

present Petition hinges on whether the absence of an explicit

"irrevocability clause" in a trust deed renders a public charitable trust

"revocable" in law, thereby justifying the rejection of its registration.

1. At the outset, a plain reading of section 12AB of the Act

reveals that the conditions for grant of registration are an objective

satisfaction on the part of the Principal Commissioner regarding (i) the

objects of the trust, (ii) the genuineness of its activities, and (iii)

compliance with other material laws. The section does not contain any

condition that the trust deed must have an explicit clause stating that it

is irrevocable before registration is granted, and in our view, such a

condition cannot be implied also. Respondent No.1, therefore, is

attempting to read a condition into the statute which does not exist. The

entire case of Respondent No.1 is built on the premise that section 11 is

"subject to sections 60 to 63" and, hence, a specific clause as to

irrevocability is a must for grant of registration. However, this approach

overlooks the fact that the Legislature in its wisdom only made the Page 15 of 48 MARCH 09, 2026
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grant of exemption under section 11 subject to sections 60 to 63 and did

not provide for any such similar provision in section 12AB of the Act.

1. Be that as it may, let us first examine the case of Respondent

No. 1 regarding the revocability of trusts. Respondent No. 1 has

presumed a trust to be revocable absent an express irrevocable clause.

For this purpose, Mr. Gupta has relied upon Sections 61 and 63 of the

Act. Section 61 deals with the taxability of income from a "revocable

transfer of assets." Therefore, the key issue to be determined is what

constitutes a "revocable transfer." The definition of "revocable transfer"

is to be found in section 63(a) of the Act, which reads as under:

"a transfer shall be deemed to be revocable if--

(i) it contains any provision for the re-transfer directly or
indirectly of the whole or any part of the income or assets to the
transferor, or

(ii) it, in any way, gives the transferor a right to re-assume
power directly or indirectly over the whole or any part of the
income or assets;"
(emphasis supplied)

1. The language of section 63 is clear and unambiguous.

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construed. For a transfer to be revocable, the instrument must contain a

positive provision for re-transfer or a provision which gives a right to

the transferor to re-assume power over the assets or income. There is

no ambiguity in this regard. The statute does not enact that the mere

absence of an irrevocability clause makes a trust revocable. On the

contrary, it implies that a trust is irrevocable (which is the normal

principle in all transfers) unless it is expressly made revocable. Silence

in the deed implies irrevocability, not revocability. The interpretation to

the contrary placed by Respondent No.1 turns section 63 on its head.

Such an interpretation is completely misplaced. The reliance on section

63(a)(ii) is also misplaced. We cannot understand as to how an absence

of any irrevocability clause can be construed as giving the transferor a

right to reassume power over the assets or income. Even section 63(a)

(ii) contemplates a specific provision which gives the transferor a right

to re-assume such power.

1. Our interpretation is further fortified by the provisions of

the MPT Act, under which the Petitioner trusts are registered. It is a

fundamental principle of public trust law that once property is Page 17 of 48 MARCH 09, 2026
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dedicated to a public charitable purpose, the dedication is complete and

the settlor is divested of the property. The assets can never revert to the

settlor. It is regard, it is relevant to note a judgement of this Court in Controller of Estate Duty, Vidarbha vs. Smt. Mangala [(1983) 143 ITR

491 (Bom)], wherein a Division Bench of this Court held as follows:-

"There is thus unanimity in the view that in the case of a
charitable endowment or trust once the dedication is completed
there is no power of revocation left with the settlors. Even though
in a given case the settlor has reserved the power to revoke the
trust, in our view such a reservation would be wholly invalid and
the power cannot be invoked so as to undo the settlement."
15. A later judgment of this Court in [Smt. Virbala K. Kewalram

& Ors. Vs. Shri. Ramchand Lalchand & Ors.](https://indiankanoon.org/doc/135151/) reported in 1996(4) ALL

MR 490, had laid down the same principle as follows:

"12. In the instant case, the trust created by executing a
trust deed which was registered under the Registration
Act on the same day i.e. on 31st May, 1963 and a trust
came to be registered as a Public Charitable Trust only
in November, 1965 and the Trust came to be registered
under the Bombay Public Trusts Act, 1950 as Public
Charitable Trust late in November, 1965. It is submitted
that before the trust registered as a Public Charitable
Trust, the Trustees by executing a trust Deed deleted
one property out of the two properties in favour of
widow and the daughter of the settlor of the trust.
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Therefore, the question is whether the trustees are
competent to do so. In my view, as observed above,
"no". The Trust Deed of the settlor is like a last wish-
will of the settlor. Once a Trust is created, it is
irrevocable unless it is expressly desired by the settlor
himself. In view of the admitted fact that two properties
mentioned in the trust deed were intended to be the trust
properties and the income out of that properties to be
utilised for the purpose of fulling the object of the trust
and in another words, as desired by the settlor. The
source of income of the trust is only the properties
coming under the Trust Deed. The Trustees are the
custodian of the trust property and they were required
to manage the property as per the wish expressed in the
Trust Deed. Therefore, it is held that the previous
trustees were not at liberty to change the documents by
moving the deed of rectification relating to the
properties of the trust as described in the Trust Deed.
Therefore, the amendment in the said deed of trust
properties carried out in pursuance to the said deed of
rectification is bad and the order passed by the Dy.
Charity Commissioner dated 22nd November, 1965 is
bad. Therefore, the Charity Commissioner modified that
order while exercising the revisional jurisdiction u/s.70-
A after lapse of time, is not in any manner bad-in-law.
Under Section 70-A, the Charity Commissioner has
been conferred even suo motu revisional power and no
limitation is there for the purpose of exercising the
revisional power."
(emphasis supplied)

