Shree Motumal Dwarkadas Ahuja Trust Vs CIT (Exemptions) (ITAT Mumbai)
Conditional 80G Approval Over Missing Irrevocability Clause Requires Fresh Examination: ITAT Orders Limited Remand
Approval Granted, but Its Benefits Made Conditional
The Mumbai Tribunal restored for fresh examination the conditions attached to a charitable trust’s approval under section 80G(5). The Commissioner had granted approval but made its applicability and consequential tax benefits subject to the outcome of proceedings which the Revenue proposed to pursue before the Supreme Court.
The condition arose because the trust deed did not contain an express declaration of irrevocability. Although the Commissioner acknowledged the binding Bombay High Court decision on this issue and granted approval in compliance with it, he attached a reservation concerning the proposed Supreme Court challenge.
The Tribunal did not finally declare the disputed condition invalid or direct its outright deletion. It set aside the order only to the extent of the challenged conditions and directed the Commissioner to reconsider them in light of binding judicial precedents and the legal position prevailing when the fresh order is passed.
Absence of an Express Irrevocability Clause
The trust applied for approval under section 80G(5). By an order dated 8 April 2026, issued in Form 10AD, the CIT(E) granted approval under clause (ii) of the second proviso to section 80G(5) for AYs 2027-28 to 2031-32.
However, Condition No. 5 of the annexure recorded that the trust instrument did not expressly affirm that the transfer of property to the trust was irrevocable for all time.
The Commissioner referred to section 332(2)(b) of the Income-tax Act, 2025 and observed that the statutory eligibility conditions were not satisfied.
At the same time, he recognised the Bombay High Court’s decision in The Chamber of Tax Consultants & Others v. CIT(E), Writ Petition (L) No. 7587 of 2026. As recorded in the impugned order, the High Court held that a public charitable trust is deemed irrevocable by operation of law unless its instrument expressly provides a power of revocation.
The High Court had also directed that applications for registration or renewal under sections 12AB and 80G should not be rejected solely for want of an express irrevocability clause.
Compliance with the High Court, Accompanied by a Reservation
The Commissioner accordingly granted approval in compliance with the jurisdictional High Court’s directions.
Nevertheless, observing that the Revenue proposed to approach the Supreme Court against that decision, he provided that the applicability and consequential tax benefits of the approval, with effect from 1 April 2026, would remain subject to the Supreme Court’s outcome.
The trust challenged this conditional approval before the Tribunal. Its grievance was therefore not rejection of the application, but the reservation attached to an approval already granted.
This distinction is central to understanding both the controversy and the limited relief ultimately ordered.
The Trust Sought Reconsideration
The authorised representative submitted that the trust had carried on charitable activities for several years and that its activities were genuine and consistent with its objects.
It was argued that the Commissioner, having granted approval, should not have imposed the disputed condition merely because the deed lacked an express irrevocability clause.
The representative also relied on the jurisdictional High Court’s consideration of the issue and requested that the matter be restored to the CIT(E) for fresh consideration according to law.
The Revenue relied on the approval order, contending that the conditions had been imposed with reference to the statutory provisions and legal position mentioned in it. It nevertheless submitted that the matter could be considered according to law.
Tribunal Directs a Fresh, Reasoned Decision
The Tribunal noted that the approval had admittedly been granted after considering the application and available material.
It also observed that the Commissioner had expressly acknowledged the binding High Court directions while simultaneously making the consequential benefits dependent upon proposed Supreme Court proceedings.
Considering the particular facts and the nature of the grievance, the Tribunal concluded that the conditions required fresh examination.
It therefore set aside the order to the limited extent of the disputed conditions, particularly Condition No. 5, and restored that issue to the CIT(E).
The Commissioner was directed to consider the jurisdictional High Court decision, any applicable subsequent Supreme Court order or judgment, and other binding judicial developments. The trust must receive a reasonable opportunity to furnish documents, precedents and submissions, followed by a reasoned and speaking order.
The Tribunal expressly left all contentions open and made no finding on the merits of the conditions or the trust’s entitlement. The appeal was allowed for statistical purposes.
Author’s Comments
This is a limited remand, not a final ruling deleting the condition. A summary stating that the Tribunal conclusively prohibited conditional approval would go beyond the operative decision.
The underlying issue nevertheless remains significant: absence of an express irrevocability clause is different from an express power to revoke the trust. The Commissioner must examine the applicable judicial position rather than equate those two situations.
There is also a useful contrast with S R Foundation, discussed earlier, where the Tribunal directly deleted a materially similar contingency attached to section 12AB registration and section 80G approval. Here, the trust requested reconsideration, and the Tribunal adopted that course.
For the fresh proceedings, the trust should present the relevant deed provisions and binding decisions addressing the disputed condition. The task before the CIT(E) is to reconsider the challenged conditions within the limited remand and explain the conclusion according to the governing law.
Cases Discussed
- The Chamber of Tax Consultants & Others Vs CIT(E) (Bombay High Court) — Writ Petition (L) No. 7587 of 2026; [2026] 184 taxmann.com 374.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 08/04/2026 passed by the Ld. Commissioner of Income Tax (Exemptions), Mumbai [“Ld. CIT(E)” for short], in Form No. 10AD, granting approval to the assessee u/s 80G(5) of the Income-tax Act, 1961 (“the Act”) subject to certain conditions.
