Kshitij Foundation Vs CIT (ITAT Mumbai)
Registration Cannot Be Kept on Hold for a Future Supreme Court Challenge: ITAT Deletes Conditions in 12AB and 80G Orders
The controversy
The Mumbai ITAT examined whether registration under section 12AB and approval under section 80G could be granted subject to the outcome of proceedings that the Revenue proposed to pursue before the Supreme Court.
The CIT(E) had granted both benefits after following a Bombay High Court decision concerning the absence of an express irrevocability clause in a public charitable trust’s deed. However, the authority qualified their operation by making the registration, approval and consequential tax benefits contingent upon future Supreme Court proceedings.
The Tribunal deleted the disputed conditions in both orders, holding that statutory decisions must be made according to the law applicable when the orders are passed.
Registration granted, but uncertainty retained
Kshitij Foundation is a public charitable trust registered under the Maharashtra Public Trusts Act, 1950.
By separate orders dated 28 March 2026, the CIT(E) granted registration under section 12AB(1)(b) for AYs 2027-28 to 2036-37 and approval under section 80G(5) for AYs 2027-28 to 2031-32.
While examining the applications, the CIT(E) noticed that the trust instrument did not expressly state that the transfer of property to the trust was irrevocable for all time.
Nevertheless, the authority followed the Bombay High Court’s decision in The Chamber of Tax Consultants and Others v. CIT(E), Writ Petition (L) No. 7587 of 2026. As recorded in the Tribunal’s order, that decision recognised that a public charitable trust would be irrevocable by operation of law unless its instrument expressly provided a power of revocation.
Registration or renewal could therefore not be rejected merely because an explicit irrevocability clause was absent.
Proposed litigation made a condition of relief
Although granting registration and approval, the CIT(E) stipulated that their applicability and consequential benefits from 1 April 2026 would remain subject to the outcome of proceedings proposed before the Supreme Court.
The trust challenged Condition No. 15 in the section 12AB order and Condition No. 5 in the section 80G order.
It argued that the conditions created continuing uncertainty despite substantive eligibility having been accepted. The conditional wording also affected donors’ willingness to contribute and their comfort in claiming section 80G deductions.
The trust further pointed out that there was no finding that its deed permitted revocation by the settlor or trustees, or diversion of trust property for their private benefit.
Delay explained by initial acceptance of favourable orders
Both appeals were delayed by 59 days.
The trustees explained that, because registration and approval had already been granted, they initially believed that an appeal against the conditional wording alone was unnecessary. They sought advice and appealed after encountering practical difficulties in receiving donations.
The Tribunal accepted this explanation as bona fide and supported by affidavits. Relying on Collector, Land Acquisition v. Mst. Katiji, 167 ITR 471 (SC) and N. Balakrishnan v. M. Krishnamurthy, (1998) 7 SCC 123, it emphasised the acceptability of the explanation rather than merely the length of delay.
Finding sufficient cause, it condoned the delay and admitted both appeals.
Present law must govern the statutory decision
The Tribunal noted that the CIT(E) had examined the application, recorded the activities as charitable and granted registration. The substantive requirements, as examined by that authority, had therefore been found satisfied.
The only reservation concerned the missing express irrevocability clause, an issue already addressed through the Bombay High Court decision.
The Tribunal held that, once registration was granted under the applicable law, its effect could not be diluted through a contingency based on the possible outcome of future judicial proceedings.
A potential subsequent change in the legal position did not, by itself, justify qualifying the registration. The absence of any finding of an express revocation power or possible private diversion of property further supported deletion of the condition.
Same reasoning applied to section 80G
For section 80G approval, the Tribunal similarly found no independent conclusion that the trust failed to satisfy the prescribed statutory requirements.
Having accepted the applicable High Court decision and granted approval, the CIT(E) could not simultaneously restrict its operation through a future litigation contingency.
The Tribunal accordingly deleted both disputed conditions and directed that registration and approval operate in accordance with law and their statutory consequences. Both appeals were allowed outright.
Author’s comments
The decision addresses a practical problem: an apparently favourable order can still impair a trust’s functioning when its wording leaves donors uncertain about the benefits granted.
The ruling requires the authority to complete its statutory decision under the applicable legal position. A proposed challenge to that position cannot itself justify attaching uncertainty to an otherwise accepted application.
