Income Tax Appellate Tribunal - Mumbai
The Cehmical & Alkali Merchants ... vs Cit (Exemption) , Mumbai on 20 May, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH MUMBAI
BEFORE MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER &
SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER
ITA No. 1027/Mum/2026
(Assessment Year: 2027-28)
The Chemical & Alkali CIT(Exemptions),
Merchants Association 601, 6th Floor,
501-504, Himalaya Vs. Cumballa Hill MTNL
House, 79 Palton Road, TE Building, Pedder
Near Times of India Road, Dr. Gopalrao
Press, Mubmai-400 001 Deshmukh Marg,
Mumbai-400 026
PAN/GIR No. AAATT3670R
(Applicant) (Respondent)
Assessee by Shri Parth Shah, Ld. AR
Revenue by Shri R. A. Dhyani & Shri V. S. Mahajan,
Ld. DRs
Date of Hearing 28.04.2026
Date of Pronouncement 20.05.2026
आदे श / ORDER
PER MAKARAND VASANT MAHADEOKAR, AM:
This appeal is filed by the assessee against the order passed by the learned Commissioner of Income-tax (Exemptions), Mumbai [hereinafter referred to as "CIT(E)"] in Form No. 10AD dated 27.12.2025, whereby the application filed by the assessee in Form No. 10AB on 16.05.2025 for regularisation of registration 2 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n under section 12AB of the Income-tax Act, 1961[hereinafter referred to as "the Act"], has been rejected.
Facts of the Case
2. The assessee filed application in Form No. 10AB on 16.05.2025 under section 12A(1)(ac)(ii) of the Act seeking regularisation of provisional registration under section 12AB of the Act. The CIT(E), on examination of Form No. 10AB, noticed that in para 6 of the form, in response to the query "whether the trust deed contains clause that the trust is irrevocable", the assessee had stated that the trust deed contains the clause that the trust is irrevocable. However, according to the CIT(E), the trust deed/MOA did not contain any express clause regarding irrevocability or dissolution/winding up. The CIT(E) was of the view that in the absence of an explicit irrevocability and dissolution clause, there existed no statutory safeguard to ensure that the assets of the assessee trust/institution shall be applied solely towards charitable purposes and, upon dissolution, shall be transferred to another trust or institution having similar charitable objects.
3. The assessee explained before the CIT(E) that Clause 2.1 of the Rules and Regulations provides that the income and property of the Association, wherever derived, shall be applied solely for the promotion of its objects as set forth in the Constitution. The assessee further submitted that Clause 2.2 provides that no portion of the income or property shall be paid or transferred, 3 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n directly or indirectly, by way of dividend, bonus or otherwise by way of profit to persons who at any time are or have been members of the Association, or to any person claiming through them. It was submitted that no power of revocation was reserved with any member, trustee, office bearer or managing committee; no clause permitted dissolution or winding up at will; and no provision allowed distribution of surplus or assets to members or private individuals. The assessee thus submitted that the trust is irrevocable in substance, intent and operation, even though the word "irrevocable" is not expressly used.
4. The assessee also submitted before the CIT(E) that it is a registered public charitable trust governed by the Maharashtra Public Trusts Act, 1950 and, therefore, its properties are statutorily impressed with a public charitable character. It was submitted that under the Maharashtra Public Trusts Act, 1950, all properties of a registered public trust are permanently dedicated to charitable purposes; the trust cannot be dissolved, wound up or dealt with at the discretion of the trustees; and upon dissolution, cessation or deregistration, the assets cannot be distributed to trustees or private individuals and are required to be dealt with under the supervision of the Charity Commissioner. The assessee also relied upon a resolution dated 02.05.2025 passed by the trustees, prior to filing of the application, reaffirming that the trust is irrevocable and that upon dissolution or cessation, the net assets shall be transferred 4 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n only to another public charitable trust having similar objects and shall not be distributed among trustees or private individuals.
5. The CIT(E), however, rejected the contention of the assessee. The CIT(E) held that the Maharashtra Public Trusts Act, 1950 and the Income-tax Act, 1961 are two different statutes and compliance with the former does not override or dilute the mandatory requirements under sections 11, 12, 12AA and 12AB of the Income-tax Act, 1961. The CIT(E) further held that the trust deed itself must reflect irrevocability in clear and express terms and that merely asserting that public trusts are irrevocable by operation of law is insufficient. The CIT(E) also observed that the assessee had affirmed in Form No. 10AB that the trust deed contains an irrevocability clause, whereas in response to the show-cause notice, the assessee stated that a resolution dated 01.05.2025 was passed to include clauses of irrevocability and dissolution. According to the CIT(E), this inconsistency established that the declaration made in Form No. 10AB was factually incorrect and amounted to misrepresentation of material facts falling within Explanation (g) to section 12AB(4) of the Act.