2. The assessee has raised as many as 13 grounds of appeal. However, on perusal of the grounds, we note that the sole substantive grievance of the assessee is against the conditional approval granted by the Ld. CIT(E) u/s 80G(5) of the Act, particularly the condition relating to absence of an explicit irrevocability clause in the Trust Deed and making the consequential benefits flowing from the approval subject to the outcome of proceedings before the Hon’ble Supreme Court.
2.1. Brief facts of the case are that the assessee is a charitable trust. The assessee had filed an application seeking approval u/s 80G(5) of the Act. The Ld. CIT(E), vide impugned order dated 08/04/2026, granted approval under clause (ii) of the second proviso to section 80G(5) for A.Ys. 2027-28 to 2031-32.
2.2. The approval was, however, made subject to the conditions contained in the Annexure to the impugned order. Condition No. 5 records that the instrument of trust does not contain an explicit clause affirming that transfer of property under the trust is irrevocable for all times. The Ld. CIT(E) further referred to section 332(2)(b) of the Income Tax Act, 2025 and observed that the statutory eligibility conditions were not satisfied.
2.3. At the same time, the Ld. CIT(E) took note of the decision of the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. CIT(E), Writ Petition (L) No. 7587 of 2026, wherein, as recorded in the impugned order, the Hon’ble High Court held that a public charitable trust is deemed irrevocable by operation of law unless the instrument expressly provides for a power of revocation and directed the Department not to reject applications for registration/renewal u/s 12AB/80G solely for want of an express irrevocability clause.
2.4. The Ld. CIT(E), accordingly, granted the approval in compliance with the aforesaid decision of the Hon’ble Bombay High Court. However, observing that the Revenue proposed to approach the Hon’ble Supreme Court against the said decision, the Ld. CIT(E) further provided that the applicability and consequential tax benefits of the approval w.e.f. 01/04/2026 would remain subject to the outcome of the decision of the Hon’ble Supreme Court.
Aggrieved by the aforesaid conditional approval, the assessee is in appeal before us.
3. The Ld. AR submitted that the assessee has been carrying on charitable activities for several years and that its activities are genuine and in accordance with its objects. It was submitted that the Ld. CIT(E), having granted approval u/s 80G(5), ought not to have imposed the impugned condition merely on account of absence of an express irrevocability clause in the Trust Deed.
3.1. The Ld. AR further submitted that the issue regarding irrevocability of a public charitable trust already stands considered by the Hon’ble jurisdictional High Court and, therefore, the conditional approval granted by the Ld. CIT(E) requires reconsideration. The Ld. AR accordingly prayed that the issue may be restored to the file of the Ld. CIT(E) for fresh consideration in accordance with law.
4. The Ld. DR relied upon the impugned order. He submitted that the approval itself has been granted to the assessee and the conditions incorporated therein have been imposed having regard to the statutory provisions and the legal position referred to in the impugned order. The Ld. DR, however, submitted that the matter may be considered in accordance with law.
We have perused the submissions advanced by both sides in light of the record placed before us.
5. It is an undisputed fact that the Ld. CIT(E) has granted approval to the assessee u/s 80G(5) of the Act for A.Ys. 2027-28 to 2031-32. The grievance of the assessee is, therefore, not against rejection of its application as such, but against the conditions attached to the approval, more particularly Condition No. 5 of the Annexure to Form No. 10AD. The impugned order itself records that the approval has been granted after considering the application of the assessee and material available on record.
5.1. We note that while imposing Condition No. 5, the Ld. CIT(E) has himself taken cognizance of the decision of the Hon’ble jurisdictional High Court in The Chamber of Tax Consultants & Ors. v. CIT(E) (supra) and has stated that approval was being granted in respectful compliance with the binding judicial directions of the Hon’ble High Court. Simultaneously, however, the consequential benefits of such approval have been made subject to the outcome of the proceedings proposed to be pursued before the Hon’ble Supreme Court.
5.2. Considering the peculiar facts and circumstances of the case and the nature of grievance raised by the assessee, in our considered opinion, the issue requires fresh examination at the end of the Ld. CIT(E), having regard to the binding judicial precedents applicable to the assessee and the legal position prevailing at the time of passing the fresh order.
5.3. We, therefore, deem it appropriate to set aside the impugned order to the limited extent of the conditions disputed by the assessee, particularly Condition No. 5 of the Annexure, and restore the issue to the file of the Ld. CIT(E) for fresh adjudication in accordance with law. The Ld. CIT(E) shall consider the decision of the Hon’ble jurisdictional High Court referred to in the impugned order, as well as any subsequent order/judgment passed by the Hon’ble Supreme Court or any other binding judicial development, if applicable, and decide the issue afresh in accordance with law.
5.4. Needless to say, the assessee shall be afforded a reasonable opportunity of being heard and shall be at liberty to file all relevant documents, judicial precedents and submissions in support of its claim. The Ld. CIT(E) shall thereafter pass a reasoned and speaking order in accordance with law. We make it clear that we have not expressed any opinion on the merits of the conditions imposed or on the entitlement of the assessee, and all contentions of both sides are left open.
Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal filed by the assessee stands allowed for statistical purposes.
Order pronounced in the open court on 08/10/2026.
