Jamshed & Shirin Guzder Trust Vs CIT (ITAT Mumbai)
Sections 12AB and 80G – CIT(E) Cannot Make Registration Conditional Upon Proposed Supreme Court Appeal – Absence of Express Irrevocability Clause Cannot Defeat Registration of Charitable Trust – Mumbai ITAT
Background of the Case
The assessee, Jamshed & Shirin Guzder Trust, was a charitable trust registered under the Maharashtra Public Trusts Act, 1950. The trust had applied for registration under Section 12AB and approval under Section 80G of the Income-tax Act, 1961.
The Commissioner of Income Tax (Exemptions), Mumbai, by two separate orders dated 13.04.2026, granted registration under Section 12AB(1)(b) for Assessment Years 2027-28 to 2036-37 and approval under Section 80G(5) for Assessment Years 2027-28 to 2031-32.
However, the registration and approval were accompanied by certain conditions which effectively made the consequential tax benefits dependent upon the outcome of a proposed appeal by the Revenue before the Supreme Court.
The controversy arose because the trust deed did not contain an express clause declaring that the transfer of trust property was irrevocable for all times.
The CIT(E) referred to Section 332(2)(b) of the Income-tax Act, 2025, and expressed reservations regarding the absence of an explicit irrevocability clause.
Interestingly, the CIT(E) was aware of the judgment of the Bombay High Court in The Chamber of Tax Consultants & Others v. CIT(E), Writ Petition (L) No. 7587 of 2026, wherein the High Court had held that a public charitable trust is deemed to be irrevocable by operation of law unless the trust instrument expressly provides for revocation.
Although the CIT(E) granted registration and approval in compliance with the High Court judgment, he incorporated additional conditions stating that the applicability and consequential tax benefits would remain subject to the outcome of proceedings proposed to be initiated before the Supreme Court.
Aggrieved by these conditions, the assessee approached the Tribunal.
CIT(E) Grants Registration but Makes Tax Benefits Conditional Upon Supreme Court Proceedings
The CIT(E), while granting registration under Section 12AB, incorporated Condition No. 15, recording that the trust deed did not contain an express clause declaring the transfer of trust property to be irrevocable.
The CIT(E) acknowledged the Bombay High Court judgment holding that an express irrevocability clause was not mandatory for a public charitable trust where irrevocability followed by operation of law.
Nevertheless, the CIT(E) stated that, by way of abundant caution, the applicability and consequential tax benefits of registration with effect from 01.04.2026 would remain subject to the outcome of the decision of the Supreme Court.
A substantially identical condition was incorporated as Condition No. 5 in the order granting approval under Section 80G.
Thus, although the registration and approval were formally granted, the Revenue sought to qualify their operation by reference to possible future proceedings before the Supreme Court.
The assessee challenged these conditions without disputing the registration and approval otherwise granted.
Assessee Contends That Public Charitable Trust Is Irrevocable by Operation of Law
Before the Tribunal, the assessee contended that a public charitable trust registered under the Maharashtra Public Trusts Act, 1950, is inherently irrevocable by operation of law unless the trust instrument expressly provides otherwise.
The assessee submitted that the assets of such a trust cannot revert to the settlor and must remain dedicated to charitable purposes in accordance with the applicable law.
Reliance was placed upon the Bombay High Court judgment in The Chamber of Tax Consultants & Others v. CIT(E).
The assessee argued that once the jurisdictional High Court had settled the issue, the CIT(E) was bound to follow that decision.
Merely because the Revenue proposed to challenge the judgment before the Supreme Court, the CIT(E) could not dilute the legal effect of the registration and approval already granted.
The assessee therefore requested the Tribunal to expunge the objectionable observations contained in Condition No. 15 relating to Section 12AB and Condition No. 5 relating to Section 80G.
Tribunal Holds That Jurisdictional High Court Judgment Remains Binding Unless Stayed or Reversed
The Mumbai Tribunal examined the nature of the conditions imposed by the CIT(E).
The Tribunal observed that there was no dispute regarding the grant of registration under Section 12AB or approval under Section 80G.
The limited controversy concerned whether the CIT(E), having granted registration and approval in compliance with the Bombay High Court judgment, could simultaneously make the statutory benefits conditional upon the outcome of proceedings proposed before the Supreme Court.
