Shiv Sushil Bindal Charitable Trust Vs CIT(Exemption) (ITAT Delhi)
Delhi ITAT: U/s 12AB/80G Renewal Cannot Be Rejected for Absence of Express Irrevocability Clause; Dissolution Clause Transferring Assets to Similar Charity Is Sufficient
The Delhi ITAT held that absence of an express “irrevocability clause” in a charitable trust deed cannot by itself justify rejection of registration under section 12AB or approval under section 80G. The Tribunal directed the CIT(E) to consider the applications on merits and grant registration/approval if the other statutory conditions are satisfied.
The assessee was an old charitable trust registered under section 12A since 16.06.1993 and under section 80G since 05.09.2007, with no change in its objects or activities. Its renewal applications were rejected because the CIT(E) insisted that the trust deed must expressly declare the trust irrevocable.
The CIT(E) had also relied upon the Income-tax Act, 2025, particularly section 332, observing that from 01.04.2026 the law requires property to be held for the benefit of the general public under an irrevocable trust. On this basis, he concluded that the trust instrument itself must contain an explicit clause declaring the transfer of property irrevocable for all time.
The Tribunal disagreed. Crucially, Clause 42 of the trust deed already provided:
“In case of dissolution of the Trust the remaining assets shall be handed over to some other Trust/Society having similar aims and objects and will not be disbursed in any other manner.”
The ITAT held that this clause effectively ensured that on dissolution the assets could not revert to or benefit the settlor or any individual, but had necessarily to pass to another organisation having similar charitable objects. Thus, in substance, the trust satisfied the requirement against revocability for private benefit.
Following the Bombay High Court decision in Chamber of Tax Consultants v. CIT(E), the Tribunal held that the CIT(E) was not justified in insisting upon the physical insertion of an express irrevocability clause in the trust deed.
The order also records the legal proposition, based on CIT v. S. Raghbir Singh (SC), that where the trust deed contains no power to revoke, retransfer or resume the property, the trust cannot be regarded as revocable. In other words, the relevant enquiry is whether a revocation power exists, rather than whether the deed contains the magic words “this trust is irrevocable.”
Accordingly, the CIT(E)’s rejection was set aside and he was directed to consider the applications on merits and grant registration provided the other requisite conditions are satisfied.
Cases Discussed
- Chamber of Tax consultants vs. CIT (E) (Bombay HC), [2026] 184 com374 (Bom.)
- CIT v. Shree Durga Mata Mandir (Punjab & Haryana HC), 2020 (3) TMI 501 – Punjab & Haryana HC
- CIT(E) vs. Setco Foundation (Bombay HC), 2019(2) TMI 532- Bombay.
- CIT(E) v. Shri Narsinghji Ka Mandir (Rajasthan HC), 2019-TIOL-2110-HC-RAJ-IT
- Geeta Lalwani Foundation v. DIT (Bombay HC), 2018 (7), TMI 2053 Bombay HC
- CIT v. Tapagachha Sangh Mota (Gujarat HC), TS-251-HC-2015 (Guj)
- Controller of Estate Duty, Vidharbha vs. Smt. Mangala (Bombay HC), (1983) 143 ITR 491 (Bom)
- CIT vs. S. Raghbir Singh (SC), (1965) 57 ITR 408
FULL TEXT OF THE ORDER OF ITAT DELHI
These two appeals by the assessee are directed against the orders both dated 19.03.2026 of the ld. Commissioner of Income Tax (Exemption), [hereinafter referred to as the ‘Ld. CIT(A)] pertaining to Assessment Years (A.Y.) 2025-26, rejecting the applications for registration u/s 12AB and approval u/s 80G of the Act.
These two appeals are heard together, for the sake of convenience and brevity, we disposed these two appeals in a consolidated order.
2. The assessee has raised the following grounds of appeal (ITA No.- 3254/Del/2026):
“1. The CIT(E) erred in law and on facts in rejecting the renewal application of the assessee for registration u/s 12AB(1)(b)(ii)(B) of the Act alleging that non-existence of the irrecoverable clause in the Trust Deed, which direction is illegal perse and was also even otherwise never desired by the revenue authorities from the assessee since the constitution of the assessee Trust.
2. The CIT(E) erred in law and on facts in rejecting the application for renewal of registration u/s 12AB(1)(b)(ii)(B) of the Act ignoring that the assessee has been registered u/s 12A since 16/06/1993 when it was constituted and there has been no change in either the activities or the objects of the Trust since then. Thus, the impugned rejection order must be reversed and the registration prayed must be granted.
3. The CIT(E) erred in law and on facts by mis-interpreting the provisions of the sections 60 to 63 which are not at all applicable on a charitable Trust and therefore, the same cannot be a reason to reject the application for registration u/s 12AB.
