Bai Nemtullabai A Maskati Trust Vs CIT (ITAT Mumbai)
The ITAT Mumbai considered two appeals filed by the assessee trust against orders concerning registration under Section 12AB and approval under Section 80G of the Income Tax Act, 1961. The appeals arose from the same proceedings and were heard together.
The trust had initially applied for renewal of registration under Section 12AB and approval under Section 80G. By separate orders dated 15 April 2026, the CIT (Exemption) rejected both applications primarily because the trust deed did not contain an express clause declaring the trust irrevocable or providing for irrevocable dedication of trust property for charitable purposes. The CIT (Exemption) considered the absence of such a clause to mean that the statutory requirements contemplated under Section 332(2)(v) of the Income Tax Act, 2025 were not satisfied.
During the pendency of the appeal against the rejection, the Bombay High Court considered the issue in Chamber of Tax Consultants & Others vs. CIT (Exemption) in Writ Petition (L) No. 7587 of 2026. The High Court held that a public charitable trust is presumed to be irrevocable by operation of law unless its instrument contains a specific provision permitting revocation. It also directed that applications for registration, renewal or approval should not be rejected merely because the trust deed lacked an explicit irrevocability clause.
Following the High Court judgment, the CIT (Exemption) granted the trust registration under Section 12AB and approval under Section 80G. However, the grant orders contained observations that the Revenue was contemplating a challenge before the Supreme Court and that the registration, approval and consequential benefits would remain subject to the ultimate outcome of such proceedings. The assessee challenged these caveats.
The Tribunal held that the original appeal challenging the rejection had become infructuous because the substantive relief sought had subsequently been granted. Accordingly, ITA No. 7520/Mum/2026 was dismissed as infructuous.
In ITA No. 7521/Mum/2026, the Tribunal examined the validity of the caveats. It held that a judgment of the jurisdictional High Court remains binding on authorities within its jurisdiction so long as it continues to operate. A proposed appeal, special leave petition or pending challenge before a higher court does not dilute that binding effect unless the judgment is stayed, modified or reversed by a competent judicial authority.
The Tribunal further held that once the CIT (Exemption) granted registration and approval pursuant to the binding Bombay High Court judgment, the grant could not simultaneously be diluted by observations based merely on a possible future challenge. It found that such caveats did not emanate from the statutory provisions governing Sections 12AB and 80G or from the directions of the High Court.
The Tribunal also referred to IAA Rajesh Foundation vs. CIT (Exemption), order dated 15 May 2026, where an identical caveat had been directed to be deleted.
Accordingly, the Tribunal directed deletion of the observations and caveats making the registration, approval and consequential benefits subject to the outcome of a proposed Supreme Court challenge. The trust was held entitled to the Section 12AB registration and Section 80G approval as granted, without any qualification, restriction or conditional rider. ITA No. 7521/Mum/2026 was allowed, while ITA No. 7520/Mum/2026 was dismissed as infructuous.
Cases Discussed
- Chamber of Tax Consultants & Others vs. CIT (Exemption) (Bombay High Court), Writ Petition (L) No. 7587 of 2026
- IAA Rajesh Foundation vs. CIT (Exemption) (ITAT Mumbai), order dated 15.05.2026
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeals, being ITA Nos. 7520/Mum/2026, and 7521/Mum/2026, have been preferred by the assessee trust against separate orders passed by the learned CIT (Exemption) in relation to grant of registration under section 12AB and approval under section 80G of the Income Tax Act, 1961. Since the appeals arise out of the same set of proceedings, involve common facts and revolve around an interconnected controversy relating to renewal of registration and approval granted to the assessee trust, they were heard together and are being disposed of by way of this consolidated order.
