Muslim Majlis Vs CIT(Exmeption) (ITAT Mumbai Bench)
Portal Cannot First Force a Trust to Say “Yes” & Then Punish It for Saying “Yes”: ITAT Restores 12AB Renewal Rejected for Absence of Irrevocability Clause
Summary: The assessee, Muslim Majlis, was a charitable trust enjoying registration u/s 12 since the year 1973. It had also been granted registration under the amended regime for AYs 2022-23 to 2026-27. When the trust applied for renewal of its registration u/s 12AB, the CIT(E) rejected the application on the ground that its trust deed did not contain an express clause declaring that the trust was irrevocable, nor did it contain a specific clause dealing with dissolution or winding up.
The CIT(E) went a step further. In Form No. 10AB, Row No. 6 required the applicant to answer whether the trust deed contained a clause declaring the trust to be irrevocable. The income-tax portal practically compelled the applicant to select “Yes”, because selection of “No” prevented the form from being uploaded. The CIT(E), however, treated the very answer of “Yes” as furnishing false or incorrect information, since the trust deed did not contain an express irrevocability clause. According to the CIT(E), this amounted to a “specified violation” under Explanation (g) to section 12AB(4).
Thus, the Department’s utility first compelled the trust to give a particular answer and the Department thereafter sought to punish the trust for giving that answer!
Before the Tribunal, the assessee relied upon the landmark judgment of the Bombay High Court in The Chambers of Tax Consultants & Others v. CIT(E) [184 taxmann.com 374 (Bom.)]. The High Court had considered this identical controversy and held that an application for registration or renewal u/s 12AB could not be rejected merely because the trust deed did not contain an express clause of irrevocability or dissolution.
The Mumbai ITAT noticed that the assessee’s renewal application had been rejected solely on the ground that the trust deed did not contain clauses relating to irrevocability and dissolution. Therefore, the controversy was squarely covered by the jurisdictional High Court’s decision.
The Bombay High Court had held that a public charitable trust is irrevocable by operation of law, unless the trust instrument expressly reserves a power of revocation. Consequently, mere absence of a sentence in the trust deed stating that “the trust is irrevocable” cannot convert an otherwise valid public charitable trust into a revocable trust.
The High Court had also rejected the Department’s plea that it was administratively difficult for the Commissioner to examine the various clauses of every trust deed. Section 12AB(1)(b) itself empowers and requires the Commissioner to call for documents, make inquiries and satisfy himself regarding the genuineness of the activities and compliance with other laws. Examination of the trust deed is, therefore, not an optional administrative favour. It is part of the Commissioner’s statutory duty.
The trust deed is the foundational document for determining the objects, powers and legal character of a trust. The Commissioner cannot insist upon an artificial standardised clause merely to avoid examining the instrument placed before him.
The High Court had also found the design of Form No. 10AB to be manifestly arbitrary. If an applicant selected “No” against Row No. 6, the portal displayed an error stating that registration was not permissible if the trust did not have an irrevocability clause. The applicant was, therefore, forced to select “Yes” merely to submit the form.
A procedural form cannot be designed in a manner which prevents an assessee from furnishing the correct factual position. More importantly, the Department cannot compel an applicant to make a declaration and later use that very declaration against it as false information. Penalising an assessee for a difficulty created by the Department’s own utility would offend basic principles of fairness and legality.
The High Court had accordingly directed the Department to refrain from rejecting applications u/s 12AB merely for want of an express irrevocability or dissolution clause. It further directed that the answer “Yes” to Row No. 6 should not be treated as false information where the portal itself compelled that answer. The utility was required to be amended and the question appropriately reframed as: “Is the trust/institution revocable?”
The High Court had also clarified that the registration certificates themselves contain adequate safeguards. The standard conditions stipulate that, upon dissolution, the surplus and assets must be transferred to another organisation having similar objects and cannot directly or indirectly benefit persons specified u/s 13(3). Further, sections 115TD to 115TF provide for taxation of accreted income where a charitable institution converts, merges or dissolves contrary to the statutory requirements. Therefore, the Revenue’s interests were already sufficiently protected.
Following the binding jurisdictional High Court judgment, the ITAT restored the matter to the file of the CIT(E). The CIT(E) was directed to reconsider and dispose of the application for renewal u/s 12AB in the light of the law laid down in The Chambers of Tax Consultants, after providing adequate opportunity to the assessee.