4. The CIT(E) erred in law and on facts also by misunderstanding the provisions of section 332(2) to be precise under the clause (b) thereto of the Income-tax Act, 2025 applicable w.e.f. 01/04/2026 which does not provide that there should be an explicit clause to the effect that properties of the Trust are irrevocable for all times but it requires that the properties held by the charitable Trust for the benefit of general public should not be revocable for the benefit of other than a charity which conditions do specifically exist in the trust deed of the assessee.
5. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.”
2.1 The assessee has raised the following grounds of appeal (ITA No.-3255/Del/2026):
“1. The CIT(E) erred in law and on facts in rejecting the renewal application of the assessee for registration u/s 80G(5)(ii)(b)(B) of the Act alleging that non-existence of the irrecoverable clause in the Trust Deed, which direction is illegal perse and was also even otherwise never desired by the revenue authorities from the assessee since the constitution of the assessee Trust.
2. The CIT(E) erred in law and on facts in rejecting the application for renewal of registration 80G(5)(ii)(b)(B) of the Act ignoring that the assessee has been registered u/s 80G since 05/09/2007 when it was constituted and there has been no change in either the activities or the objects of the Trust since then. Thus, the impugned rejection order must be reversed and the registration prayed must be granted.
3. The CIT(E) erred in law and on facts by mis-interpreting the provisions of the sections 60 to 63 which are not at all applicable on a charitable Trust and therefore, the same cannot be a reason to reject the application for registration u/s 80G.
4. The CIT(E) erred in law and on facts also by misunderstanding the provisions of section 332(2) to be precise under the clause (b) thereto of the Income-tax Act, 2025 applicable w.e.f. 01/04/2026 which does not provide that there should be an explicit clause to the effect that properties of the Trust are irrevocable for all times but it requires that the properties held by the charitable Trust for the benefit of general public should not be revocable for the benefit of other than a charity which conditions do specifically exist in the trust deed of the assessee.
5. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing..”
2.2. Both the appeals pertain to rejection of application for registration u/s 12A and 80G of the Act involve identical facts and circumstances. Hence these are being disposed off by a common order and ITA No.3254/Del/2026 pertaining to rejection of registration u/s 12A is taken as the lead case.
3. Brief facts are that the assessee has filed application in Form 10AB for registration u/s 12A(1)(ac)(ii) on 30.09.2025. On going through Trust Deed, the CIT(E) noted the absence of irrevocality clause. Accordingly, the assessee was advised to remove this defect. In response to the notice issued by the CIT(E), the assessee submitted that it is not required that the assessee should insert the irrevocability clause. After examining the submissions of the assessee in the light of the relevant provisions the CIT(E) rejected the application with the following observations:
4. The question that arises is whether it necessary that the conditions of the instrument establishing an entity (eg Trust Deed) has to be irrevocable?
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(xiii) Without prejudice to the above, it would not be out of context to consider here the provisions of the Income-tax Act 2025 (“ITA 2025”), which shall come into force from 1st April 2026, i.e. from tax year 2026-27. The provisions relating to public trusts etc. have been consolidated in Chapter XVII-B in the said Act, which is titled as “Special Provisions for registered non-profit organizations”. In particular, section 332 of the ITA 2025 deals with registration of non-profit organizations (NPOs). Sub-section (1) of section 332 provides a list of persons who may make an application for registration before the competent authority, to claim benefits of tax-exemption as registered NPO. Sub-section (2) of section 332 lays down the conditions of eligibility for such a person to make an application. One of the eligibility conditions is that the property should be held for the benefit of general public under an irrevocable trust wholly for charitable or religious purposes in India. The relevant provision of the ITA 2025 is reproduced as under, –
5. To sum up, the authority granting registration to a public trust created wholly for charitable purposes or religious purposes is not only well within its powers, but also duty bound, to ensure that the instrument of trust contains an explicit clause to the effect that the transfer of property under trust is irrevocable for all times, before forming his satisfaction that the public trust is eligible for registration having regard to its stated objects. The absence of an irrevocable clause in the Trust Deed indicates that the trust is not structured to endure indefinitely or in perpetuity and therefore, trust fails to demonstrate an unequivocal commitment to its charitable objectives without potential revocation.
6. In view of the above discussion, as the applicant has failed to remove the absence of irrevocable clause in the Trust deed of incorporation, despite ample opportunity afforded, the application filed in Form 10AB for grant of registration u/s 12A(1) (ii) is hereby rejected with a liberty to file a fresh application as per relevant provisions of the Income Tax Act, 1961 after removal of the aforesaid deficiencies.”
3.1 Aggrieved, the assessee has preferred an appeal before the ITAT.
4. Before us, Ld. AR has made elaborate arguments and has also filed paper book containing the documents filed before the CIT(E) which includes a copy of the Trust Deed. He has drawn our attention to Clause (42) of the Trust Deed which reads as under:
“42. In case of dissolution of the Trust the remaining assets shall be handed over to some other Trust/Society having similar aims and objects and will not be disbursed in any other manner.”
4.1 Ld. AR has further placed reliance on the following decision in support of his contention that irrevocability clause is not mandatorily required to be incorporated and its absence would not be a ground of rejection u/s 12AB.