1. Thus, from the above, it can be deduced that once a property

is dedicated to a public charitable purpose, the settlor is divested of the

property and such property can never revert back to the settlor. Page 19 of 48

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1. It is now pertinent to note two provisions of the MPT Act.

First of all, reference may be made to sections 22(3A) and 22(3B) of the

MPT Act which are reproduced hereunder:

"(3A) The Deputy or Assistant Charity Commissioner may, after such
detailed and impartial inquiry and following such procedure as may
be prescribed, de-register the trust on the following grounds :--

(a) when its purpose is completely fulfilled ; or

(b) when its purpose becomes unlawful ; or

(c) when the fulfillment of its purpose becomes impossible by
destruction of the trust- property or otherwise ; or

(d) when the trust, being revocable, is expressly revoked ; or

(e) when the trustees are found not doing any act for fulfilling object
of the trust:

Provided that, no trust shall be de-registered under clause (e) unless
its trustees have committed default in reporting the change under sub-
section (1), in submission of the audited accounts as prescribed by
sub-section (2) of section 33 or sub-section (1A) of section 34 or in
making any other compliance prescribed by or under this Act for a
period of five years from the last date of reporting the change,
submission of the accounts or making the compliance, as prescribed
by or under this Act or the rules made thereunder, as the case may be.
(3B) The Deputy or Assistant Charity Commissioner may take over the
management of properties of the trust de-registered under sub-section
(3A) and pass such necessary orders for the same as he deems fit and
may, if he considers it expedient, dispose them of by sale or otherwise
and deposit the sale proceeds in the Public Trusts Administration
Fund established under section 57."
(emphasis supplied)

1. From a plain reading of these provisions, two things emerge

very clearly. First, even section 22(3A)(d) refers to "trust, being Page 20 of 48 MARCH 09, 2026
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revocable, is expressly revoked"; meaning thereby that in order that a

trust is a revocable trust, a power to revoke is essential. In other words,

the Trust Deed should have an express clause enabling the settlor to

invoke the same and revoke the trust. In the absence of any revocability

clause, a trust cannot be revoked. This is in line with settled law that

when a person transfers property to another, either by way of gift or by

way of a settlement, and on the acceptance of such transfer by the donee

or the settlor, as the case may be, there is a complete transfer of

ownership of property and the transferor is denuded of all right, title

and interest in the property, unless the transfer is explicitly made

conditional on the happening of some event. Absent any such specific

clause, the fulfillment whereof either results in transfer of ownership of

property to the transferee, or on the transferor being able to revoke the

transfer, the transfer is absolute. The interpretation that unless there is

an irrevocability clause, the trust is revocable, is completely contrary to

law and has no legs to stand on. Secondly, the provisions of [sections

22(3A)](https://indiankanoon.org/doc/12014616/) and (3B) are clear as to the consequences where a trust is

revocable, and is revoked. In such a scenario, the Deputy or Assistant

Charity Commissioner will first de-register the trust, then, he may take

over the management of the properties of the trust de-registered, and Page 21 of 48 MARCH 09, 2026
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thereafter, dispose them of by sale or otherwise, and deposit the sale

proceeds in the Public Trusts Administration Fund established under

Section 57 of the MPT Act. Thus, the assets of a trust, which is

registered under the MPT Act, would never come back to the settlor.

They are sold on revocation and the funds are deposited in the Public

Trusts Administration Fund. Once that is the case, then such trusts can

never be termed as revocable trusts in terms of section 63(a) of the Act. Section 63(a) of the Act provides that a trust is revocable if the Trust

Deed has a provision for re-transfer directly or indirectly of the whole or

any part of the income or assets to the transferor, or where such

provision in any way, gives the transferor a right to re-assume power

directly or indirectly over the whole or any part of the income or assets.

The same is impossible in case of a trust registered under the MPT Act.

This is for the simple reason that in the case of a revocable trust, if the

same is revoked, then the assets or proceeds from sale would never go

the settlor. Thus, the reasoning of Respondent No. 1 is completely

baseless and unfounded.