The trust had also initiated proceedings before the Charity Commissioner to modify clauses concerning irrevocability and dissolution. The Tribunal noted those steps but did not make deletion of the conditions dependent upon their completion.
The relief remains specific to the disputed litigation conditions. Registration and approval continue to operate subject to the statutory requirements, including the conditions governing the relevant tax benefits; deletion does not amount to an unrestricted exemption from future compliance.
Cases Discussed
- Collector, Land Acquisition, Anantnag & Anr. vs. Mst. Katiji & Ors., (1987) 167 ITR 471 (SC) — Relied upon for the justice-oriented interpretation of sufficient cause and condonation of non-deliberate delay.
- N. Balakrishnan vs. M. Krishnamurthy, (1998) 7 SCC 123 (Supreme Court) — Relied upon for the principle that acceptability of the explanation rather than length of delay is decisive.
- The Chamber of Tax Consultants & Ors. vs. CIT(E), Writ Petition (L) No. 7587 of 2026 (Bombay High Court) — Followed regarding irrevocability of public charitable trusts by operation of law and absence of an express irrevocability clause.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
Present appeals filed by the assessee arise out of two separate orders, both dated 28/03/2026, passed by the Ld. Commissioner of Income Tax (Exemptions), Mumbai [“Ld. CIT(E)”], whereby 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 were granted respectively, subject, inter alia, to a condition that the applicability and consequential tax benefits flowing from such registration/approval w.e.f. 01/04/2026 would remain subject to the outcome of the proceedings before the Hon’ble Supreme Court.
2.1. 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. The impugned 12AB registration covers A.Ys. 2027-28 to 2036-37, whereas the approval u/s 80G(5) covers A.Ys. 2027-28 to 2031-32.
3. At the outset, it is noted that both the appeals are delayed by 59 days. The assessee has filed condonation petitions supported by affidavits of the Trustee explaining that, since substantive registration u/s 12AB and approval u/s 80G had already been granted, the Trustees were initially under a bona fide belief that no appeal was required merely against the conditional clause. It has further been stated that, subsequently, the assessee faced practical difficulty in receiving donations as the donors were hesitant on account of the conditional nature of the registration/approval, where after the assessee was advised to prefer the present appeals. The aforesaid explanation is duly supported by the affidavits filed on behalf of the assessee.
3.1. In Collector, Land Acquisition, Anantnag & Anr. vs. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC), the Hon’ble Supreme Court has held that the expression “sufficient cause” deserves to be construed in a justice-oriented manner so that substantial justice is advanced and a matter is not defeated merely on account of a non-deliberate delay. Further, in N. Balakrishnan vs. M. Krishnamurthy (1998) 7 SCC 123, Hon’ble Supreme Court held that the length of delay is not decisive and that the acceptability of the explanation furnished for such delay is the relevant consideration. Hon’ble Court also noted that, where the explanation does not disclose mala fides or a deliberate dilatory strategy, a liberal approach is warranted.
3.2. Applying the aforesaid principles to the facts before us, we find that the delay has arisen on account of a bona fide understanding entertained by the assessee after substantive registration/approval had already been granted and not due to any deliberate inaction, negligence or mala fide conduct. We are therefore satisfied that sufficient cause has been shown for the delay of 59 days.
Accordingly, the delay in filing both the appeals is condoned and the appeals are admitted for adjudication on merits.
ITA No. 8295/Mum/2026
4. The assessee has raised the following grounds of appeal:
“1. Conditional order of registration of the Trust u/s 12AB of the Act
i. The Commissioner of Income Tax (Exemptions), Mumbai, [CIT(E)] while granting registration u/s 12AB(1)(b) vide his order dated 28th March 2026 erred in holding in Sr. No. 15 of conditions mentioned in Annexure to the order that the instrument of trust does not contain any explicit clause affirming that the transfer of property under trust is an irrevocable transfer for all times and in making the registration/approval subject to the outcome of the decision of Hon’ble Supreme Court.
ii. The appellant submits that non-inclusion of express clause about ‘irrevocability’ of the trust in the trust deed is not a condition precedent and unless a trust is specifically classified as a revocable trust, it would automatically or by default be classified as irrevocable at the instance of the settlor or the trustees.
iii. The CIT(E) failed to appreciate that the appellant trust is a public charitable trust duly registered under the Maharashtra Public Trusts Act, 1950, under which the trust cannot be revoked, dissolved, or its property diverted except with the prior approval and intervention of the Charity Commissioner, and therefore the trust is irrevocable in law.