6. The second reason given by the CIT(E) for rejecting the application relates to alleged violation of section 11 of the Act. The CIT(E) noticed that object clauses III(B)(12) and III(B)(19) of the assessee's MOA referred to making representations to the Government of India or any foreign Governments and entering into arrangements with any Government or Authority, municipal, 5 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n local or otherwise. The assessee explained that these clauses are purely representational, incidental and enabling in nature and do not authorise or imply any financial contribution or application of funds outside India. It was submitted that these clauses do not mandate, authorise or require application of income or corpus outside India and were intended to facilitate the main charitable and public utility objects. The CIT(E), however, held that the use of such words conveyed an intention to utilise funds outside India, thereby leaving open the possibility for future endeavours which may involve expenditure outside the country. On this basis, the CIT(E) held that the assessee had violated section 11 of the Act.
7. Accordingly, the CIT(E) rejected the application for registration under section 12AB on the grounds of non-inclusion of irrevocability or dissolution clause in the trust deed/MOA, specified violation under Explanation (g) to section 12AB(4), and alleged violation of section 11 of the Act.
8. Aggrieved by the order of CIT(E), the assessee is in appeal before us raising following grounds of appeal:
1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Exemptions) ["CIT(E)"] erred in rejecting the Appellant's application for regularisation of registration under section 12AB of the Income-tax Act, 1961, without properly appreciating the statutory scheme, settled legal principles, and the material placed on record.
2. On the facts and in law, the learned CIT(E) erred in holding that the absence of an express irrevocability clause in the Memorandum / Rules and Regulations of the Association is prejudicial to the grant of 6 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n registration, without appreciating that the Appellant is a public charitable association registered under the Maharashtra Public Trusts Act, 1950, under which irrevocability is inherent by operation of law.
3. On the facts and in law, the learned CIT(E) failed to appreciate that the Rules and Regulations of the Association categorically provide that the income and property of the Association shall be applied solely towards its objects and prohibit any distribution, directly or indirectly, to members or private individuals, thereby permanently dedicating the assets to charitable purposes.
4. On the facts and in law, the learned CIT(E) failed to appreciate that neither the members nor the managing committee have any power under the governing documents or under the Maharashtra Public Trusts Act, 1950 to revoke the Association, dissolve it at will, or distribute its assets or surplus for private benefit.
5. On the facts and in law, the learned CIT(E) erred in insisting upon the presence of an express dissolution or winding-up clause in the governing documents, while ignoring the comprehensive statutory framework under the Maharashtra Public Trusts Act, 1950, which governs dissolution, vesting and application of trust assets and expressly prohibits any reversion of such assets to members or private individuals.
6. On the facts and in law, the learned CIT(E) erred in invoking Explanation (g) to section 12AB(4) of the Act and treating the Appellant's application as involving a "specified violation", without establishing any deliberate falsehood, conscious misstatement, suppression of material facts or lack of bona fides.
7. On the facts and in law, the learned CIT(E) failed to appreciate that Form No. 10AB does not permit submission unless the question regarding irrevocability is answered in the affirmative, and therefore the Appellant's declaration was a bona fide response compelled by the statutory design of the Form and consistent with the legal position applicable to public charitable institutions registered under the Maharashtra Public Trusts Act, 1950.
8. On the facts and in law, the learned CIT(E) further erred in invoking Explanation (g) without demonstrating how the application was "incomplete" within the meaning of the statute, when all documents prescribed under Rule 17A of the Income-tax Rules, 1962 were duly furnished during the course of proceedings.7 ITA No. 1027/Mum/2026
Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n
9. On the facts and in law, the learned CIT(E) erred in treating certain incidental / enabling clauses in the objects of the Association as permitting application of income outside India, without recording any finding of actual application of funds outside India and without appreciating that the Association has, at all material times, carried out its activities strictly within India.
10. On the facts and in law, the learned CIT(E) erred in rejecting the application on the basis of a theoretical or hypothetical possibility of future expenditure, which is impermissible in proceedings under section 12AB that require examination of existing objects and actual activities.
