Sham Sunder Lal Kalawati Acharwale Charitable Trust vs ITO, Ward-Exemption 2(1), Delhi

O R D E R

 The Chamber of Tax Consultants vs. CIT(E) (WP No. 7587/2026 (09.03.2026) (Bombay HC)  Anita Memorial Trust as CIT(E) 1263/Mum 2026) Mumbai ITAT

“12.

Be that as it may, let us first examine the case of respondent No. 1 regarding the revocability of trusts. respondent No. 1 has presumed a trust to be revocable absent an express irrevocable clause. For this purpose, Mr. Gupta has relied upon ss. 61 and 63 of the Act. Sec. 61 deals with the taxability of income from a "revocable transfer of assets." Therefore, the key issue to be determined is what constitutes a "revocable transfer." The definition of "revocable transfer" is to be found in s. 63(a) of the Act, which reads as under:

"a transfer shall be deemed to be revocable if-

(i)

it contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor, or

(ii)

it, in any way, gives the transferor a right to reassume power directly or indirectly over the whole or any part of the income or assets;"

(emphasis, italicised in print, supplied)

13.

The language of s. 63 is clear and unambiguous. Sec. 63 creates a fiction, and like all fictions, it must be strictly construed. For a transfer to be revocable, the instrument must contain a positive provision for retransfer or a provision which gives a right to the transferor to re-assume power over the assets or income. There is no ambiguity in this regard. The statute does not enact that the mere absence of an irrevocability clause makes a trust revocable. On the contrary, it implies that a trust is irrevocable (which is the normal principle in all transfers) unless it is expressly made revocable. Silence in the deed implies irrevocability, not revocability. The interpretation to the contrary placed by respondent No. 1 turns s. 63 on its head. Such an interpretation is completely misplaced. The reliance on s. 63(a)(ii) is also misplaced. We cannot understand as to how an absence of any irrevocability clause can be construed as giving the transferor a right to reassume power over the assets or income. Even s. 63(a)(ii) contemplates a specific provision which gives the transferor a right to reassume such power.

14.

Our interpretation is further fortified by the provisions of the MPT Act, under which the petitioner trusts are registered. It is a fundamental principle of public trust law that once property is dedicated to a public charitable purpose, the dedication is complete and the settlor is divested of the property. The assets can never revert to the settlor. It is regard, it is relevant to note a judgement of this Court in Controller of Estate Duty, Vidarbha vs. Smt. Mangala (1983) 143 ITR 491 (Bom), wherein a Division Bench of this Court held as follows:

"There is thus 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 settlor has reserved the power to revoke the trust, in our view such a reservation would be wholly invalid and the power cannot be invoked so as to undo the settlement."

15.

A later judgment of this Court in Smt. Virbala K. Kewalram & Ors. vs. Ramchand Lalchand & Ors. (1996) 4 ALL MR 490, had laid down the same principle as follows:

"12.

In the instant case, the trust created by executing a trust deed which was registered under the Registration Act on the same day i.e. on 31st May, 1963 and a trust came to be registered as a Public Charitable Trust only in November, 1965 and the Trust came to be registered under the Bombay Public Trusts Act, 1950 as Public Charitable Trust late in November, 1965. It is submitted that before the trust registered as a Public Charitable Trust, the Trustees by executing a trust deed deleted one property out of the two properties in favour of widow and the daughter of the settlor of the trust. Therefore, the question is whether the trustees are competent to do so. In my view, as observed above, "no". The Trust deed of the settlor is like a last wish-will of the settlor. Once a Trust is created, it is irrevocable unless it is expressly desired by the settlor himself. In view of the admitted fact that two properties mentioned in the trust deed were intended to be the trust properties and the income out of that properties to be utilised for the purpose of fulling the object of the trust and in another words, as desired by the settlor. The source of income of the trust is only the properties coming under the Trust Deed. The Trustees are the custodian of the trust property and they were required to manage the property as per the wish expressed in the Trust deed. Therefore, it is held that the previous trustees were not at liberty to change the documents by moving the deed of rectification relating to the properties of the trust as described in the trust deed. Therefore, the amendment in the said deed of trust properties carried out in pursuance to the said deed of rectification is bad and the order passed by the Dy. Charity CIT dt. 22nd Nov., 1965 is bad. Therefore, the Charity CIT modified that order while exercising the revisional jurisdiction under s.70A after lapse of time, is not in any manner bad-in-law. Under s. 70A, the Charity CIT has been conferred even suo motu revisional power and no limitation is there for the purpose of exercising the revisional power."

(emphasis, italicised in print, supplied)

16.

Thus, from the above, it can be deduced that once a property is dedicated to a public charitable purpose, the settlor is divested of the property and such property can never revert back to the settlor.”