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1. It is also pertinent to refer to section 55 of the MPT Act

which provides for the application of the doctrine of cy-pres. Section 55

of the MPT Act is reproduced hereunder for better understanding:

"55. Cypres.-- (1) If upon an application made to him or
otherwise,the Assistant or Deputy Charity Commissioner is of
opinion that,--

(a) the original object for which the public trust was created has
failed ;

(b) the income or any surplus balance of any public trust has not
been utilized or is not likely to be utilised;

(c) in the case of a public trust other than a trust for a religious
purpose, it is not in public interest expedient, practicable,
desirable, necessary or proper to carry out wholly or partially
the original intention of the author of the public trust or the
object for which the public trust was created and that the
property or the income of the public trust or any portion thereof
should be applied to any other charitable or religious object; or

(d) in any of the cases mentioned in sections 10 to 13 or in regard
to the appropriation of the dharmada sums held in trust under section 54, the directions of the Charity Commissioner are
necessary then,
the Assistant or Deputy Charity Commissioner shall pass
appropriate orders after making an enquiry and make a report to
the Charity Commissioner.

(2) The Charity Commissioner may suo motu or on the report of
Assistant or Deputy Charity Commissioner, give directions and in
giving such direction, he shall give effect to the original intention
of the author of the public trust or object for which the public
trust was created.

(3) The Charity Commissioner may direct the property or income
of the public trust or any portion thereof to be applied cypress to
any other charitable or religious objects. In doing so, it shall be
lawful for the Charity Commissioner to alter any scheme already
settled or to vary the terms of any decree or order already passed
in respect of the public trust or the conditions contained in the
instrument of the public trust.
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                  (4) An appeal shall lie against the decision or order passed by the
                  Charity Commissioner under sub-section (2) or, as the case may
                  be, sub-section (3) of this section to this section to the Court, as if
                  such order was a decree passed by the District Court from which
                  an appeal lies, within sixty days from the date of the said order,
                  which shall otherwise be final."

1. A plain reading of the above provisions makes it very clear

that on the occurrence of the events specified in section 55(1) of the

MPT Act, where the Trust assets/ properties cannot be used for the

objects specified in the Trust Deed, then, the Office of the Charity

Commissioner, by following the process laid down in section 55 of the

MPT Act, can pass an order directing the property or income of the

public trust or any portion thereof to be applied cypres to any other

charitable or religious object. This, therefore, also further strengthens

the proposition that once an asset is settled for charitable purposes,

such an asset can either be used for the purposes for which it is settled

or for other similar purposes in terms of section 55 of the MPT Act, but

such assets and properties can never revert back to the settlor of the

trust.

1. Not only are the provisions of the MPT Act clear, but the

interpretation placed by the Ministry of Finance in this regard is also Page 24 of 48 MARCH 09, 2026
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germane. It would be pertinent to bring out the reply of the Ministry of

Finance to the CAG and to the Public Accounts Committee of the Lok

Sabha as brought out in the 27 th Report which was presented to the Lok

Sabha and laid before the Rajya Sabha on 16.12.2015 with regard to the

provisions of the MPT Act. The relevant extract of the reply of the

Ministry of Finance to CAG which is brought out in a Press Release

dated 17-12-2013, is as under:

"2.9 The Ministry stated (May 2013) that in Mumbai & Gujarat,
Bombay Public Trust Act, 1980 ensure that no amount can go
back to any founder etc. because properties are transferred with
the permission of the Charity Commissioner only to other Trusts
having similar objects. Thus inclusion of dissolution clause in
the deed is neither necessary nor legal in States where specific
legislation bars such reversion."
(emphasis supplied)

1. Further, the relevant reply of the Ministry of Finance to the

Public Accounts Committee of the Lok Sabha is as under:

" Further as already explained earlier (May 2013) in
Mumbai & Gujarat, Bombay Public Trust Act, 1980 ensures that
no amount can go back to any founder etc. because properties
are transferred with the permission of the Charity Commissioner
only to other Trusts having similar objects. Thus, inclusion of
dissolution clause in the deed is neither necessary nor legal in
States where specific legislation bars such reversion. In
Rajasthan also from where many cases are reported, the position
is similar."
(emphasis supplied) Page 25 of 48 MARCH 09, 2026
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1. Once the Ministry of Finance is of the above opinion, then,

Respondent No.1, who functions under the administrative authority of

such Ministry, cannot take a contrary stand.

1. The above discussion clearly demonstrates that Respondent

No. 1 has completely misapplied the legal position. He has not

understood the provisions of the Act and the MPT Act in their correct

perspective. His apprehensions, if any, are completely unfounded.

There cannot be any presumption that in the absence of an

irrevocability clause, a trust is revocable and there is a possibility that

the assets settled by the settlor would revert back to him. On the

contrary, as explained earlier, unless there is any revocability clause, the

trust is irrevocable and even in case of a revocable trust registered

under the MPT Act, the assets would never revert back to the settlor.

