Absence of Dissolution Clause in the Trust Deed cannot be a reason for Denying Registration: ITAT Mumbai [Read Order]


Recently, in Kamla Nevatia Charitable Trust v. DIT(E), the Mumbai bench of the ITAT held that registration under section 12A of the Income Tax Act cannot be denied to a Trust merely for the reason that the Trust Deed do not have a dissolution clause.

The sole grievance of the assessee-Trust was that the DIT(E), invoking the provisions of Bombay Public Trust Act had rejected the registration application filed by them by pointing out that a trust was a perpetual entity,that if the trustees were unable to carry out the objects of the trust it had to be dissolved or wound up,that on its winding up its corpus and property had to be transferred to another trust having similar objects with sanction of the charity commissioner, that no such clause was found to be in the trust deed, that the assessee could not be said to having constituted as a valid public charitable trust.

The bench noticed that the Tribunal, in the case of Rama Rashmi Chhaganlal Waghwala Charitable Trust, had concluded a similar issue in favour of the assessee. The decision was on the basis of the order of the Tribunal in Geeta Lalwani Foundation(supra), wherein it was held that,”Regarding the dissolution clause nothing is brought on record even before us that the Bombay Public Trust Act, 1950 mandates for incorporation of mandatory clause of dissolution of any irrevocable trust. Therefore, in our opinion, the decision of the DIT(E) rejecting the registration u/s.12A of the Income Tax Act was required to be reversed. Accordingly,grounds raised by the assessee are allowed.”

Read the full text of the order below.