The appeal was accordingly allowed for statistical purposes.
Author’s Comment
This order reinforces a simple but important principle: registration cannot be denied merely because an old trust deed does not contain modern, departmentally preferred language. What is material is the legal character of the trust and not the presence of a ritualistic sentence declaring it to be irrevocable.
More significantly, an assessee cannot be accused of furnishing false information when the Department’s own portal forced the assessee to select that answer. Technology may facilitate administration, but a defective utility cannot override the Act, settled principles of trust law or binding judicial precedent.
Cases Discussed
- The Chambers of Tax Consultants and Others v. CIT(E) [184 taxmann.com 374 (Bom.)]
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
This appeal is filed by the assessee against the order of the learned CIT(E), Mumbai, dated 18.02.2026 in rejecting the renewal of registration u/s. 12AB of the Act.
2. The assessee raised the following grounds of appeal:
“1) Because the learned respondent has erred in rejecting the renewal application that during the filing of form -10AB the appellant compelled to answer Yes to the question in Row 6, viz., Whether the trust deed contains clause that the trust is irrevocable and respondent has considered that the appellant has furnished the false information.
2) Because the learned Respondent has erred in law and on facts in rejecting the application on the ground that the trust deed/MOA does not contain a clause regarding irrevocability OR dissolution, and in treating the same as a specified violation under Explanation (g) to section 12AB(4) of the Income-tax Act, 1961. The impugned rejection is arbitrary, contrary to the facts and record, and not in accordance with the statutory provisions, and therefore deserves to be quashed and set aside.
3) Because the learned Respondent erred in law and on facts in failing to appreciate that the appellant trust has been duly registered under section 12 of the Income tax Act, 1961 since 1973 and has further been granted renewed registration for the assessment years 2022-23 to 2026-27, without any objection regarding the irrevocable clause in trust deed.
4) Because the order is contrary to the settled law propounded by the Hon’ble Bombay High Court vide writ petition No.(L) No. 7587/2026.”
3. Ld. Counsel for the assessee, at the outset, submitted that the renewal of registration u/s. 12AB was denied for the reason that the trust deed does not contain clause stating that the trust is irrevocable or dissolution / winding up and this amounted to specified violation as per Explanation-G to section 12AB(4) of the Act.
3. Ld. Counsel for the assessee submitted that the very same issue has been considered by the Hon’ble Bombay High Court in the case of The Chambers of Tax Consultants and Others v. CIT(E), 184 taxmann.com 374 (Bom.), wherein the Hon’ble High Court held that application for registration/renewal u/s. 12AB of the Act should not be rejected solely on the ground of absence of an explicit irrevocability or dissolution clause in the trust deed.
4. Heard rival contentions and perused the orders of the authorities below. On perusal of the order of the learned CIT(E), it is noticed that the application for renewal of registration u/s. 12AB of the Act was denied to the assessee-trust solely on the ground that the trust deed do not contain clauses of irrevocability/dissolution.
5. We observed that the Hon’ble jurisdictional High Court in the case of The Chambers of Tax Consultants and Others v. CIT(E) (supra) held that the learned CIT(E) should refrain from rejecting the applications for renewal of registration u/s. 12AB of the Act solely on the ground of absence of an explicit irrevocability or dissolution clause in the trust deed, observing as under:
“39. 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.
40. It is also relevant to note that while granting registration under the new regime, various conditions were imposed in the 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 put in the conditions for grant of registration to protect the Revenue 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).
42. 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 trust affirming the irrevocable nature of the Trust, satisfaction cannot be formed by the authority granting registration.”
43. 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) 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.
44. Now, we come to the second ground for rejection, namely furnishing “false information”. It is undisputed that in Row No. 6 of 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 write “Yes” to Row number 6 despite there being no specific 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.
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 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 1st April, 2026.
47. 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.”
6. This decision squarely applies to the facts of the case.
Thus, respectfully following the decision of the Hon’ble jurisdictional High Court, we restore the issue to the file of the learned CIT(E) with a direction to dispose of the application for renewal of registration u/s. 12AB of the Act in the light of the decision of the Hon’ble jurisdictional High Court in the case of The Chambers of Tax Consultants and Others v. CIT(E) (supra) after providing adequate opportunity to the assessee.
7. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 11/09/2026.