1. Section 78 of the Indian Trusts Act, 1882, is also apposite in

this regard. Undoubtedly, it is true that by virtue of section 1 of the

Indian Trusts Act, 1882 the provisions thereof do not apply to public or Page 26 of 48 MARCH 09, 2026
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private religious or charitable endowments, but nevertheless, the

provisions of section 78 codify a well settled principle in law that would

equally apply to a public charitable or religious trust absent any

provision contrary thereto in the MPT Act. Section 78, in so far as it is

relevant for the present purpose, provides that a trust created otherwise

than by way of a will can be revoked only, inter alia, by the consent of all

beneficiaries who are competent to contract or in exercise of a power of

revocation expressly reserved to the author of the trust. In so far as a

public charitable trust is concerned, the first condition can never be

fulfilled because there is no question of obtaining the unanimous

approval of all members of the public. The second condition is

analogous to what is provided for in section 22(3A) of the MPT Act, viz.,

that there has to be a specific power of revocation expressly reserved in

the author of the trust and a specific exercise of such power. Absent the

aforesaid circumstances, a trust is clearly irrevocable. In other words, it

is virtually impossible to say that a charitable trust can be revocable

because it does not contain an irrevocability clause. Page 27 of 48

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1. At this stage, it would be apposite to deal with the argument

of the Respondent that what if the Trust Deed has a specific revocability

clause for reverting the property settled to the settlor. The statutory

framework referred to hereinabove unambiguously provides that if a

public trust, registered under MPT Act, is revocable, and is revoked,

then the assets/ properties of the trust would never go back to the

settlor and that the assets would be disposed of and sale proceeds of the

same would be deposited in the Public Trusts Administration Fund.

Thus, any clause in the Trust Deed to the contrary would naturally be of

no effect. There cannot be any doubt that any clause in a contract

cannot be contrary to the express provisions of the MPT Act. Thus, even

this apprehension is ill founded.

1. The above position in law, including the statutory

framework, the precedents and the interpretation of the Ministry of

Finance, makes it legally impossible for the assets of a public charitable

trust in Maharashtra to be re-transferred to the settlor. Therefore, the

condition for revocability under section 63 of the Act can never be met. Page 28 of 48

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1. Another angle to the above issue would be to consider the

rights and liabilities of trustees of a public charitable trust registered

under the MPT Act. Section 36A of the MPT Act deals with powers and

duties of, and restrictions on, trustees. The same is reproduced

hereunder:

"36A. Powers and duties of, and restrictions on, trustees.-- (1) A
trustee of every public trust shall administer the affairs of the trust
and apply the funds and properties thereof for the purpose and
objects of the trust in accordance with the terms of the trust, usage
of the institution and lawful directions which the Charity
Commissioner or court may issue in respect thereof, and exercise
the same care as a man of ordinary prudence does when dealing
with such affairs, funds or property, if they were his own.
(2) The trustee shall, subject to the provisions of this Act and the
instrument of trust, be entitled to exercise all the powers incidental
to the prudent and beneficial management of the trust, and to do all
things necessary for the due performance of the duties imposed on
him.

(3) No trustee shall borrow moneys (whether by way of mortgage or
otherwise) for the purpose of or on behalf of the trust of which he is
a trustee, except with the previous sanction of the Charity
Commissioner, and subject to such conditions and limitations as
may be imposed by him in the interest or protection of the trust.
Provided that, the Charity Commissioner or the Joint Charity
Commissioner, as the case may be, shall decide the application for
borrowing money from the Bank or Financial Institution forthwith
and preferably within a period of fifteen days, if the Bank or the
Financial Institution has provisionally sanctioned the loan.
(3A) Notwithstanding anything contained in sub-section (3), in
exceptional and extraordinary situations where the absence of
previous sanction contemplated under sub-section (3) result in
hardship to the trust, beneficiary or bona fide third party, the
Charity Commissioner may grant ex-post-facto sanction to borrow
moneys from any nationalized bank or the Scheduled Bank, by the
trustees.

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                  (4) No trustee shall borrow money for his own use from any
                  property of the public trust of which he is a trustee :

Provided that, in the case of a trustee who makes a gift of
debentures or any deposit in his business or industry the trustee
shall not be deemed to have borrowed from the trust for his own
use."

(emphasis supplied)
29. A trustee acting in a fiduciary capacity indubitably has to act

only as per the instructions provided for in the Trust Deed by the Settlor

with the exceptions that he has to comply with the orders of the

authorities under the MPT Act and orders of the Courts. Section 36A(1) is very clear that a trustee of every public trust shall administer the

affairs of the trust and apply the funds and properties thereof for the

purpose and objects of the trust in accordance with the terms of the

trust. The trust property has to be applied by the trustees in terms of the

Trust Deed. Thus, when the Trust Deed does not contain any clause as

to revocability, the trustee cannot allow the trust property to be re-

transferred to the settlor. Though not very relevant, similar are the

provisions in Chapter III of the Indian Trusts Act, 1882 as to the rights,

duties and responsibilities of a trustee. This also supports the case that

once there is no revocability clause, the trust is irrevocable as the

trustee cannot act in defiance of the provisions of the Trust Deed. Page 30 of 48

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1. At this stage, it will be apt to bring out the distinction

between a revocable trust and a revocable transfer. A trust itself may be

irrevocable in its nature, but it can receive a donation that is revocable.

