AI Structured Summary
Not yet generated for this judgment
Judgment
PER MAHAVIR SINGH, VICE PRESIDENT :
These appeals by the assessee are directed against the respective orders both dated 12.03.2026 of the Ld. Commissioner of Income Tax (Exemption), Delhi [hereinafter referred to as “CIT(E)”] passed u/s. 12AB(1)(ac)(ii) and u/s. 80G of the Income Tax Act, 1961 (hereinafter referred as Act). Since the issues involved in these appeals are inter-connected, hence, the same were heard together and disposed of by this common order for the sake of convenience, by dealing with ITA No. 2720/Del/2026 being the lead case.
The grounds raised in ITA No. 2720/Del/2026 read as under:-
i)The CIT(E) erred in law and on facts in rejecting the renewal application of the assessee for registration u/s. 12AB(1)(ac)(ii) 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.
ii) The CIT(E) erred in law and on facts in rejecting the application for renewal of registration u/s. 12AB(1)(ac)(ii) of the Act ignoring that the assessee has been registered u/s. 12A since 29.9.1999 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.
The ground raised in ITA No. 2721/Del/2026 read as under:-
i)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.
ii) The CIT(E) erred in law and on facts in rejecting the application for renewal of registration u/s. 80G(5)(ii)(b)(B) of the Act ignoring that the assessee has been registered u/s. 80G since 29.9.1999 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.
The brief facts of the case are that the assessee/applicant has filed an application dated 30.9.2025 in Form 10AB for registration u/s. 12A(1)(ac)(ii) of the Act. The assessee was issued a questionnaire dated 02.01.2026 with a request to furnish certain details / documents / clarifications in support if its request for registration u/s. 12A(1)(ac)(ii) of the Act. The assessee filed part details on 9.1.1026 and thereafter an opportunity was afforded vide notice dated 24.1.2026 for compliance on 29.1.2026 to remove the deficiency of absence of irrecoverable clause, but assessee failed to remove the same. The CIT(E) noted that there was “absence of irrecoverable clause in the Trust Deed of incorporation” and assessee was advised to remove the said deficiency, but the said deficiency was not removed. Thus, the CIT(E) observed that since the assessee/applicant has failed to remove the deficiencies as required by the notices, therefore the necessary verification in support of genuineness of the activities, charitable objects, commencement of the activities could not be completed, hence, he rejected the application filed in Form 10AB for grant of registration u/s. 12A(1)(ac)(ii) of the Act with the liberty to file a fresh application as per the relevant provisions of the Income Tax Act, 1961 after removal of the deficiencies.
Aggrieved, assessee is in appeal before the Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, ld. AR for the assessee submitted that the applicant-trust was granted 12A registration on 23.9.1999 and also granted 80G approval vide order dated 30.10.2009. It was further submitted that the applicant filed the Form 10A for revalidation before the statutory deadline. It was also submitted that the Trust is engaged in charitable activities for the benefit of the general public without any profit motive. Its activities include relief to the poor, promotion of education, medical relief, yoga and healthcare initiatives, preservation of environment and protection of monuments and places of historic importance. The applicant undertakes welfare programmes for socially and economically weaker sections and carries out its activities strictly in accordance with the Trust Deed. It was also submitted that the income and surplus, if any, are wholly applied towards charitable purposes and all activities are voluntary, non-commercial and fall within the definition of “Charitable purpose” under section 2(15) of the Act. The renewal application of the assessee for registration u/s. 12AB(1)(ac)(ii) 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. It was further submitted that CIT(E) rejected the application for renewal of registration u/s. 12AB(1)(ac)(ii) of the Act ignoring that the assessee has been registered u/s. 12A since 29.9.1999 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. Ld. AR for the assessee submitted that Hon’ble Bombay High Court in the case of Chamber of Tax Consultants vs. CIT(E) [2026] 184 Taxmann.com 374 (Bombay) has dealt the similar issue and held that “where public charitable trusts registered under MPT Act, 1950 were denied renewal under section 12AB on the ground that trust deeds lacked explicit irrevocability and dissolution clauses, though under section 63 and MPT Act trusts were not revocable in absence of express power, further no such condition was prescribed under section 12AB, rejection was unsustainable and was to be quashed.” Ld. DR relied upon the order of the Ld. CIT(E). We find that the Hon’ble Bombay High Court in the case of Chamber of Tax Consultants vs. CIT(E) has dealt the similar and identical issue wherein, it has been held as under:-
44.Now, we come to the second ground for rejection, namely furnishing "false information". It is undisputed that in Row No. 6 of MARCH 09, 2026 S.R.JOSHI 1-wpl-7587-2026.doc 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.
In view of aforesaid factual matrix, we note that the issue of non-existence of the irrecoverable clause in the Trust Deed is squarely covered by the aforesaid precedent in favour of the assessee in the present case. As per the aforesaid decision, public charitable trust is deemed irrevocable by operation of law unless the instrument of trust expressly provides a power of revocation, thus, 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. In the instant case it reveals that the applicant is doing charitable activities and that too voluntarily and, thus, must be treated with a fair and reasonable approach by the revenue. Thus, in our view, the order of the Ld. CIT(E) is not sustainable in the eyes of law, in view the aforesaid precedent and accordingly, the impugned order of the Ld. CIT(E) is hereby quashed with the directions grant registration u/s. 12A(1)(ac)(ii) of the Act to the applicant-trust, in accordance with law. Resultantly, the appeal of the assessee is allowed in the aforesaid manner.
As regards ITA No. 2721/Del/2026 is concerned, we note that Ld. CIT(E) has noted that since registration u/s. 12A(1)(ac)(ii) of the Act is being rejected, thus, granting of approval u/s. 80G(5)(ii) is not relevant without the registration u/s. 12A, hence, the same was rejected by the Ld. CIT(E). Since we have already quashed the Ld. CIT(E) order as aforesaid and directed him to grant registration u/s 12A(1)(ac)(ii) of the Act to the applicant-trust, thus the consequential order passed denying approval u/s. 80G(5)(ii) of the Act, where such rejection is on the ground that once registration under section 12A is denied, registration u/s. 80G also cannot be granted, is also hereby quashed and set aside in the very terms. In the result, this appeal of the assessee is also allowed.
In the result, both the appeals of the assessee are allowed in the aforesaid manner.