iv. The scheme of section 12AB of the Act does not confer any express power upon the CIT(E) to impose independent conditions while granting registration to a charitable trust, except to the extent specifically contemplated under the Act.
v. The appellant submits that the impugned clause no. 15 has the effect of keeping the appellant’s registration status in a state of continuing uncertainty for its entire validity period, which is contrary to the legislative scheme of section 12AB(1), and travels beyond the powers vested in the CIT(E) thereunder and impacts the donors comfort in making donations and claiming deduction u/s 80-G.
vi. Without prejudice to the above, the appellant further submits that with regard to clauses of ‘irrevocability’ and ‘dissolution’ the appellant has filed Scheme Application to the Charity Commissioner u/s 50A(1) of the Maharashtra Public Trust Act 1950 for modifying the Trust Deed in connection therewith. Copy of the same along with Status Report of Scheme Application of Advocate dated 10th February 2026 was filed with the CIT(E) which was not considered by the CIT(E) while passing the order.
vii. The appellant therefore submits that the condition in S. No. 15 of the order of CIT(E) be deleted to remove any uncertainty in the grant of registration.
2. Each of the above grounds is without prejudice to one another.
3. That the Appellant craves leave to add to, alter, vary or cancel any of the above grounds of appeal.”
4.1. Though various grounds have been raised, the sole substantive grievance of the assessee is against Condition No. 15 imposed by the Ld. CIT(E) while granting registration u/s 12AB of the Act.
Brief facts of the case are as under:-
5. Assessee is a charitable trust which filed an application seeking registration u/s 12AB of the Act. The Ld. CIT(E), vide order dated 28/03/2026 passed in Form No. 10AD, granted registration u/s 12AB(1)(b) for A.Ys. 2027-28 to 2036-37 and recorded the nature of activities as “Charitable”. While considering the application, the Ld. CIT(E) noticed that the instrument of trust did not contain an explicit clause affirming that the transfer of the property under trust was irrevocable for all times. The Ld. CIT(E), however, also took note of the decision of the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. vs. CIT(E), Writ Petition (L) No. 7587 of 2026, wherein it was held that a public charitable trust would be deemed irrevocable by operation of law unless the trust instrument expressly provides a power of revocation and that registration/renewal could not be rejected merely for absence of an explicit irrevocability clause. The Ld. CIT(E), accordingly, granted registration in compliance with the aforesaid judicial directions, but further provided that its applicability and consequential tax benefits w.e.f. 01/04/2026 would remain subject to the outcome of the proceedings proposed to be pursued by the Revenue before the Hon’ble Supreme Court.
Aggrieved by the said condition, the assessee is in appeal before us.
5.1. The Ld.AR submitted that, having granted registration u/s 12AB, the Ld.CIT(E) could not have imposed an independent condition not contemplated under the provisions of the Act. It was further submitted that the assessee is a public charitable trust registered under the Maharashtra Public Trusts Act, 1950 and that there is no finding in the impugned order that the trust deed contains any power enabling the settlor or trustees to revoke the trust or divert its properties for their own benefit. The Ld. AR further submitted that the assessee had already filed an application before the Charity Commissioner u/s 50A(1) of the Maharashtra Public Trusts Act, 1950 for modification of the clauses concerning irrevocability and dissolution and that the relevant documents were also placed before the Ld. CIT(E).
The Ld. DR relied upon the impugned order.
We have perused the submissions advanced by both sides in light of the record placed before us.
6. The assessee is a public charitable trust registered under the Maharashtra Public Trusts Act, 1950. The Ld. CIT(E), upon examination of the application filed by the assessee, has granted registration under section 12AB(1)(b) of the Act for A.Ys. 2027-28 to 2036-37 and has recorded the nature of activities of the assessee as “Charitable”. Thus, the substantive conditions for grant of registration under section 12AB, as examined by the Ld. CIT(E), have been found to be satisfied.
6.1. It is evident from the impugned order that the only reservation expressed by the Ld. CIT(E) related to the absence of an express clause in the trust deed declaring that the transfer of the property under the trust was irrevocable for all times. At the same time, the Ld. CIT(E) has himself taken note of the decision of the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. vs. CIT(E), Writ Petition (L) No. 7587 of 2026, wherein the issue of absence of an express irrevocability clause in the trust instrument was considered. Following the aforesaid decision, the Ld. CIT(E) proceeded to grant registration to the assessee.