For instance, if a donor contributes funds with a condition that they will

revert to him if a specific charitable object is not fulfilled within a

certain time, the income from that specific donation may be clubbed in

the hands of the donor in accordance with section 61 and such income

cannot be considered as income of the trust. This is the intended scope

of the interplay between sections 11 and 60 to 63, and the use of the

words "subject to the provision of sections 60 to 63" in the opening part

of section 11 in no manner questions the fundamental irrevocable

nature of the public trust itself. Further, such income once taxed in the

hands of the transferor, cannot be included as income of the transferee

trust, and consequently, no exemption can be claimed by the Trust

under section 11 of the Act.

1. Mr. Pardiwalla is also right when he contends that the

conditions for grant of registration remain the same both under sections 12AA and 12AB of the Act. When considering the same Trust Page 31 of 48 MARCH 09, 2026
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Deed, registration was granted both under section 12AA and [section

12AB(1)(a)](https://indiankanoon.org/doc/125713570/) of the Act (new regime as well), there is no reason

forthcoming to take a different stand when an application is made for

renewal of registration. It may be pertinent to note that there are

various trusts who are more than 20-30 years old and some also 50

years old. They were, with the same Trust Deed and same set of

activities, granted registration earlier. There is no logic, when the

conditions for renewal remain the same in section 12AB as compared to

the earlier provisions i.e., section 12AA, then, why different criteria are

applied today to deny registration. On this ground of the Petitioner as

raised in the petition, nothing has been commented in the reply

affidavit. However, in his argument, Mr. Gupta contended that there is

no estoppel in law. Such an argument cannot be countenanced. There

being no change in the requirements for grant of registration, a

completely new condition cannot be invoked to put at naught the entire

provisions dealing with grant of exemption to charitable trusts at the

threshold by denying registration, leave aside the grant of exemption.

This is also one of the reasons to interfere with the orders passed by

Respondent No. 1.

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1. It would be pertinent to refer to the decision of this Court in CIT vs. Tara Educational & Charitable Trust (Income Tax Appeal No. 247 of 2015), as relied upon by the Petitioners, wherein this Court vide

its judgement dated 31.07.2017 has held as follows:

"4 The registration of the Trust has to be done on
compliance of the provisions of Section 12AA of the Act. The
authority is required to consider the genuineness of the
activities of the Trust and the section does not lay down that
unless and until the clause of dissolution of the Trust is
incorporated in the Trust Deed, the Trust cannot be
registered.

5 The statute takes care of the apprehension as is shown by
the Director of Income Tax (Exemptions). The authority has
observed that in case the objects / activities of the Trust
cannot be carried out and it has to be dissolved, the corpus
and properties remain on the date of the dissolution
transferred. The absence of the clause of dissolution in the
Trust Deed would be in no manner an impediment in the
operation of the statute. Section 55 of the Maharashtra
Public Trust Act takes care of such contingency. The
Tribunal in its order has considered the scope of Section 12A of the Act and has rightly passed the order."
(emphasis supplied)

1. Thus, this Court has categorically held that the absence of a

dissolution clause in the Trust Deed is not a valid ground for rejecting

registration under section 12AA, as first of all there is no such

requirement in section 12AA of the Act, and even otherwise, the

provisions of section 55 of MPT Act take care of such a contingency. The

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different from section 12AA in this regard, and this binding precedent is

fully applicable in the present context as well.

1. In this connection, one may profitably refer to the reply of

the Ministry of Finance, to the Public Accounts Committee, as brought

out in paragraph 20 of the report, which is reproduced hereunder:

"The Office Manual on the basis of which this
objection is purportedly raised only states that it should be
ensured that in case of dissolution the trust assets do not
revert to funder's account. It does not stipulate that
dissolution clause be insisted upon. However, such
dissolution clause is generally being insisted upon since
under the Indian Trust Act, the Trust can be dissolved and
there is no bar on the assets reverting to the founder
account.

In the absence of any specific provision in Income Tax Act with respect to dissolution clause, rejection of application
for registration on this account is neither enforceable nor
legally sustainable.

Further the judicial decisions too are not in favour of the
Department on this issue. Some of these cases are as under:

Tara Educational and Charitable Trust vs DIT (ITA no
1247/Mum/2013 dated July 18, 2014).

