2025 (9) TMI 1551 - AT - Income Tax

Registration under s.12A(1)(ac)(iii) granted where trust regularly pursued objects; initial deed omissions cured by committee resolution

ITAT set aside the CIT(E) order and directed grant of registration under s.12A(1)(ac)(iii), finding the assessee trust has been regularly functioning and ... Denial of grant approval of Section 12A(1)(ac)(iii) - trust deed of the trust is not having irrevocability Clause or Dissolution Clause - HELD THAT:- We find that the trust has regularly functioning since its inception and pursuing its objects as prescribed in trust deed. Revenue has not either doubted the nature of activities carried on by the assessee trust nor any adverse remarks were ever drawn in the instant case. The registration is rejected merely on the ground trust deed did not contain the dissolution and irrevocability clause. We note that the assessee has already filed a resolution adopted by the management committee, wherein the dissolution and irrevocability clause were already adopted and finally incorporated into the trust deed. Case of the assessee was squarely covered by the decision of Shri Narshinghji Ka Mandir [2019 (9) TMI 636 - RAJASTHAN HIGH COURT] wherein as held that registration to the trust cannot be denied on the sole ground that the no clause was provided in trust deed about dissolution of trust, even trust without containing these clauses in the trust deed is valid. Similarly in the case of Shri Agarwal Panchayat [2015 (9) TMI 1774 - ITAT JODHPUR] held that the registration u/s 12A cannot be denied on the ground that there is no dissolution clause in the trust deed. In view of the above facts and the ratio laid down in the above decisions, we are inclined to set aside the order of ld. CIT (E) and direct the ld. CIT (E) to grant registration to the trust. Appeal of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether registration under Section 12A(1)(ac)(iii) can be refused solely because the trust deed does not contain an irrevocability clause or a dissolution clause. 2. Whether cancellation of provisional registration granted under Section 12A can be justified on the ground that the executed trust deed lacks explicit irrevocability/dissolution clauses notwithstanding adoption of those clauses later by the managing committee by resolution. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of refusing registration under Section 12A(1)(ac)(iii) solely for absence of irrevocability/dissolution clauses in trust deed Legal framework: Section 12A(1)(ac)(iii) governs registration of trusts for tax-exemption purposes; the statutory scheme requires satisfaction that the trust is created for charitable purposes and operates accordingly. Irrevocability and dissolution clauses are often regarded as safeguards to ensure permanence of purpose and structured distribution of assets upon dissolution. Precedent treatment: The Court follows authoritative decisions holding that absence of a dissolution or irrevocability clause in the trust deed, by itself, does not vitiate the validity of a trust nor justify denial of registration (Rajasthan High Court decision in Shri Narshinghji Ka Mandir and a coordinate Bench decision in Shri Agarwal Panchayat). Those precedents were applied rather than distinguished or overruled. Interpretation and reasoning: The Tribunal examined the material facts: the trust has been functioning since inception, pursuing objects as stated in the trust deed; the revenue did not challenge the nature or genuineness of charitable activities; and the managing committee had adopted irrevocability and dissolution clauses by resolution which were placed on record. The Court reasoned that the core statutory enquiry under Section 12A concerns the trust's objects and actual conduct, not a formalistic insistence on particular clause language when the trust's permanence and objects are otherwise established. Denial of registration solely on the absence of such clauses would elevate form over substance and run contrary to the precedents relied upon. Ratio vs. Obiter: Ratio - Registration under Section 12A cannot be refused solely because the trust deed lacks explicit irrevocability or dissolution clauses where the trust's objects and activities are otherwise bona fide and the clauses have been adopted by the managing body. Obiter - Observations on the policy value of those clauses as safeguards, while acknowledged, are not decisive where facts demonstrate conformity with the objects. Conclusion: The Court concluded that refusal of registration on the sole ground of absence of dissolution/irrevocability clauses was unsustainable; registration must not be denied for that reason alone where the trust's character and functioning are not disputed and where adopting resolutions incorporate the missing safeguards. Issue 2: Validity of cancelling provisional registration on the ground of lack of irrevocability/dissolution clauses when such clauses were adopted by resolution Legal framework: Provisional registration under Section 12A confers temporary recognition pending scrutiny; cancellation requires valid grounds connected to statutory criteria. The administrative action must be based on material facts and proper evidentiary standards. Precedent treatment: The Tribunal applied the same line of precedent as in Issue 1, treating prior decisions as directly applicable and supportive of the proposition that absence of specific clauses is not per se fatal to registration or provisional certification. Interpretation and reasoning: The Court noted the procedural sequence: information was sought, the assessee initially delayed, then furnished documents including resolutions adopting the clauses. The Tribunal observed that the resolution adopting irrevocability/dissolution clauses was on record and that the revenue did not impugn the trust's activities. The cancellation of provisional registration was therefore grounded on a narrow technicality rather than any substantive deficiency. Given that the adopted resolution effectively incorporated the clauses and the trust's objects and functioning remained intact, cancellation was unjustified. Ratio vs. Obiter: Ratio - Cancellation of provisional registration cannot be sustained solely because the executed trust deed lacked express irrevocability/dissolution clauses when the governing body has formally adopted those clauses and the trust's bona fides are not in doubt. Obiter - Comments on procedural compliance (filing of documents in the required format such as affidavits vs. plain paper) are ancillary and do not form the basis of the decision. Conclusion: The Tribunal set aside the cancellation of provisional certification and directed the authority to grant registration, since the substantive requirements of Section 12A were satisfied despite the initial absence of the specific clauses in the trust deed and despite procedural irregularities in submission format. Cross-references and operative holding 1. The conclusions on both issues are interrelated: the substantive sufficiency of the trust's objects and activities, together with the adoption of irrevocability/dissolution clauses by resolution, render the absence of those clauses in the original deed an insufficient ground to refuse or cancel registration under Section 12A(1)(ac)(iii). 2. The Tribunal explicitly followed the cited High Court and coordinate Bench authorities; those precedents form the binding ratio applied to the facts and are determinative of the outcome.