The Tribunal held that a judgment of the jurisdictional High Court is binding upon all authorities functioning within its territorial jurisdiction unless its operation is stayed, reversed or modified by a superior Court.
In the present case, there was nothing on record to establish that the Bombay High Court judgment had been stayed or reversed.
The CIT(E) had merely recorded that the Revenue proposed to move a Special Leave Petition before the Supreme Court.
The Tribunal categorically observed:
“A proposal or intention to challenge a binding judgment before a superior Court cannot, by itself, render the operation of such judgment conditional.”
Therefore, the CIT(E) was not justified in making the applicability of registration and approval dependent upon the outcome of prospective Supreme Court proceedings.
CIT(E) Cannot Grant Registration in Compliance With High Court Judgment and Simultaneously Dilute Its Benefits
The Tribunal further observed that the CIT(E) had expressly granted registration and approval in compliance with the binding directions of the Bombay High Court.
Having accepted the binding nature of that judgment, the CIT(E) could not simultaneously dilute the consequences of such registration and approval by making the statutory benefits contingent upon future proceedings before the Supreme Court.
Such a qualification would create uncertainty regarding registration and approval which had otherwise been unequivocally granted.
The Tribunal also noted that the CIT(E) had not rejected the assessee’s applications.
On the contrary, registration under Section 12AB and approval under Section 80G had already been granted for the prescribed assessment years.
Therefore, the issue was not whether the assessee was entitled to registration or approval, but whether the additional qualifications imposed by the CIT(E) were legally sustainable.
The Tribunal held that they were not.
Tribunal Directs Deletion of Objectionable Conditions Under Sections 12AB and 80G
The Tribunal held that the observations contained in Condition No. 15 of the order granting registration under Section 12AB, insofar as they suggested that the eligibility conditions were not satisfied merely because the trust deed lacked an express irrevocability clause, could not be sustained.
Similarly, the condition making the applicability and consequential tax benefits dependent upon the outcome of proceedings before the Supreme Court was held to be unsustainable.
Accordingly, the Tribunal directed the CIT(E) to expunge the objectionable observations contained in Condition No. 15.
The registration under Section 12AB was directed to remain undisturbed and to operate in accordance with law, subject to the remaining applicable conditions.
Applying the same reasoning, the Tribunal directed the CIT(E) to expunge the corresponding observations contained in Condition No. 5 of the order granting approval under Section 80G.
The approval already granted under Section 80G was also directed to remain undisturbed.
Consequently, both appeals filed by the assessee were allowed.
Author’s Comments – Filing an Appeal Does Not Suspend the Binding Force of a High Court Judgment
This decision assumes significance in the context of the registration and approval of charitable trusts, particularly following the controversy surrounding the requirement of an express irrevocability clause in trust deeds.
The Bombay High Court, in The Chamber of Tax Consultants & Others v. CIT(E), had held that a public charitable trust is deemed to be irrevocable by operation of law unless the trust instrument expressly confers a power of revocation.
The principle is particularly relevant to public charitable trusts governed by the Maharashtra Public Trusts Act, 1950.
The absence of an express irrevocability clause cannot automatically lead to the conclusion that a public charitable trust is revocable.
Where the governing law itself prevents the trust property from reverting to the settlor and requires the property to remain dedicated to charitable purposes, the irrevocable character of the trust may arise by operation of law.
However, an even more important principle emerging from the present decision concerns judicial discipline and the binding nature of decisions of jurisdictional High Courts.
The CIT(E) was conscious of the Bombay High Court judgment and granted registration and approval in purported compliance with that decision.
Yet, by incorporating conditions making the consequential tax benefits dependent upon the outcome of proposed Supreme Court proceedings, the CIT(E) effectively attempted to qualify the operation of the binding judgment.
If the mere intention of the Revenue to challenge a High Court judgment were sufficient to make its operation conditional, the binding nature of judicial precedents would become meaningless.
An authority cannot treat a judgment as binding for the limited purpose of formally granting relief while simultaneously withholding certainty regarding the consequences of that relief.
The Revenue undoubtedly has the right to challenge an adverse judgment before the Supreme Court. However, the right to challenge a judgment and the obligation to comply with that judgment are two entirely different matters.