Shree Prantij Dash Shrimali Vanik Gyanti Trust vs.
DIT (ITA no 407/Ahd/2013 dated June 21, 2013). In
this case, the Hon'ble ITAT has relied on the case
of Shree Chargam Dash PorwadMahamandal vs.
DIT."
(emphasis supplied) Page 34 of 48 MARCH 09, 2026
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1. Thus, the Ministry of Finance has categorically opined, and

in no uncertain terms, that in the absence of any specific provision in

the Act with respect to the existence of a dissolution clause, rejection of

an application for registration on this account is neither enforceable nor

legally sustainable. Moreover, while justifying the same, reliance was

placed on a decision of the Mumbai Bench of the Income-tax Appellate

Tribunal in the case of Tara Educational and Charitable Trust. It is

relevant to note that it is the same decision of the Tribunal which was

affirmed by this Court in Income Tax Appeal No. 247 of 2015 vide the

judgment dated 31.07.2017. Thus, it can be seen that absence of a

dissolution clause in the Trust Deed was not considered to be a relevant

criteria for grant of registration under section 12AA of the Act. As

already noted above, the conditions for grant of registration have not

materially changed under section 12AB of the Act in so far as this aspect

is concerned. Therefore, the aforesaid judgement of this Court and the

interpretation of Ministry of Finance in this regard, as set out above, are

equally relevant in the context of a registration under section 12AB of

the Act.

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1. The reliance by Respondent No.1 on the Income Tax Act,

2025 is entirely misplaced and cannot justify actions taken under the

current Act. Be that as it may, even under the said provisions, the stand

of the Respondent cannot be sustained. The provision relied upon is as

under:

"332 Application for registration.

(1) ..

(2) A person referred to in sub-section (1) shall be eligible for
registration, if--

(a) such person is constituted or registered or incorporated in
India for carrying out one or more charitable purposes, as referred
to in section 2(23) or one or more public religious purposes; and

(b) the properties of such person are held for the benefit of the
general public under an irrevocable trust--

(i) wholly for charitable or religious purposes in India;

or

(ii) partly for charitable or religious purposes in India, if
such person was constituted or registered or
incorporated prior to the commencement of the Income-tax Act, 1961 (43 of 1961)."
(emphasis supplied)

1. It can be seen that even under the new Act what has to be

demonstrated as a condition for grant of registration is that the trust is

irrevocable, which could be established by indicating the absence of any

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between a trust being irrevocable and insisting on an irrevocability

clause in the Trust Deed. What section 332(2)(b) requires is that the

trust is irrevocable. As already discussed earlier, in the absence of a

specific revocability clause, a public charitable trust is always

irrevocable. Further, absence of any specific clause of revocability

makes the trust irrevocable. Thus, we don't find that the conditions of

section 332(2) of the Income Tax Act, 2025 would not be fulfilled on

account of a mere absence of an irrevocability clause in the Trust Deed.

1. Another pertinent point raised by the Petitioners is that the

Act already contains adequate safeguards like section 13(1)(c) which

deals with denial of exemption where income or assets are used for

benefit of interested persons and section 115TD which provides for exit

tax on dissolution on non-fulfillment of certain conditions. To

appreciate this contention, it would be appropriate to bring out the

relevant provisions of Section 13 hereunder:

"13. (1) Nothing contained in section 11 or section 12 shall
operate so as to exclude from the total income of the previous
year of the person in receipt thereof--

...

(c) in the case of a trust for charitable or religious purposes or a
charitable or religious institution, any income thereof--
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(i)if such trust or institution has been created or established after
the commencement of this Act and under the terms of the trust or
the rules governing the institution, any part of such income
enures, or

(ii) if any part of such income or any property of the trust or the
institution (whenever created or established) is during the
previous year used or applied,
directly or indirectly for the benefit of any person
referred to in sub-section (3), such part of income as referred to in
sub-clauses (i) and (ii):

Provided that in the case of a trust or institution created or
established before the commencement of this Act, the provisions of
sub-clause (ii) shall not apply to any use or application, whether
directly or indirectly, of any part of such income or any property of
the trust or institution for the benefit of any person referred to in sub-
section (3), if such use or application is by way of compliance with a
mandatory term of the trust or a mandatory rule governing the
institution:

Provided further that in the case of a trust for religious
purposes or a religious institution (whenever created or established)
or a trust for charitable purposes or a charitable institution created
or established before the commencement of this Act, the provisions of
sub-clause (ii) shall not apply to any use or application, whether
directly or indirectly, of any part of such income or any property of
the trust or institution for the benefit of any person referred to in sub-
section (3) in so far as such use or application relates to any period
before the 1st day of June, 1970.

...

(3) The persons referred to in clause (c) of sub-section (1) and sub-
section (2) are the following, namely :--

(a) the author of the trust or the founder of the institution;

(b) any person whose total contribution to the trust or
institution, during the relevant previous year exceeds one lakh
rupees, or, in aggregate up to the end of the relevant previous year
exceeds ten lakh rupees, as the case may be;

(c) where such author, founder or person is a Hindu undivided
family, a member of the family;
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                 (cc)      any trustee of the trust or manager (by whatever name
                 called) of the institution;

(d) any relative of any such author, founder, 4[***] member,
trustee or manager as aforesaid;

(e) any concern in which any of the persons referred to in
clauses (a), (c), (cc) and (d) has a substantial interest."