11. On the facts and in law, the learned CIT(E) has not recorded any adverse finding whatsoever regarding the charitable nature of the objects of the Association or the genuineness of its activities, which are the core and mandatory parameters for grant of registration under section 12AB(1)(b) of the Act.
12. On the facts and in law, the learned CIT(E) erred in travelling beyond the limited scope of enquiry permissible under section 12AB, which is confined to examination of the charitable nature of the objects and the genuineness of activities, and in rejecting the application on technical, interpretational and inferential considerations unrelated to these statutory parameters.
13. On the facts and in law, the impugned order rejecting registration under section 12AB is arbitrary, contrary to law, and liable to be quashed.
14. The Appellant craves leave to add to, alter, amend or withdraw any of the above grounds of appeal at or before the time of hearing.
9. During the course of hearing before us, the learned Authorised Representative (AR) submitted that the primary ground on which registration has been rejected by the CIT(E) is absence of an express irrevocability clause and dissolution clause. It was submitted that this issue is now squarely covered in favour of the assessee by the judgment of the Hon'ble jurisdictional High Court in Chamber of Tax Consultants vs. Commissioner of Income-tax (Exemptions), [2026] 184 8 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n taxmann.com 374 (Bom), judgment dated 09.03.2026. The learned AR submitted that the Hon'ble High Court has categorically held that absence of an explicit irrevocability clause or dissolution clause cannot be a ground for rejection of registration under section 12AB. It was further submitted that the Hon'ble High Court has also held that the answer "Yes" to Row 6 of Form No. 10AB, in the absence of an explicit irrevocability clause, cannot be treated as furnishing false or incorrect information constituting specified violation.
10. The learned AR further submitted that para 46 of the aforesaid judgment contains a specific direction to the Department that applications for registration/renewal under section 12AB shall not be rejected solely on the ground of absence of explicit irrevocability and/or dissolution clause and that all such orders where renewal of registration under section 12AB has been rejected on such grounds stand quashed and are required to be decided afresh in accordance with law and the ratio laid down by the Hon'ble jurisdictional High Court. The learned AR, therefore, submitted that the impugned order passed by the CIT(E) is unsustainable and deserves to be set aside.
11. The learned AR specifically addressed the objection raised by the CIT(E) in respect of Clause III(B)(12) of the Memorandum of Association. It was submitted that the CIT(E) has misdirected himself in construing these clauses as permitting application of income outside India. The learned AR submitted that a plain 9 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n reading of these clauses demonstrates that they are purely enabling and facilitative in nature, permitting the assessee to make representations before various authorities, including foreign Governments or bodies, in connection with the objects of the Association.
12. The learned Departmental Representative relied upon the order passed by the CIT(E). However, he could not controvert the position that the issue regarding rejection of registration on the ground of absence of express irrevocability clause and dissolution clause is covered by the judgment of the Hon'ble jurisdictional High Court in the case of Chamber of Tax Consultants vs. CIT(E).
13. We have heard the rival submissions and perused the material placed on record, including the impugned order passed by the learned CIT(E) and the judicial precedent relied upon by the assessee. The issues arising for our consideration are twofold, namely: (i) whether the learned CIT(E) was justified in rejecting the application under section 12AB on account of absence of an express irrevocability and dissolution clause in the governing documents; and (ii) whether the objection regarding possible application of funds outside India, based on Clauses III(B)(12) and III(B)(19), constitutes a valid ground for rejection at the stage of grant of registration.
14. At the outset, we find that the primary basis for rejection of the application is the absence of an express clause in the 10 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n Memorandum/Rules and Regulations providing for irrevocability of the trust and transfer of assets upon dissolution. This issue is no longer res integra in view of the judgment of the Hon'ble jurisdictional High Court in the case of Chamber of Tax Consultants vs. CIT(E)(supra). The Hon'ble High Court has categorically held that the scheme of section 12AB does not mandate the existence of an explicit irrevocability clause as a condition precedent for grant of registration. It has been further held that, in law, a trust is presumed to be irrevocable unless a power of revocation is expressly reserved, and therefore, mere absence of such clause cannot lead to an adverse inference.
15. The Hon'ble High Court has also examined the interplay between the provisions of the Income-tax Act, 1961 and the Maharashtra Public Trusts Act, 1950, and has held that in the case of public charitable trusts governed by the said Act, the statutory framework itself ensures that the property of the trust is permanently dedicated to charitable purposes and cannot revert to the settlor or be distributed for private benefit. Thus, the apprehension expressed by the learned CIT(E) regarding lack of safeguard is contrary to the settled legal position.
