Income Tax Department to Challenge Bombay HC Ruling on Charitable Trusts in Supreme Court
I-T department to move Supreme Court against HC relief in public trust row
Image: The Economic Times
The Income Tax Department of India plans to appeal to the Supreme Court against a Bombay High Court ruling that allows charitable trusts to operate without an irrevocability clause in their deeds. The ruling affects tax benefits under Section 12AB of the Income-tax Act, 1961.
- 01The Bombay High Court ruled on March 9, 2026, that the absence of an irrevocability clause does not justify refusal of registration for charitable trusts.
- 02The Income Tax Department is concerned about potential misuse of trusts and has made the irrevocability clause a condition for tax benefits.
- 03Following the HC ruling, the I-T department renewed registrations of trusts but with a caveat pending the Supreme Court's decision.
- 04The new Income Tax Act, effective April 1, 2026, mandates that charitable trusts must be irrevocable to qualify for tax exemptions.
- 05Charitable trusts are exploring options to comply with the I-T department's demands, including possibly providing indemnity bonds.
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The ongoing dispute between India's Income Tax Department and public charitable trusts is escalating to the Supreme Court following a Bombay High Court ruling. The I-T department insists that charitable trusts must include an irrevocability clause in their deeds to qualify for tax benefits under Section 12AB of the Income-tax Act, 1961. This demand stems from concerns over the potential misuse of trust assets. On March 9, 2026, the Bombay High Court ruled that the absence of such a clause cannot be grounds for denying registration to trusts. In response, the I-T department has begun renewing registrations but with conditions pending the outcome of their appeal to the Supreme Court. The new Income Tax Act, effective April 1, 2026, requires that trusts be irrevocable. Charitable organizations are now considering how to address these requirements, including the possibility of providing indemnity bonds to affirm their irrevocability.
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The Supreme Court's decision will significantly affect the operation and registration of charitable trusts across India, particularly in Maharashtra.
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