(emphasis supplied)

1. From a reading of the above referred provisions, it is evident

that the intention of the legislature is clear that it is at the time of

considering the claim of exemption, that the issue of transfer of any

asset to any transferor has to be looked into. In fact, provisions of section 13(1)(c) are very widely worded and a plain reading of the same

reveals that it provides for sufficient safeguards to deter any transfer of

assets to, or use of trust income for the benefit of, persons specified in section 13(3), which includes the settlor. Even this contention of the

Petitioners provides an answer to the apprehension, though unfounded,

of Respondent No. 1 regarding reverting of the assets back to the

settlors.

1. It is also relevant to note that while granting registration

under the new regime, various conditions were imposed in the Page 39 of 48 MARCH 09, 2026
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registration certificate, which prevent any misuse of assets. While

granting registration under section 12AB(1)(a) for the first time under

the amended regime, specific conditions were imposed towards

dissolution and revocation of assets to founder/ settlor. The same can

be verified from the conditions of approval in case of Petitioner No. 3 in

Form 10AC which is at Exhibit C-3, some of which are brought out

hereunder:

"10 Conditions subject to which registration is being
granted. The registration is granted subject to the following
conditions:-

...

b. In the event of dissolution, surplus and assets shall be
given to an organization, which has similar objects and no
part of the same will go directly or indirectly to anybody
specified in section 13(3) of the Income -tax Act, 1961.
c. In case the trust/institution is converted into any form,
merged into any other entity or dissolved in any previous
year in terms of provisions of section 115TD, the applicant
shall be liable to pay tax and interest in respect of accreted
income within specified time as per provisions of section
115TD to 115TF of the Income Tax Act, 1961 unless the
application for fresh registration under section 12AB for
the said previous year is granted by the Commissioner."
41. It is brought to our notice that these conditions are common

in almost all the registrations granted to the trusts. The Petitioners are,

therefore, right when they contend that there are adequate safeguards

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qua the issue raised by Respondent No. 1. In fact, this is also what was

suggested by the Ministry of Finance to the Public Accounts Committee

of the Lok Sabha in paragraph 21 of the Report (supra).

1. This takes us to the next contention raised on behalf of

Respondent No. 1, viz., that it is not feasible for a Commissioner to

examine various recitals of every Trust Deed to confirm irrevocability,

and therefore, an express clause is necessary for administrative clarity

and to prevent litigation. In this regard, it would be relevant to

reproduce paragraph 11 of the Affidavit in reply as under:

"11. The Petitioners have also contended that a public charitable
trust is irrevocable by operation of law and, therefore, absence
of an explicit irrevocability clause in the trust deed cannot be a
ground for rejection. It is contended that the trust is deemed
irrevocable. It is submitted that a deed of trust may contain
several recitals. Now, if the trust deed is silent as to revocability
i.e there is no express revocable clause in the trust deed, but
there is a recital in any form for provision of re-transfer of the
trust assets or income or property to the settlor, then the trust is
deemed to be revocable within the meaning of Sections 60-63 of
the Act. In such circumstances, the trust cannot be granted
registration since it is hit by Sections 60-63 of the Act read
alongwith section 11 of the Act which makes the said sections
have overriding effect before any exemption is granted under Section 11. The PCIT cannot examine in each case the nature of
the various recitals or whether there is any scope of retransfer of
trust assets which is highly litigious and that is why a legal duty
is placed upon the trust to contain an express irrevocability
clause failing which no registration can be granted. In the
absence of a specific and express clause in the instrument of Page 41 of 48 MARCH 09, 2026
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trust affirming the irrevocable nature of the Trust, satisfaction
cannot be formed by the authority granting registration."
(emphasis supplied)

1. Mr Pardiwalla, the learned Senior Counsel for the

Petitioners, was rightly very concerned about the said averment of

Respondent No. 1. We find substance in his submission. [Section

12AB(1)(b)](https://indiankanoon.org/doc/113647181/) mandates the Commissioner to, inter alia, call for such

documents or information from the trust or institution or make such

inquiries as he thinks necessary in order to satisfy himself about the

genuineness of the activities of the trust or institution. This would

necessarily mean that the Commissioner has to examine the Trust

Deed. It is his job to go through the Trust Deed which is the very basic

document to determine the objects of the trust. Therefore, we are not

impressed with the said reasoning of Respondent No. 1 in the affidavit

in reply, which was strenuously relied upon by Mr. Gupta in the course

of his arguments.

