Case Details: Chamber of Tax Consultants vs. Commissioner of Income-tax (Exemptions) [2026] 184 taxmann.com 374 (Bombay)
Judiciary and Counsel Details
- B. P. Colabawalla & Firdosh P. Pooniwalla, JJ.
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Percy Pardiwalla, Sr. Adv., Dharan Gandhi & Ms Aanchal Vyas, Advs. for the Petitioner.
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Arjun Gupta for the Respondent.
Facts of the Case
The petitioners were public charitable trusts registered under the applicable laws and had either applied for fresh registration or renewal of registration under section 12AB. The Commissioner (Exemptions) rejected their applications primarily on the ground that the trust deeds did not contain explicit irrevocability and/or dissolution clauses.
Further, while filing Form 10AB, the trusts were required to answer whether the trust deed contained a clause stating that the trust is irrevocable. The e-filing utility did not permit submission of the form unless the applicant selected “Yes.” Accordingly, the petitioners selected “Yes,” even though their trust deeds did not expressly contain such a clause. The Department treated this as furnishing false or incorrect information, constituting a specified violation under section 12AB.
The matter reached before the High Court.
High Court Held
The Bombay High Court held that a public charitable trust is inherently irrevocable by operation of law, unless the trust deed expressly provides a power of revocation. The Court observed that under the Maharashtra Public Trusts Act (MPT Act), even where a trust is revoked, the trust property does not revert to the settlor but is dealt with in accordance with statutory provisions, such as vesting in the Public Trusts Administration Fund or being applied to similar charitable purposes. Thus, the fundamental condition of revocability, as contemplated under section 63 of the Income-tax Act, can never be satisfied merely due to the absence of an explicit clause.
The Court categorically ruled that the absence of an irrevocability clause or dissolution clause in the trust deed is not a valid ground for rejecting registration under section 12AB. It emphasised that neither section 12AA nor section 12AB prescribes such a requirement. The statute only requires satisfaction regarding the genuineness of activities and the charitable nature of objects, and not the presence of specific drafting clauses in the trust deed.
The Court also relied on statutory safeguards already embedded in law. It noted that provisions such as section 13(1)(c) prevent misuse of income or property for the benefit of specified persons, including the settlor, while section 115TD imposes exit tax on dissolution or conversion of trusts. Additionally, section 55 of the MPT Act incorporates the doctrine of cy-pres, ensuring that trust assets are applied to similar charitable purposes rather than reverting to the settlor. These safeguards adequately address the Revenue’s concerns.
With respect to Form 10AB, the Court strongly criticised the design of the e-filing utility. It held that the system compelled applicants to select “Yes” to proceed with filing, thereby forcing them to make a declaration that may not strictly align with the wording of the trust deed. The Court ruled that such compelled responses cannot be treated as false or incorrect information, and the Department cannot penalise applicants for deficiencies in its own system.
The Court further directed the Revenue to modify the utility of Form 10A/10AB and replace the existing question with a more appropriate formulation: “Is the trust/institution revocable?”.
List of Cases Reviewed
- CIT v. Tara Educational & Charitable Trust [IT Appeal No. 247 of 2015, dated 31-07-2017] (para 33) followed
List of Cases Referred to
- CIT v. Tara Educational & Charitable Trust [IT Appeal No. 247 of 2015, dated 31.07.2017] (para 6)
- Controller of Estate Duty v. Smt. Mangala [1983] 143 ITR 491 (Bombay) (para 14)
- Smt. Virbala K. Kewalram v. Ramchand Lalchand 1996 (4) ALL MR 490 (para 15).
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