6.2. In these circumstances, the issue before us is confined to the further condition imposed by the Ld. CIT(E) that the applicability of the registration and the consequential tax benefits with effect from 01.04.2026 would remain subject to the outcome of the proceedings proposed to be pursued by the Revenue before the Hon’ble Supreme Court.
6.3. In our considered view, once the competent authority, after examining the application under section 12AB and the material available before it, has arrived at a decision to grant registration, the registration so granted cannot be made subject to a contingency based upon the possible outcome of future proceedings before a higher judicial forum. The exercise of jurisdiction under section 12AB has to be completed in accordance with the statutory provisions and the law as applicable on the date of the order. The possibility of the legal position being altered subsequently pursuant to further judicial proceedings cannot, by itself, constitute a basis for qualifying the registration by imposing such a condition.
6.4. More importantly, the impugned order does not record any finding that the trust deed contains an express provision conferring a power of revocation upon the settlor or the trustees, or that the trust property is capable of being diverted for the private benefit of the persons connected with the trust. The objection regarding the absence of an express irrevocability clause has already been considered by the Ld.CIT(E) in the light of the aforesaid decision of the Hon’ble Bombay High Court and, following the said judicial pronouncement, registration has been granted. Therefore, having accepted the legal position applicable to the assessee’s case and having granted registration, the Ld. CIT(E) could not, in our view, dilute the effect of such registration by making it subject to the outcome of a prospective challenge before the Hon’ble Supreme Court.
6.5. We also take note of the submission of the Ld. AR that the assessee has already initiated proceedings before the Charity Commissioner under section 50A(1) of the Maharashtra Public Trusts Act, 1950 for modification of the relevant clauses relating to irrevocability and dissolution and that the supporting material was placed before the Ld. CIT(E). The said fact further demonstrates that the assessee has taken steps to address the concern regarding the language of the trust deed. However, since registration has already been granted under section 12AB, we do not consider it necessary to express any opinion on the proceedings pending before the Charity Commissioner.
6.6. Accordingly, we delete the condition that the applicability of the registration and the consequential tax benefits with effect from 01.04.2026 shall remain subject to the outcome of the proceedings proposed to be pursued by the Revenue before the Hon’ble Supreme Court. The registration granted under section 12AB shall operate in accordance with law and the statutory consequences thereof, without being subjected to the aforesaid condition.
7. We have considered the rival submissions and perused the material available on record. As noted hereinabove, the Ld. CIT(E), while granting approval under section 80G(5) of the Act, has accepted the applicability of the decision of the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. vs. CIT(E), Writ Petition (L) No. 7587 of 2026, and has accordingly granted approval to the assessee. Thus, the absence of an express irrevocability clause in the Trust Deed did not, in the opinion of the Ld. CIT(E), constitute a ground for denying approval under section 80G(5).
7.1. Once the Ld. CIT(E), upon consideration of the applicable legal position, has granted approval under section 80G(5), we find no justification for making the applicability of such approval and the consequential statutory benefits subject to the outcome of proceedings proposed to be pursued by the Revenue before the Hon’ble Supreme Court. As held by us while disposing of the assessee’s appeal concerning registration under section 12AB, the possibility of a subsequent alteration of the legal position pursuant to proceedings before a higher judicial forum cannot, by itself, constitute a valid basis for qualifying an order granting statutory approval.
7.2. We further note that Condition No. 5 of the Annexure to the order merely makes the approval granted under section 80G(5) subject to a future contingency, without recording any independent finding that the assessee otherwise fails to satisfy the statutory conditions prescribed for such approval. Having granted the approval after considering the decision of the Hon’ble Bombay High Court, the Ld. CIT(E) was not justified in simultaneously curtailing the operation of such approval by making it conditional upon the outcome of future proceedings.
7.3. Accordingly, following our findings in the appeal relating to registration under section 12AB, we delete Condition No. 5 of the Annexure to the order dated 28/03/2026, whereby the applicability of the approval under section 80G(5) and the consequential tax benefits with effect from 01/04/2026 have been made subject to the outcome of the proceedings before the Hon’ble Supreme Court. The approval granted under section 80G(5) shall operate in accordance with law and the statutory consequences thereof, without being subjected to the aforesaid condition.
In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on 08/10/2026.