1. Now, we come to the second ground for rejection, namely

furnishing "false information". It is undisputed that in Row No. 6 of Page 42 of 48 MARCH 09, 2026
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Form No. 10AB, an applicant was required to answer the question

"Whether the trust deed contains clause that the trust is irrevocable?" in

either of two forms 'Yes' or 'No'. It is also not disputed that the trusts

making the application are compelled to answer "Yes" if they want the

form to be uploaded. If this question was answered in the negative, then

the system does not allow the form to be filed at all. During the course

of hearing, Mr. Pardiwalla, showed us a screenshot of the portal

wherein, when "No" was ticked, there was an error displayed on the

screen with the comment "Approval/ Registration is not allowed if the

applicant being a trust does not have an irrevocable clause" . As we have

already discussed earlier, this is not the correct position in law. In any

event, the system cannot be designed in a manner so as to not allow an

applicant to file an application with correct particulars. It is pertinent to

note that there is a verification clause at the end of the form and the

person signing the form declares that the details given in the form are

true and correct to the best of his knowledge and belief. If one is forced

to answer any question in any particular fashion which is not correct,

then, certainly the verification clause is violated. This is completely

arbitrary. The problem does not end here. An applicant is forced to

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irrevocability clause and this is considered by Respondent No. 1 to be

furnishing "false or incorrect information," constituting a "specified

violation" under clause (g) of the Explanation below section 12AB(4) of

the Act. There cannot be any justification to this at all. To penalise an

Assessee for a situation created by a utility designed by the Department

itself is in violation of all legal principles. A procedural form cannot be

used as a tool to coerce applicants into making declarations that are

then used to their detriment. Therefore, we are of the view that the

Respondents will have to change their system in this regard and the

least which can be done is not to use this as a ground to deny

registration. The argument of the Respondents that even subsequently,

the trusts have asserted that they are irrevocable, which is also false,

does not merit any acceptance. First of all, that is not the reason as

stated in the impugned order to deny registration. At this stage, such

orders cannot be improved upon. Moreover, since the Deed has no

revocability clause, and, thus, the trusts have, under a bonafide belief,

submitted that the trusts are irrevocable. In fact, their belief is correct

and this, therefore, cannot be considered to be false or incorrect

information at all.

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1. 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. Even if the Deed

provides for any revocability clause, due to operation of sections 22(3A)

and 22(3B) of the MPT Act, such trusts which are registered under the

MPT Act, would be irrevocable insofar as the Income-tax Act is

concerned but we leave this issue open to be decided in an appropriate

case. The action of Respondent No. 1 is therefore, contrary to the plain

language of the statute, binding judicial precedents of this Court, and is

manifestly arbitrary. Such action, as rightly pointed out by the

Petitioners, have shaken the entire ecosystem of functioning of the

charitable trusts. It cannot be forgotten that the trusts are contributing

to nation building by doing charitable activities and that too voluntarily

and, thus, must be treated with a fair and reasonable approach by the

revenue.

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1. In the result, the Writ Petition is allowed. Due to the

peculiar facts, as presented by the Petitioners, we pass the following

order:

(i) The Respondents shall refrain from rejecting
applications for registration/renewal under section 12AB solely on the ground of the absence of an explicit
irrevocability and/or dissolution clause in the Trust
Deed/instrument.

(ii) The Respondents shall not treat the answer "Yes" to Row
6 of Form 10AB, in the absence of any explicit clause of
irrevocability, as furnishing "false or incorrect
information" constituting a "specified violation". Further,
this shall not be a ground to reject an application for
registration under section 12AB of the Act.
(iii) The Respondents shall also amend the utility of Form
10A/10AB to allow applicants to correctly state their
position regarding the irrevocability clause without being
forced to make an incorrect declaration. This should be
done as soon as possible.

(iv) Question number 6 in Form 10AB should be modified to
read thus, "Is the trust/institution revocable?". Page 46 of 48

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(v) The impugned orders passed in the case of Petitioner
Nos. 3 to 8 rejecting registration under section 12AB of
the Income-tax Act, are hereby quashed and set aside.

(vi) All such orders where renewal of registration under Section 12AB has been rejected on the grounds discussed
above, are also hereby quashed and set aside.

(vii) Further, it is also directed that all consequential orders
passed denying registration under section 80G of the Act,
where such rejection is on the ground that once
registration under section 12AB is denied, registration
under section 80G also cannot be granted, are also
hereby quashed and set aside. This would, of course,
apply only to a case where registration under section
12AB has been rejected on the grounds discussed above.
The above order that we pass is to avoid any multiplicity
of litigation so as to not require the trusts to challenge
the orders passed by Respondent No. 1 denying
registration under section 12AB and 80G of the Act on
the grounds as discussed in this order.

(viii) Respondent No.1 shall decide the applications of the
Petitioners and all other similarly situated trusts, whose
orders are hereby quashed, afresh and in accordance
with the law and the ratio laid down in this judgment,
within a period of six weeks from today. Any order so Page 47 of 48 MARCH 09, 2026
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                      passed shall be deemed to come into effect from 1 st April,
                      2026.

1. Rule is made absolute in the aforesaid terms and the Writ

Petition is also disposed of in terms thereof. However, there shall be no

order as to costs.

1. This order will be digitally signed by the Private Secretary/

Personal Assistant of this Court. All concerned will act on production by fax

or email of a digitally signed copy of this order.

[FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.] Page 48 of 48 MARCH 09, 2026
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