Irrevocability Clause Not Precondition for Section 12AB Registration: Analysis of Bombay High Court Decision in Chamber of Tax Consultants Vs CIT (Exemptions)

The Bombay High Court in Chamber of Tax Consultants Vs CIT (Exemptions) has delivered a significant ruling on the conditions for registration and renewal of charitable trusts under Section 12AB of the Income Tax Act 1961. The judgment directly addresses two frequent grounds of rejection adopted by the Exemptions wing:

  1. Absence of an express “irrevocability” clause or dissolution clause in the trust deed; and
  2. Treatment of the “Yes” answer in Row 6 of Form 10AB (relating to irrevocability) as furnishing “false or incorrect information”.

This decision will have wide impact on public charitable trusts, especially those registered under the Maharashtra Public Trusts Act, 1950 (MPT Act), and on the administration of registrations under Section 12AB and related provisions such as Section 80G.

Background and Parties

The writ petition was instituted under Article 226 of the Constitution by:

  • Petitioner No. 1: The Chamber of Tax Consultants, a long-established non-profit body of tax professionals.
  • Petitioner No. 2: Bombay Chartered Accountants’ Society, an association of chartered accountants engaged in professional education and representation.
  • Petitioner Nos. 3 to 8: Public charitable trusts duly registered under the MPT Act, which had enjoyed registration under Section 12A/Section 12AA and later under Section 12AB for years.

Their fresh/renewal applications under Section 12AB in Form 10AB were rejected by the Commissioner of Income Tax (Exemptions), Mumbai, essentially on two counts:

  • The founding instruments did not contain:

    • an explicit statement that the trust is irrevocable, and/or
    • a specific dissolution clause; and

  • While e‑filing Form 10AB, the assessees had clicked “Yes” in Row 6 (“Whether the trust deed contains clause that the trust is irrevocable?”), because the utility would not accept the form otherwise. This answer was subsequently treated as a deliberate misstatement and “specified violation” under clause (g) of the Explanation to Section 12AB(4).

The petition sought (i) quashing of the rejection orders in the individual cases, and (ii) broader directions to prevent similar refusals for other charitable trusts.

The High Court examined three central issues:

  1. Can registration/renewal under Section 12AB be refused merely because the trust deed does not contain:

    • an express irrevocability clause, or
    • a dissolution clause?

  2. Does answering “Yes” in Row 6 of Form 10AB, when the deed is silent on irrevocability but the system otherwise blocks filing, amount to furnishing “false or incorrect information” for the purposes of Section 12AB(4)?

  3. Is the Commissioner legally empowered to insist that a charitable trust must contain an explicit irrevocability clause as a condition for registration?

Statutory Framework Considered

The Court analysed, among others, the following provisions:

  • Sections 11, 12AB, 13, 60, 61, 63, 80G, 115TD of the Income Tax Act 1961.
  • Sections 22(3A), 22(3B), 36A, 55, 57 of the Maharashtra Public Trusts Act 1950.
  • Section 78 of the Indian Trusts Act 1882.
  • Section 332 of the Income-tax Act, 2025 (as cited by Revenue).
  • Constitutional remedy under Article 226.

Petitioners’ Key Contentions

The assessees and professional bodies advanced a structured challenge to the Commissioner’s approach:

1. No statutory requirement for express irrevocability in Section 12AB

  • Section 12AB(1)(b) requires the Principal Commissioner to:

    • verify objects of the trust,
    • assess genuineness of activities, and
    • ensure compliance with material laws.

  • The provision does not stipulate that:

    • the deed must contain an express clause of irrevocability, or
    • a specific dissolution mechanism is a precondition for registration.

  • By reading such a requirement into Section 12AB, the Commissioner effectively legislated a new condition, which is impermissible.

2. Consistency with prior registrations under Section 12A/12AA/12AB

  • The very same trust deeds, without irrevocability or dissolution clauses, had been accepted:

    • under the earlier regime (Section 12A/Section 12AA), and
    • under the revised regime at the initial Section 12AB(1)(a) registration stage.

  • There has been no change either:

    • in the text of the deeds, or
    • in the statutory conditions for registration under the new regime,

    which would justify a new, stricter interpretation by the Commissioner.

3. Misapplication of Sections 60–63 (revocable transfers)

  • These provisions are anti-avoidance rules dealing with revocable transfers of income or assets, primarily relevant at the assessment stage when exemption under Section 11 is claimed.

  • Even if a transfer is “revocable” within Section 63, the consequence is that:

    • income from the asset is taxed in the hands of the transferor, and
    • such income is excluded from the transferee’s computation.

    Hence, there is no occasion for the transferee-trust to claim exemption on such income.

  • Therefore, issues of revocability relate to grant of exemption, not eligibility for registration.

4. Proper construction of “revocable transfer” under Section 63

  • Under Section 63(a) a transfer is deemed revocable only if the instrument:

    • provides expressly for re-transfer (directly or indirectly) of income or assets, or
    • gives the transferor a right to re-assume power over the income or assets.

  • A deed that is silent on revocability does not fall within this definition.

  • As a matter of trust law, a trust is ordinarily irrevocable unless a power of revocation is specifically reserved.

5. Inherent irrevocability of MPT Act trusts

  • Public charitable trusts in Maharashtra are governed by the MPT Act.