Until the judgment is stayed, reversed or modified by a superior Court, it continues to bind the authorities within the jurisdiction.
Further, even the mere filing or pendency of a Special Leave Petition does not, by itself, operate as a stay of the judgment under challenge.
This distinction is important because the condition imposed by the CIT(E) referred only to proceedings proposed to be pursued before the Supreme Court. There was no material establishing that the Bombay High Court judgment had been stayed or reversed.
The Tribunal therefore rightly distinguished between a possible future change in the legal position and the law binding upon the authorities at the time of passing the order.
Another important aspect is that the assessee had not challenged the grant of registration or approval itself. The appeals were confined to the objectionable conditions appended to otherwise favourable orders.
The Tribunal recognised that such conditions could independently prejudice the assessee by creating uncertainty regarding the statutory benefits flowing from registration and approval.
Therefore, the Tribunal directed deletion of the objectionable conditions without disturbing the substantive registration and approval already granted.
This also establishes that an assessee need not necessarily accept every condition incorporated in an otherwise favourable registration order, particularly where such a condition is contrary to binding judicial precedent.
At the same time, the decision does not mean that registration under Section 12AB or approval under Section 80G becomes unconditional in every respect. The trust must continue to satisfy the applicable statutory requirements, and the remaining valid conditions continue to operate.
The legal principle emerging from the decision is that a tax authority cannot circumvent or dilute a binding jurisdictional High Court judgment by making relief conditional upon a proposed appeal before the Supreme Court. Judicial discipline requires compliance with the law as it stands, not with the law as the Revenue hopes it may become after further litigation.
Cases Discussed
- The Chamber of Tax Consultants & Others v. CIT(E) — Bombay High Court, Writ Petition (L) No. 7587 of 2026. The jurisdictional High Court held that a public charitable trust is deemed irrevocable by operation of law unless its instrument expressly provides a power of revocation, and that applications cannot be rejected solely for absence of an express irrevocability clause.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
Present appeals are filed by the assessee against two separate orders, both dated 13/04/2026, passed by the Ld. Commissioner of Income Tax (Exemptions), Mumbai [“Ld. CIT(E)”], granting registration u/s 12AB and approval u/s 80G of the Income-tax Act, 1961 (“the Act”), respectively, subject to certain conditions. The grievance of the assessee in both appeals is confined to the observations incorporated by the Ld.CIT(E) making the registration/approval and the consequential tax benefits conditional upon the outcome of the proceedings proposed to be pursued by the Revenue before the Hon’ble Supreme Court.
ITA No. 7732/Mum/2026 – Approval u/s 80G
2. The assessee has raised the following grounds:
“1) The learned Commissioner of Income Tax (Exemption) erred in granting conditional approval u/s. 80G of the Act by adding condition in clause no. 5.
2. The learned Commissioner of Income Tax (Exemptions) erred in stating that applicability and consequential tax benefits of this registration/approval with effect from 01st April, 2026 onwards, remain subject to outcome of the decision of Hon’ble Supreme Court in the matter of the Special Leave Petition the revenue is preferring to move against the Order of the Bombay High Court in the Writ Petition(L) No.7587 of 2026 in the case of The Chamber of Tax Consultants & Ors v. The Commissioner of Income Tax (Exemption).
3. The learned Commissioner of Income Tax (Exemptions) ought to have considered that once the Appellant trust is registered under the Maharashtra Public Trusts Act, 1950, the assets of a public charitable trust in Maharashtra can never revert to the settlor and must be transferred to another trust with similar objects. This makes them inherently irrevocable by operation of law.
4. The Appellant craves leave to amend, alter and/or add any other ground of appeal.”
The grounds thus challenge, principally, the conditional nature of the approval granted by the Ld. CIT(E).
2.2 ITA No. 7733/Mum/2026 – Registration u/s 12AB
The assessee has raised grounds challenging, inter alia, Condition No. 15 incorporated by the Ld. CIT(E), whereby registration u/s 12AB was made conditional upon the outcome of the proceedings proposed to be pursued by the Revenue before the Hon’ble Supreme Court. The assessee has further contended that a public charitable trust registered under the Maharashtra Public Trusts Act, 1950 is irrevocable by operation of law and that, there being no change in its objects or activities, the Ld. CIT(E) ought not to have imposed the impugned condition.
3. Brief facts of the case are that, the assessee is a charitable trust. It had preferred applications before the Ld.CIT(E) seeking registration u/s 12AB and approval u/s 80G of the Act. Insofar as registration u/s 12AB is concerned, the Ld.CIT(E), vide order dated 13/04/2026, granted registration u/s.12AB(1)(b) bearing Unique Registration Number AAATJ2630H27MB01 for Assessment Years 2027-28 to 2036-37. The said registration was, however, made subject to the conditions appearing in the annexure to the order. Condition No. 15 records that the instrument of trust does not contain an express clause declaring transfer of the trust property to be irrevocable for all times. The Ld.CIT(E), after referring to the decision of the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. CIT(E), Writ Petition (L) No. 7587 of 2026, nevertheless granted registration but further observed that the applicability and consequential tax benefits thereof w.e.f. 01/04/2026 would remain subject to the outcome of the decision of the Hon’ble Supreme Court.
3.1. Similarly, in respect of the application for approval u/s 80G, the Ld.CIT(E), vide separate order dated 13/04/2026, granted approval under clause (ii) of the second proviso to section 80G(5) bearing Unique Registration Number AAATJ2630H27MB02 for Assessment Years 2027-28 to 2031-32. The approval was also made subject to the conditions contained in the annexure. Under Condition No.5, observations substantially identical to those appearing in Condition No.15 of the registration order were incorporated, whereby consequential tax benefits flowing from the approval were stated to remain subject to the outcome of the proceedings before the Hon’ble Supreme Court.
Aggrieved by the aforesaid conditional observations, while otherwise accepting the registration and approval granted to it, the assessee is in appeal before us.
4. The Ld. AR submitted that the registration as well as approval had admittedly been granted by the Ld.CIT(E) and, therefore, the limited grievance of the assessee was against Condition No. 15 of the order granting registration u/s 12AB and Condition No. 5 of the order granting approval u/s 80G.
It was submitted that the Ld.CIT(E) himself took note of the decision rendered by the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. CIT(E), Writ Petition (L) No. 7587 of 2026, wherein the Hon’ble Bombay High Court held that a public charitable trust is deemed to be irrevocable by operation of law unless the instrument of trust expressly confers a power of revocation.
4.1. It was further contended that, despite granting registration/approval in compliance with the binding decision of the Hon’ble jurisdictional High Court, the Ld.CIT(E) proceeded to make the consequential benefits conditional upon the outcome of proceedings proposed to be preferred before the Hon’ble Supreme Court. The Ld.AR submitted that such an observation effectively diluted the registration and approval already granted and created uncertainty regarding the statutory benefits flowing therefrom.
4.2. It was accordingly prayed that the objectionable observations contained in Condition No. 15 of the order u/s 12AB and Condition No. 5 of the order u/s 80G be expunged, without disturbing the registration and approval otherwise granted to the assessee.
4.4 The Ld. DR relied upon the orders passed by the Ld. CIT(E).
We have perused the submissions advanced by both sides in light of the record placed before us.
5. The short controversy before us is whether, having granted registration u/s 12AB and approval u/s 80G in accordance with the decision of the Hon’ble Bombay High Court, the Ld.CIT(E) was justified in simultaneously making the efficacy of such registration/approval and consequential tax benefits subject to the outcome of proceedings proposed to be pursued by the Revenue before the Hon’ble Supreme Court.
5.1. There is no dispute that the substantive applications filed by the assessee have been accepted. The order granting registration expressly records that registration u/s 12AB(1)(b) has been granted to the assessee for Assessment Years 2027-28 to 2036-37. Likewise, approval u/s 80G(5) has been granted for Assessment Years 2027-28 to 2031-32. Thus, the assessee is not challenging any rejection of registration or approval. Its grievance is confined to the qualification appended thereto.
5.2 We note that in Condition No. 15 of the registration order, the Ld. CIT(E) observed that the instrument of trust does not contain an explicit clause stating that transfer of the property under trust is irrevocable for all times. Reference was thereafter made to section 332(2)(b) of the Income Tax Act, 2025. The Ld.CIT(E), however, himself recorded the decision of the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. CIT(E), Writ Petition (L) No. 7587 of 2026, wherein, as recorded in the impugned order, it was held that a public charitable trust is deemed to be irrevocable by operation of law unless the trust instrument expressly provides a power of revocation and that the Department could not reject applications for registration/renewal merely for absence of an explicit irrevocability clause in the trust deed/instrument.
5.3. Having recorded the aforesaid position, the Ld. CIT(E) granted registration in what has expressly been described as respectful compliance with the binding judicial directions of the Hon’ble Bombay High Court. However, immediately thereafter, the Ld. CIT(E) observed that the assessee and other stakeholders were being informed, by way of abundant caution, that the applicability and consequential tax benefits of the registration/approval w.e.f. 01/04/2026 would remain subject to the outcome of the decision of the Hon’ble Supreme Court.
An identical stipulation has been incorporated in Condition No. 5 of the order granting approval u/s 80G.
5.4. In our considered view, the aforesaid qualification cannot be sustained. The judgment of the Hon’ble jurisdictional High Court is binding upon the authorities functioning within its territorial jurisdiction unless its operation is stayed, reversed or modified by a superior Court. There is nothing in the material placed before us to suggest that the judgment relied upon by the Ld. CIT(E) stood stayed or reversed at the relevant point of time. The impugned orders themselves merely record that the Revenue was preferring to move a Special Leave Petition against the decision of Hon’ble Bombay High Court.
A proposal or intention to challenge a binding judgment before a superior Court cannot, by itself, render the operation of such judgment conditional.
5.5. Once the Ld. CIT(E) accepted the binding character of the judgment of the Hon’ble Bombay High Court and granted registration/approval in compliance therewith, it was not open to him to simultaneously dilute the consequence of such registration/approval by making the statutory benefits flowing therefrom contingent upon the outcome of prospective proceedings before the Hon’ble Supreme Court. Such a qualification creates uncertainty regarding an approval which has otherwise been unequivocally granted.
5.6. We also find that the operative part of both orders does not reject the assessee’s applications. On the contrary, the registration and approval have been specifically granted. In the order u/s 80G, the Ld. CIT(E) has expressly recorded that the approval is granted for the Assessment Years mentioned therein subject to the conditions contained in the annexure. Likewise, registration u/s 12AB has also been granted subject to the conditions appearing in the annexure. The limited issue, therefore, is the sustainability of the impugned caveat and not the entitlement of the assessee to registration/approval as such.
6. In view of the foregoing discussion, we hold that the observations contained in Condition No. 15 of the order dated 13/04/2026 granting approval under section 12AB, insofar as they state that the eligibility conditions are not satisfied merely for absence of an explicit irrevocability clause and further make the applicability and consequential tax benefits of the registration subject to the outcome of the proceedings before the Hon’ble Supreme Court, cannot be sustained.
6.1. We accordingly direct the Ld. CIT(E) to expunge the aforesaid observations contained in Condition No. 15.
The registration u/s 12AB granted to the assessee shall otherwise remain undisturbed and shall operate in accordance with law and subject to the remaining applicable conditions contained in the impugned order.
Accordingly, the substantive grounds raised by the assessee are allowed.
7. In respect of the approval granting 80G approval, the observations contained in Condition No. 5 is also identical to those considered by us hereinabove while adjudicating the appeal relating to registration u/s 12AB.
The approval has admittedly been granted under clause (ii) of the second proviso to section 80G(5), and the impugned qualification is founded upon the same reasoning concerning absence of an explicit irrevocability clause and the proposed challenge to the judgment of the Hon’ble jurisdictional High Court.
7.1 For the reasons recorded in paragraphs 5 and 6 hereinabove, which shall apply mutatis mutandis to the present appeal, we direct the Ld. CIT(E) to expunge the corresponding observations contained in Condition No. 5 of the order dated 13/04/2026.
The approval u/s 80G already granted to the assessee shall otherwise remain undisturbed and shall operate in accordance with law and subject to the remaining applicable conditions.
Accordingly, the substantive grounds raised by the assessee in this appeal are also allowed.
In the result, both the appeals filed by the assessee are allowed in terms indicated hereinabove.
Order pronounced in the open court on 08/10/2026.