2. The facts, in brief, are that the assessee trust had applied for renewal of registration under section 12AB as well as approval under section 80G of the Act. The learned CIT (Exemption), vide separate orders dated 15.04.2026, rejected both the applications primarily on the ground that the trust deed did not contain any specific clause declaring the trust to be irrevocable or providing that the trust property stood irrevocably dedicated for charitable purposes. According to the learned CIT (Exemption), in the absence of an express irrevocability clause, the assessee did not satisfy the statutory requirements contemplated under section 332(2)(v) of the Income Tax Act, 2025, and consequently the applications for registration and approval were liable to be rejected. Aggrieved by the aforesaid order, the assessee preferred ITA No.7520/Mum/2026 before the Tribunal.
3. During the pendency of the aforesaid appeal, the issue relating to rejection of registration applications solely on the ground of absence of an express irrevocability clause in the trust deed came up for consideration before the Hon’ble Bombay High Court in Writ Petition (L) No. 7587 of 2026 in the case of Chamber of Tax Consultants & Others vs. CIT (Exemption). The Hon’ble High Court, after considering the legal framework governing public charitable trusts, held that a public charitable trust is presumed to be irrevocable by operation of law unless the trust instrument itself contains a specific provision enabling revocation. The Hon’ble High Court further directed the authorities not to reject applications for registration, renewal or approval merely on the ground that the trust deed does not contain an explicit irrevocability clause. The aforesaid judgment thus directly addressed the very foundation on which the assessee’s applications had earlier been rejected.
4. In compliance with the aforesaid judgment of the Hon’ble Bombay High Court, the learned CIT (Exemption) subsequently granted registration under section 12AB and approval under section 80G to the assessee trust. However, while granting such registration and approval, the learned CIT (Exemption) recorded certain observations stating that the Revenue was contemplating challenge to the judgment of the Hon’ble Bombay High Court before the Hon’ble Supreme Court and, therefore, by way of abundant caution, the assessee trust, donor entities and other stakeholders were being informed that the registration, approval and consequential benefits flowing therefrom would remain subject to the ultimate outcome of the proceedings before the Hon’ble Supreme Court. It is against these observations and caveats incorporated in the subsequent grant orders that the assessee has preferred ITA No. 7521/Mum/2026.
5. Before us, the learned counsel submitted that once the jurisdictional High Court had conclusively settled the issue and the learned CIT (Exemption) had acted upon such binding directions by granting registration and approval, no qualification or conditional rider could have been attached to the grant itself. It was submitted that the observations made by the learned CIT (Exemption) create an atmosphere of uncertainty regarding the legal status of the registration and approval and are likely to adversely impact the activities of charitable institutions, particularly in relation to receipt of donations from existing and prospective donors. It was further submitted that charitable organisations depend substantially upon public confidence and statutory recognition and any such cautionary remarks in the order granting approval have the potential of creating unwarranted apprehensions amongst stakeholders. Reliance was also placed upon the decision of the Co ordinate Bench in the case of IAA Rajesh Foundation vs. CIT (Exemption), order dated 15.05.2026, wherein an identical caveat incorporated while granting registration was directed to be deleted.
6. We have carefully considered the rival submissions and have perused the orders placed before us. In so far as ITA No.7520/Mum/2026 is concerned, we find that the grievance originally raised by the assessee in those appeals no longer survives for adjudication. The rejection orders dated 15.04.2026, which formed the subject matter of challenge before us, have effectively lost their operative significance once the learned CIT (Exemption), pursuant to the judgment of the Hon’ble Bombay High Court, granted registration under section 12AB and approval under section 80G. The substantive relief sought by the assessee in those appeals already stands granted. No consequential prejudice now survives arising from the original rejection orders. Accordingly, without entering into the merits of the rejection orders any f urther, we hold that ITA No.7520/Mum/2026 has become infructuous on account of subsequent events and are dismissed as such.
7. Coming to ITA No. 7521/Mum/2026, the issue w hich requires our adjudication is whether the learned CIT (Exemption), while granting registration and approval in compliance with a binding judgment of the jurisdictional High Court, was justified in attaching a caveat that the registration and consequential benefits would remain subject to the outcome of a proposed challenge before the Hon’ble Supreme Court. In our considered opinion, such an approach is legally unsustainable and cannot be approved.