(i) Chamber of Tax consultants vs. CIT (E) [2026] 184 com374 (Bom.) wherein it has been held that rejection order passed on the ground of irrecoverably have to be quashed.
(ii) Letter of the Bombay Chartered Accountants’ Society dated 07.01.2026 addressed the Revenue Secretary and the Chairman CBDT, which clarified the issue as under:
“1. It appears that this emanates from the wording of section 11, which is subject to the provisions of section 61 to 63, which deal with revocable transfer. It is well settled that the provisions of section 11 come into play at the time of computation of the exemption under sections 11 and 12, and are not applicable for the purposes of registration under section 12A.
2….
3. It may be noted that the legal position in this regard has been laid down by the Supreme Court in CIT vs. S. Raghbir Singh (1965) 57 ITR 408, where it has held that if there is no provision in the trust deed to revoke/and or retransfer or right to resume, than such a trust cannot be considered as revocable. Therefore, what needs to be examined is the existence of a revocable clause, and not the absence of an irrevocable clause.
Further, In Controller of Estate Duty, Vidharbha vs. Smt. Mangala (1983) 143 ITR 491 (Bom), it has been held that a public charitable trust cannot be revoked or dissolved and is irrevocable even if the Trust Deed provides a power to revoke the Trust. The following extract from the judgement needs to be noted:
“There is 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 settlar has reserved the power to revoke the trust, in our view such a reservation would be wholly invalid and the power connot be invoked so as to undo the settlement.”
4. Various High Courts have held that inclusion of express dissolution clause in the trust deed is not essential for grant of registration, in the following cases:
Geeta Lalwani Foundation v. DIT, 2018 (7), TMI 2053 Bombay HC
CIT(E) vs. Setco Foundation, 2019(2) TMI 532- Bombay.
CIT v. Tapagachha Sangh Mota, TS-251-HC-2015 (Guj)
CIT v. Shree Durga Mata Mandir, 2020 (3) TMI 501 – Punjab & Haryana HC
CIT(E) v. Shri Narsinghji Ka Mandir, 2019-TIOL-2110-HC-RAJ-IT
5. Under section 55 of the Maharashtra Public Trust Act 1950, if the original objects of the Trust cannot be fulfilled for any reason, the Charity Commissioner may direct the property or income of the trust or any portion thereof to be applied cypres to any other charitable objects but the trust cannot be revoked or dissolved.
Even in other States, a trust can spend its income or assets only on its objects in accordance with the Trust Deed, and cannot distribute these to its settlor or beneficiaries.
6. Under section 78 of the Indian Trusts Act 1882, a trust created otherwise than by Will can be revoked only where the beneficiaries who are competent to contract give their consent. In the case of a charitable trust, the beneficiaries being the general public, it is impossible to obtain the consent of each and every beneficiary.
7. Besides, no such demands were made when the initial registration of the trusts were granted or when there were previous renewals of registration, even where there has been no change in the Trust Deed since then.
An insertion of a clause in the Trust Deed that the trust is irrevocable would amount to an amendment of the trust deed and cannot be done without an application to the Court. If such applications have to be made throughout the country by all public charitable trusts, it would create a huge burden on the Courts throughout the country.
Having regard to the matters explained above, it will be seen that the insertion of an irrevocable clause in the trust deed of a public charitable trust is unnecessary, and that a requirement that such insertion should be made by all public charitable trusts throughout the country would create a huge burden on the judicial system.
Besides, rejection of registration renewal of such trusts would also create unnecessary litigation, and cause upheaval in the functioning of a large number of established and renowned charitable trusts.
It is therefore respectfully requested that directions be generally issued that a public charitable trust, applying for re-registration on expiry of the initial period for which registration was granted, need not have a clause in the trust deed to be considered as irrevocable, but that the concerned officer should examine the trust deed and other documents submitted to determine whether despite there being no such clause, the trust can be considered as irrevocable.”
5. Ld. DR, on the other hand, has strongly relied on the order of CIT(E) and argued that in view of clear provisions of the Act it is mandatory for the charitable entity to incorporate irrevocability clause in order to be eligible for exemption under the Act.
6. We have heard the rival submissions and perused the materials on record as well as the relevant provision of the Act and judgment pronouncements on the issue. We note that the objects clause no.42 of the Trust Deed specifically provides that in the event of dissolution of the Trust, the remaining assets shall be handed over to some other Trust/Society having similar aims and objects and will not be disbursed in any other manner. Hence, in effect the clause ensures that the trust is not revoked to benefit any individual/settlors. Considering the legal and factual position and respectfully following the decision of the Hon’ble Bombay High Court in the case of Chamber of Tax Consultants (supra), we hold that the Ld. CIT(E) was not justified in rejecting the application for registration on the ground of absence of irrecoverability clause. We accordingly direct him to consider the application for registration on merits and grant the same provided other requisite conditions are satisfied.
8. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 07.08.2026