16. Further, the learned CIT(E) has invoked Explanation (g) to section 12AB(4) on the ground that the assessee's declaration in Form No. 10AB regarding irrevocability was incorrect. This reasoning also stands negated by the aforesaid judgment of the Hon'ble jurisdictional High Court, wherein it has been held that 11 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n the format of Form No. 10AB compels the applicant to answer the question regarding irrevocability in the affirmative and that such response, in the absence of an express clause, cannot be treated as furnishing false or incorrect information. The Hon'ble High Court has clearly held that such an approach would be unjust and contrary to law.
17. Most importantly, the Hon'ble jurisdictional High Court, in its operative directions, has mandated that the Department shall refrain from rejecting applications under section 12AB solely on the ground of absence of an explicit irrevocability and/or dissolution clause and that such cases are required to be decided afresh in accordance with law. Being a binding precedent, the said directions are required to be strictly followed by the authorities subordinate to the Hon'ble High Court. In the present case, we find that the learned CIT(E) has not adhered to the ratio and directions laid down by the Hon'ble jurisdictional High Court, thereby rendering the impugned order unsustainable.
18. We now advert to the second limb of the reasoning adopted by the learned CIT(E), namely, the alleged violation of section 11 on account of Clause III(B)(12) of the objects. On a careful perusal of the said clauses, we find merit in the contention of the learned AR that these clauses are merely enabling and representational in nature. Clause III(B)(12) permits the assessee to make representations before various authorities, including foreign Governments or bodies, on matters affecting the objects of the 12 ITA No. 1027/Mum/2026 Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n Association. Such representation, by its very nature, does not involve or imply application of income. This clause is incidental to the main objects and are intended to facilitate their effective implementation.
19. The learned CIT(E) has construed this clause as indicating a possibility of utilisation of funds outside India. However, no finding has been recorded to the effect that the assessee has actually applied any part of its income outside India. The inference drawn is thus based on a hypothetical or conjectural possibility rather than on any concrete material. At the stage of registration under section 12AB, the scope of enquiry is confined to examination of the charitable nature of the objects and the genuineness of activities. The statute does not permit rejection of an application based on speculative apprehensions of future violations.
20. In our considered view, the mere presence of enabling clauses permitting representation before foreign authorities or entering into arrangements with various bodies cannot be equated with authorisation for application of income outside India. Unless there is a clear mandate in the objects permitting such application or evidence of actual utilisation in contravention of section 11, no adverse inference can be drawn. The approach adopted by the learned CIT(E) in this regard is thus legally untenable.
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21. In light of the foregoing discussion, and respectfully following the binding judgment of the Hon'ble jurisdictional High Court, we are of the considered view that the impugned order passed by the learned CIT(E) cannot be sustained. The rejection of registration is based on grounds which are not permissible in law and which travel beyond the scope of enquiry contemplated under section 12AB.
22. Accordingly, we set aside the impugned order dated 27.12.2025 passed by the learned CIT(E) and restore the matter to his file for deciding the application afresh. The learned CIT(E) is directed to consider the application in accordance with law and strictly in the light of the ratio and directions laid down by the Hon'ble jurisdictional High Court in the case of Chamber of Tax Consultants vs. CIT(E). The learned CIT(E) shall also re-examine the issue relating to Clause III(B)(12)objectively, without being influenced by mere conjectural possibilities, and after considering the explanation of the assessee in its proper perspective. Needless to state, the assessee shall be afforded reasonable opportunity of being heard and shall extend full cooperation in the proceedings.
23. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 20.05.2026.
Sd/- Sd/-
(KAVITHA RAJAGOPAL) (MAKARAND VASANT MAHADEOKAR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
14 ITA No. 1027/Mum/2026
Th e Ch e mi c al & Al k al i M er c h a nt s A ss oci at i o n
Mumbai, Dated 20/05/2026
Dhananjay, Sr.PS
आदे श की प्रतितिति अग्रेतिि/Copy of the Order forwarded to :
1. अपीलाथी / The Appellant
2. प्रत्यथी / The Respondent.
3. सं बंधधत आयकर आयु क्त / The CIT(A)
4. आयकर आयु क्त(अपील) / Concerned CIT
5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
आदे शानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy//
1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai