S R Foundation Vs CIT (Exemptions) (ITAT Mumbai)
Proposed Supreme Court Challenge Cannot Make Section 12AB Registration and 80G Approval Conditional
Registration Granted, but Benefits Made Conditional
The Mumbai Tribunal held that the Commissioner of Income-tax (Exemptions) cannot make the operation of registration under section 12AB or approval under section 80G conditional upon the outcome of proceedings which the Revenue proposes to pursue before the Supreme Court.
The Commissioner had already granted both registration and approval. The dispute concerned an additional condition stating that their applicability and consequential tax benefits would remain subject to the Supreme Court’s decision.
The Tribunal deleted this condition, emphasising that a statutory authority must exercise its powers within the enactment. An anticipated challenge to a binding judicial decision does not authorise an additional restriction which the statute itself does not prescribe.
Absence of an Express Irrevocability Clause
S R Foundation, a public charitable trust, applied for renewal of its registration. By an order dated 7 April 2026, issued in Form 10AD, the CIT(E) granted registration under section 12AB(1)(b) for AYs 2027-28 to 2036-37. The activities were expressly recorded as charitable.
While examining the application, the Commissioner noticed that the trust deed did not contain an explicit clause declaring the transfer of property to the trust irrevocable for all time. He referred to section 332(2)(b) of the Income-tax Act, 2025, observing that it contemplated an irrevocable trust.
However, the Commissioner also acknowledged the prevailing jurisdictional High Court decision that a public charitable trust is deemed irrevocable by operation of law unless its instrument expressly confers a power of revocation. Accordingly, absence of an express irrevocability clause could not, by itself, justify rejection of registration or renewal.
Registration was therefore granted. Nevertheless, because the Revenue proposed to file a Special Leave Petition, its applicability and tax benefits were made conditional upon the Supreme Court’s outcome.
The Trust’s Objection
The trust contended that section 12AB did not authorise the Commissioner to attach such a contingent condition after granting registration.
It also pointed out that absence of an irrevocability clause is different from the presence of a revocation clause. There was no finding that the deed permitted trustees to revoke the trust or appropriate its property for their own benefit.
The trust further argued that the Act already contained safeguards permitting cancellation or withdrawal of registration for specified violations. The Commissioner could not supplement those statutory safeguards with a separate condition based on a possible future judicial development.
Statutory Powers Cannot Be Enlarged by Administrative Conditions
The Tribunal accepted the trust’s submissions. It observed that section 12AB does not confer an unrestricted or inherent power to impose independent conditions beyond those contemplated by law.
The statutory scheme separately regulates cancellation or withdrawal through sections 12AB(4) and 12AB(5). Where specified violations occur, activities are non-genuine or the trust acts contrary to its objects, the authorities may take action through the prescribed mechanism.
The existence of that mechanism does not authorise an additional precautionary condition merely because the legal position might change in future.
The Tribunal also made a significant observation concerning prescribed forms: a procedural form or administrative prescription cannot confer a substantive power absent from the enactment. The Commissioner derives authority from the statutory provision, and the form cannot enlarge it.
Earlier Decisions Followed
The Tribunal relied on Chamber of Indian Charitable Trust v. PCIT, ITA Nos. 2168 and 2169/Mum/2021, decided on 28 September 2022. That decision held that section 12AB does not empower the Commissioner to stipulate conditions not expressly provided under the Act, and that Rule 17A or the prescribed form cannot override the substantive provision.
It also followed Bai Navajbai Tata Zoroastrian Girls School v. CIT(E), (2022) 141 taxmann.com 62, which held that conditions concerning matters already governed by statutory provisions cannot operate as independent legally enforceable conditions merely because the Commissioner inserts them in the registration order.
Binding Law Cannot Be Kept in Suspense
The Tribunal noted that the Commissioner had granted registration in accordance with the jurisdictional High Court’s prevailing decision.
A mere proposal to challenge that decision before the Supreme Court could not provide a statutory basis for conditional registration. Unless the legal position is modified, stayed or reversed by a competent higher judicial forum, the authorities must act according to the law holding the field.
The disputed condition was consequently deleted.
The same reasoning applied to the section 80G approval, granted for AYs 2027-28 to 2031-32. Although some appeal grounds referred to rejection, the Tribunal clarified that approval had actually been granted; only the attached condition was under challenge. Both appeals were allowed.
Author’s Comments
Following a binding judgment means giving effect to it, not granting relief with an administrative reservation that keeps its benefits uncertain. The Department’s intention to appeal cannot itself create a power to impose conditions.
The decision also highlights the importance of reading the trust deed correctly. A missing declaration of irrevocability cannot automatically be equated with an express right of revocation.
At the same time, deletion of the condition does not grant automatic exemption for every receipt or automatic deduction for every donation. Registration and approval continue to operate subject to the applicable statutory requirements. The Tribunal removed an unauthorised contingency while preserving the Revenue’s power to act in accordance with law whenever the prescribed grounds arise.
Cases Discussed
- Chamber of Indian Charitable Trusts Vs PCIT (ITAT Mumbai) — ITA Nos. 2168 & 2169/Mum/2021; Order dated 28/09/2022. Followed for the proposition that the Commissioner cannot attach conditions to registration under section 12AB beyond those prescribed under the Act and that Rule 17A or the prescribed form cannot enlarge statutory powers.
- Bai Navajbai Tata Zoroastrian Girls School Vs CIT(E) (ITAT Mumbai) — (2022) 141 taxmann.com 62. Followed for the principle that conditions already regulated by statutory provisions cannot become independent legally enforceable conditions merely because they are inserted in registration or approval orders.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT MUMBAI
The present appeals filed by the assessee arise out of two separate orders, both dated 07/04/2026, passed by the Ld. Commissioner of Income Tax (Exemptions), Mumbai [“Ld. CIT(E)”], granting registration u/s 12AB(1)(b) of the Income-tax Act, 1961 (“the Act”) and approval under clause (ii) of the second proviso to section 80G(5) of the Act, respectively, subject, inter alia, to a condition that the applicability and consequential tax benefits flowing from such registration/approval would remain subject to the outcome of proceedings before the Hon’ble Supreme Court.
2. Since both the appeals pertain to the same assessee, arise out of the same factual matrix and involve an identical issue, they were heard together and are being disposed of by way of this consolidated order.
ITA No. 7265/Mum/2026
2.1. The assessee has raised the following grounds of appeal:
“1. The learned Commissioner of Income Tax (Exemptions), Mumbai erred in law and on facts in confirming the renewal application for registration under section 12AB of the Income tax Act, 1961 subject to outcome of Hon. Supreme court.
2. The learned Commissioner erred in passing the order solely on the ground that the trust deed does not contain an express clause of irrevocability.
3. The learned Commissioner failed to appreciate that the appellant is a public charitable trust registered under the Bombay Public Trusts Act, 1950, and is governed by statutory provisions which regulate its administration, modification and dissolution.
4. The learned Commissioner failed to appreciate that in the case of a public trust registered under the Bombay Public Trusts Act, the trust property cannot be distributed among trustees or members and remains impressed with charitable obligation.
5. The learned Commissioner erred in not appreciating that at the stage of granting registration under section 12AB, the scope of enquiry is limited to examining whether the objects are charitable and whether the activities are genuine, and does not extend to importing additional conditions not prescribed under the Act.
6. In view of the facts and circumstances of the case and the grounds stated above, the appellant respectfully prays that this Hon Tribunal may be pleased to direct the learned Commissioner to grant renewal of registration to the appellant trust under section 12AB of the Act.
7. The impugned order is arbitrary, unjust and contrary to the provisions of section 12AB and liable to be set aside.
8. The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal on or before disposal of the appeal.”
2.2. Though various grounds have been raised, the sole substantive grievance of the assessee is against the condition imposed by the Ld. CIT(E) while granting renewal of registration u/s 12AB of the Act.
3. Brief facts of the case are as under:-
The assessee is a charitable trust which had filed an application seeking renewal of registration u/s 12AB of the Act. The Ld. CIT(E), vide order dated 07/04/2026 passed in Form No. 10AD, granted registration u/s 12AB(1)(b) for A.Ys. 2027-28 to 2036-37. The nature of activities of the assessee has also been recorded as “Charitable” in the impugned order. While examining the application, the Ld. CIT(E) noticed that the instrument of trust did not contain an explicit clause affirming that transfer of property under the trust was irrevocable for all times. The Ld. CIT(E) referred to section 332(2)(b) of the Income Tax Act, 2025 and observed that an irrevocable trust was contemplated therein.
3.1. The Ld. CIT(E), however, also took note of the decision of the Hon’ble Jurisdictional High Court wherein it was 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 and that registration/renewal could not be rejected solely for absence of an explicit irrevocability clause. Accordingly, the Ld. CIT(E) granted registration to the assessee. However, it was further observed that the Revenue proposed to move a Special Leave Petition before the Hon’ble Supreme Court and, therefore, the applicability and consequential tax benefits of the registration w.e.f. 01/04/2026 were made subject to the outcome of the decision of the Hon’ble Supreme Court.
Aggrieved by the aforesaid condition, the assessee is in appeal before us.
4. The Ld. AR submitted that the Ld. CIT(E), having granted registration u/s 12AB, could not have imposed an additional condition which is not contemplated under the provisions of the Act. It was submitted that the scheme of section 12AB does not authorise the Ld. CIT(E) to make a valid registration conditional upon the outcome of future proceedings before a higher judicial forum.
4.1. The Ld. AR further submitted that the assessee is a public charitable trust and absence of an express clause of irrevocability cannot, by itself, mean that the trust is revocable. There is no finding in the impugned order that the trust deed contains any clause enabling the trustees to revoke the trust or appropriate the trust property for their own benefit.
4.2. It was further submitted that the provisions of the Act themselves contain adequate safeguards empowering the competent authority to cancel or withdraw registration in the event of specified violations or where the activities are found to be non-genuine. Therefore, according to the Ld. AR, the Ld. CIT(E) could not introduce a separate contingent condition over and above the statutory provisions. The Ld. AR accordingly prayed that the impugned condition be vacated.
5. The Ld. DR, on the other hand, relied upon the order passed by the Ld. CIT(E).
We have perused the submissions advanced by both sides in light of the record placed before us.
6. The primary issue before us relates to the legality and validity of the condition imposed by the Ld. CIT(E) while granting registration u/s 12AB of the Act. Admittedly, the registration itself has been granted. The limited controversy is whether, after granting such registration, the Ld. CIT(E) could make the applicability and consequential benefits thereof subject to the outcome of proceedings proposed to be pursued before the Hon’ble Supreme Court.
6.1. The scheme of section 12AB does not confer upon the Ld. CIT(E) any unrestricted or inherent power to impose independent conditions while granting registration, except to the extent contemplated by the statutory provisions. The power exercisable by the Ld. CIT(E) is a statutory power and has to remain confined to the four corners of the enactment. In this regard, we find it relevant that the power of cancellation or withdrawal of registration is separately regulated by section 12AB(4) and section 12AB(5) of the Act. Thus, where any specified violation takes place or the activities are found to be non-genuine or are not being carried out in accordance with the objects of the trust, the Act itself provides the mechanism by which appropriate action may be taken.
6.2. Therefore, where the Legislature has expressly prescribed the circumstances and manner in which registration may subsequently be cancelled or withdrawn, an additional precautionary or contingent condition cannot be read into the provisions merely on account of a possible future change in the legal position. We also observe that subordinate legislation or a prescribed form cannot enlarge the scope of the substantive statutory provision. The authority exercising jurisdiction under section 12AB derives its power from the section itself. A procedural form or administrative prescription cannot confer a substantive power which is otherwise absent from the enactment.
6.3. In Chamber of Indian Charitable Trust vs. PCIT, ITA Nos. 2168 & 2169/Mum/2021, order dated 28/09/2022, the Coordinate Bench has held that the language employed in section 12AB does not empower the Commissioner to stipulate conditions while granting registration which are not otherwise expressly provided under the Act. It was further held that Rule 17A or the prescribed form cannot override or expand the scope of the substantive provisions contained in section 12AB.
6.4. Similarly, in Bai Navajbai Tata Zoroastrian Girls School vs. CIT(E) reported in (2022) 141 taxmann.com 62 (Mumbai-Trib.), the Coordinate Bench held that where conditions relating to the conduct of the trust or circumstances warranting cancellation are already governed by specific provisions of law, such conditions imposed by the Commissioner cannot operate as independent legally enforceable conditions.
6.5. Applying the aforesaid principles to the facts before us, we find that the Ld. CIT(E) has admittedly granted registration to the assessee. The consequential benefits flowing from such registration cannot thereafter be kept in a suspended or conditional state merely because the Revenue proposes to challenge the prevailing judicial position before the Hon’ble Supreme Court.
6.6. The impugned order itself records the prevailing position declared by the Hon’ble Jurisdictional High Court that absence of an express irrevocability clause in the instrument of a public charitable trust cannot, by itself, justify rejection of registration where there is no express power of revocation. The Ld. CIT(E), acting in accordance with the said binding judicial position, granted registration. Once such registration has been granted, the mere proposal of the Revenue to challenge the decision before the Hon’ble Supreme Court cannot constitute a statutory basis for making the registration conditional. Unless and until the prevailing legal position is modified, stayed or reversed by a competent higher judicial forum, the authorities are required to act in accordance with the law presently holding the field.
6.7. We further note that adequate safeguards already exist under the Act. The impugned order itself provides that the registration is liable to be withdrawn where the activities are found to be non-genuine, where they are not carried out in accordance with the conditions prescribed under law, where registration has been obtained by fraud or misrepresentation, or where the assessee violates any statutory condition.
6.8. Thus, the apprehension sought to be addressed by the additional condition is already taken care of by the statutory scheme. If, at any future point of time, any circumstance arises which permits action under the relevant provisions of the Act, the Revenue shall always be at liberty to proceed in accordance with law. That, however, cannot justify introduction of an additional contingent condition at the stage of grant of registration. We therefore hold that the condition making the applicability and consequential tax benefits of the registration subject to the outcome of proceedings before the Hon’ble Supreme Court is not sustainable.
We accordingly delete the impugned condition imposed while granting registration u/s 12AB of the Act.
Accordingly, the appeal filed by the assessee in ITA No. 7265/Mum/2026 stands allowed.
ITA No. 7266/Mum/2026
7. This appeal pertains to approval granted to the assessee under clause (ii) of the second proviso to section 80G(5) of the Act.
7.1. The assessee has raised the following grounds of appeal:
“1. The learned Commissioner of Income Tax (Exemptions), Mumbai erred in law and on facts in confirming the renewal application for registration under section 80G(5)(ii) of the Income tax Act, 1961 subject to outcome of Hon. Supreme court.
2. The learned Commissioner erred in rejecting the application solely on the ground that the trust deed does not contain an express clause of irrevocability.
3. The learned Commissioner erred in rejecting approval under section 80G solely on the basis of rejection of registration under section 12AB, did not record any independent finding that the objects of the appellant are non charitable or that its activities are not genuine for the purpose of section 80G.
4. The rejection of approval under section 80G being purely consequential to the rejection under section 12AB is arbitrary and unsustainable in law.
5. In view of the facts and circumstances of the case and the grounds stated above, the appellant respectfully prays that this Hon Tribunal may be pleased to direct the learned Commissioner to grant renewal of registration to the appellant trust under section 80G(5)(ii) of the Act.
6. The impugned order is arbitrary, unjust and contrary to the provisions of section 80G(5)(ii) and liable to be set aside.
7. The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal on or before disposal of the appeal.”
7.2. We note that, notwithstanding the manner in which some of the grounds have been worded, approval under section 80G(5) has in fact been granted by the Ld. CIT(E) vide order dated 07/04/2026 for A.Ys. 2027-28 to 2031-32. The substantive grievance is therefore confined to the condition attached to the approval whereby the applicability and consequential tax benefits thereof have been made subject to the outcome of proceedings before the Hon’ble Supreme Court. The condition imposed in the order granting approval u/s 80G is materially identical to the condition considered by us while adjudicating ITA No. 7265/Mum/2026. Since we have already held hereinabove that such a contingent condition cannot be sustained while granting registration u/s 12AB, our findings recorded in paragraphs 6 to 6.8 hereinabove shall apply mutatis mutandis to the approval granted u/s 80G(5).
7.6. We therefore direct the Ld. CIT(E) to delete/vacate the impugned condition imposed while granting approval u/s 80G(5) of the Act. Needless to clarify, the approval granted to the assessee shall continue to remain governed by all statutory conditions, restrictions and consequences prescribed under the Act and the Rules. Accordingly, the appeal filed by the assessee in ITA No. 7266/Mum/2026 stands allowed.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 08/10/2026.