8. It is a fundamental principle governing judicial discipline that a judgment rendered by the jurisdictional High Court is binding upon all authorities functioning within its territorial jurisdiction so long as it continues to hold the field. The efficacy and binding character of such a judgment do not depend upon whether one of the parties proposes to challenge it before a superior forum. A contemplated appeal, a proposed special leave petition or even a pending challenge before a higher court does not dilute the binding force of the judgment unless its opera tion is stayed, modified or reversed by a competent judicial authority. Therefore, once the learned CIT (Exemption) accepted the binding nature of the judgment of the Hon’ble Bombay High Court and proceeded to grant registration and approval on that basis, it was not open to simultaneously dilute the effect of such grant by incorporating observations founded merely upon a possible future contingency.
9. We further find that the observations incorporated by the learned CIT (Exemption) travel beyond the scop e of the directions issued by the Hon’ble Bombay High Court. The High Court directed that applications should not be rejected solely on the ground of absence of an express irrevocability clause. The learned CIT (Exemption), while implementing those directions, was required to grant or refuse registration in accordance with law and on the basis of the facts before him. Once registration and approval were granted, the statutory recognition so conferred could not be converted into a tentative or conditional recognition by referring to a possible future challenge. Such observations do not emanate from any provision of the Act and are unsupported by any statutory mechanism permitting a registration order to remain perpetually subject to an anticipated future event.
10. We also find considerable force in the submission of the learned counsel that such caveats have wider practical ramifications. Registration under section 12AB and approval under section 80G are not merely procedural recognitions. They constitute the foundation upon which charitable institutions organise their activities, mobilise resources and secure public participation. Donors, contributors and stakeholders often evaluate the legal status of a charitable institution on the basis of the registration and approvals granted under the Act. An observation by the statutory authority itself suggesting that the approval presently granted may remain subject to an uncertain future outcome is capable of creating avoidable ambiguity and hesitation in the minds of stakeholders. Such uncertainty is neither contemplated by the statutory scheme nor warranted by the judicial directions pursuant to which the approval has been granted.
11. We also note that an identical issue had come up before the Co ordinate Bench in the case of IAA Rajesh Foundation vs. CIT (Exemption), vide order dated 15.05.2026, wherein the Tribunal observed that once registration has been granted pursuant to the binding judgment of the jurisdictional High Court, the authority cannot append qualifying observations based merely upon a proposed challenge before the Hon’ble Supreme Court. The Tribunal accordingly directed deletion of such caveats. The principle emerging from the said decision fully supports the assessee’s grievance before us.
12. Having regard to the entirety of the facts and circumstances of the case, we are of the considered view that the observations made by the learned CIT (Exemption) stating that the registration, approval and consequential tax benefits would remain subject to t he outcome of proceedings before the Hon’ble Supreme Court cannot be sustained. Such observations neither emanate from the statutory provisions governing registration under section 12AB and approval under section 80G nor can they coexist with a grant made in compliance with a binding judgment of the jurisdictional High Court. The validity and efficacy of the registration granted to the assessee must be examined with reference to the law as it exists on the date of grant and not on the basis of speculative future developments. Needless to state, if at any future point of time any superior judicial forum lays down a different legal position, the consequences, if any, would follow in accordance with law. However, such hypothetical future possibilities cannot furnish a legal basis for qualifying a registration that presently stands validly granted.
13. Accordingly, while ITA No. 7520 /Mum/2026 is dismissed as having become infructuous, the impugned observations and caveats contained in the orders granting registration under section 12AB and approval under section 80G, which make such registration and consequential benefits subject to the outcome of a proposed challenge before the Hon’ble Supreme Court, are directed to be deleted. The assessee shall be entitled to registration under section 12AB and approval under section 80G as granted by the learned CIT (Exemption) without any such qualification, restriction or conditional rider.
14. In the result, ITA Nos. 7520/Mum/2026 is dismissed as infructuous, whereas ITA N o. 7521/Mum/2026 is allowed.
Order pronounced on 10 th July, 2026.
