U/s 80G Rejection Set Aside – Absence of Irrevocability Clause Not a Valid Ground

Lila Hira Charitable Foundation Vs CIT (Exemptions) (ITAT Mumbai)

Mumbai ITAT set aside rejection of 80G approval by CIT(E), holding that non-inclusion of an irrevocability/dissolution clause in trust deed cannot be a ground for denial.

The Tribunal noted:

• CIT(E) rejected application citing:
  • Absence of irrevocability/dissolution clause
  • Alleged “specified violation” u/s 12AB(4)
• The issue is now squarely covered by Bombay High Court ruling in Chamber of Tax Consultants

The High Court clarified:

• Charitable trusts are inherently irrevocable in law unless expressly stated otherwise
• Absence of such clause cannot justify rejection of registration or approval
• Authorities must adopt a reasonable and fair approach

Following this binding precedent, the ITAT held:

• The very basis of rejection is legally unsustainable

Accordingly, the Tribunal:

• Set aside the CIT(E)’s order
• Restored the matter for fresh adjudication in line with High Court directions
• Directed passing of a speaking order

The appeal was allowed for statistical purposes, reinforcing that technical defects in trust deed cannot defeat substantive charitable status.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The instant appeal of the assessee filed against the order of the Ld. Commissioner of Income Tax (Exemptions), Mumbai [for brevity the “Ld. CIT(E)”], order passed under section 80G (5) of the Act (for brevity ‘the Act’) for Assessment Year 2025-26, date of order 29.12.2025.

2. The brief facts of the case are that the assessee is a charitable trust filed an application in form no.10AB on 09.05.2025 under Clause iv (B) of the 1^stproviso to 80G (5) of the Act for seeking approval u/sec. 80G. The Ld. CIT(E) rejected the said application with the following observation:

“In view of the above facts and circumstances, the undersigned is left with no other option but to reject the application seeking approval under section 80G(5)(iii) of the Act on the ground of not allowable non-inclusion of irrevocability or dissolution clause in trust deed/MoA and specified violation as per Explanation (g) to the Section 12AB(4) of the Income tax Act, 1961 and non-compliance to the terms of notice dated 23.12.2025. However, the applicant is at liberty to pursue the remedies available in Statute, without any prejudice.”

The aggrieved assessee filed an appeal before the Tribunal by challenging the order of Ld. CIT(E).

3. The Ld. AR contended that the assessee’s application was duly rejected for non-inclusion of irrevocability or dissolution clause in the trust deed and the specified violation of as per explanation (g) to section 12AB(4) of the Act. Considering this, the Ld. AR respectfully submitted that the Hon’ble Bombay High Court had dealt this issue in case of the Chamber of Tax Consultants & Anr. vs CIT(E) Writ Petition (L) No.7587 of 2026 date of order 03.2026. The relevant observations of the lordship in para no.45 and 46 are reproduced as below:

“45-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.

46. 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 inco 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?”,(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 passed shall be deemed to come into effect from 1^st April 2026.”

5. The Ld. DR argued and stands in favor of the order of revenue authorities. But the Ld. DR was unable to place on record any judicial precedent contrary to the submissions advanced by the Ld. AR.

6. We heard the rival submission and considered the documents available in the record. It is an undisputed position that the issue related to non-inclusion of irrevocability or dissolution clause in the trust deed is duly considered and directed by the Hon’ble Bombay High Court vide order dated 09.03.2026 in Writ Petition (L) No.7587 of 2026. In view of the aforesaid binding judicial precedent, from foundation of the observations of Ld. CIT(E) stands nullified. Accordingly, we restore the matter to the file of Ld. CIT(E) and considered to re-adjudicate the issue by following the direction of Hon’ble Bombay High Court. Consequently, the ground raised by the assessee we restore to the file of Ld. CIT(E) with direction above. Further, it is directed to Ld. CIT(E) to pass a speaking order after respectfully following the binding order of the Hon’ble Jurisdictional High Court.

7. In the result, the appeal of the assessee bearing ITA No.829/Mum/2026is allowed for statistical.

Order pronounced in the open court on 21^st day of April 2026.