Subh Prabhat Educational Trust Vs CIT (Exemptions) (ITAT Mumbai)
Proposed SLP Cannot Make Section 12AB Registration Uncertain: ITAT Expunges Conditional Clause
Registration Cannot Be Qualified Merely Because Revenue Proposes an Appeal
The Mumbai Tribunal held that registration granted under section 12AB in compliance with a binding jurisdictional High Court judgment cannot simultaneously be made conditional upon a proposed Supreme Court challenge.
The Commissioner had granted registration to the trust but stipulated that its applicability and consequential tax benefits would remain subject to the outcome of proceedings which the Revenue proposed to pursue before the Supreme Court.
The Tribunal expunged the disputed condition outright, leaving the registration already granted undisturbed, subject to the applicable statutory requirements. The relief was therefore final on the challenged condition; the matter was not remanded for reconsideration.
Missing Irrevocability Clause Triggered the Reservation
Subh Prabhat Educational Trust applied for registration under section 12AB. By an order dated 4 April 2026, issued in Form 10AD, the CIT(E) granted registration under section 12AB(1)(b) for AYs 2027-28 to 2036-37.
However, Condition No. 15 in the annexure recorded that the trust instrument did not contain an explicit clause affirming that the transfer of property to the trust was irrevocable for all time.
The Commissioner also acknowledged the Bombay High Court’s decision in The Chamber of Tax Consultants & Others v. CIT(E), Writ Petition (L) No. 7587 of 2026.
As recorded in the order, the High Court had held that a public charitable trust is deemed irrevocable by operation of law unless its instrument expressly provides a power of revocation. Registration or renewal could not be rejected merely because an express irrevocability clause was absent.
The Commissioner accordingly granted registration in compliance with that judgment. Nevertheless, since the Revenue proposed to approach the Supreme Court, he made the applicability and consequential benefits of registration, with effect from 1 April 2026, subject to the Supreme Court’s outcome.
The Trust Challenged Only the Conditional Qualification
Before the Tribunal, the trust clarified that it was not aggrieved by the grant of registration. Its objection was confined to Condition No. 15 and the accompanying reservation concerning future litigation.
It argued that, once the Commissioner had accepted and implemented the jurisdictional High Court’s binding decision, there was no justification for making the efficacy of registration contingent upon a proposed challenge.
The authorised representative further submitted that filing, or proposing to file, a Special Leave Petition does not by itself render the High Court’s judgment inoperative. Unless stayed or reversed, the judgment continued to govern the authorities concerned.
Attention was also drawn to the trust deed’s provision requiring transfer of trust property to another institution with similar objects if carrying out the trust became impossible. According to the trust, this demonstrated that the property could not revert to the settlor.
The Revenue relied on the Commissioner’s order.
Binding Judgment Continues Until Judicially Displaced
The Tribunal accepted that the controversy was narrow. Registration had already been granted, and the only question was whether it could be subjected to the disputed qualification.
It observed that the Commissioner himself had recognised the Bombay High Court’s decision and granted registration precisely in compliance with it.
Having implemented that binding judgment, the Commissioner could not make the registration conditional or uncertain merely because the Revenue proposed to challenge it.
The Tribunal held that the jurisdictional High Court’s judgment continued to bind authorities within its territorial jurisdiction unless stayed, modified or reversed by a superior court.
Significantly, nothing had been placed on record demonstrating that the judgment stood stayed or reversed so as to justify the reservation inserted in the registration order.
Future Judicial Consequences Operate According to Law
The Tribunal also addressed the possibility of a subsequent Supreme Court decision.
Any consequence arising from a later binding pronouncement would operate in accordance with law and the applicable statutory provisions. An additional contingent condition was therefore unnecessary.
The Commissioner could not make the current applicability and benefits of registration dependent upon prospective litigation merely to anticipate a possible change in the governing legal position.
Accordingly, Condition No. 15 was expunged, together with the observations making registration and consequential benefits subject to the Supreme Court’s outcome. The existing registration otherwise remained undisturbed.
The assessee’s appeal was allowed.
Author’s Comments
Compliance with a binding judgment cannot be diluted through an administrative reservation. A proposed appeal expresses the Department’s disagreement with the judgment; it does not suspend the judgment’s operation.
The order also preserves the distinction between absence of an express irrevocability declaration and presence of an express power of revocation. Those situations cannot automatically be treated as equivalent.
The result is consistent with S R Foundation, discussed earlier, where a similar contingent condition was deleted. It differs in its operative relief from Shree Motumal Dwarkadas Ahuja Trust, where the disputed conditions were restored for fresh examination. Here, the Tribunal directly removed the qualification while preserving the registration.
The ruling does not insulate the trust from statutory compliance or the lawful consequences of a subsequent binding judgment. It establishes the narrower principle that those consequences must flow from law, rather than from an anticipatory condition inserted by the Commissioner. The trust’s registration must operate under the governing legal position, with its statutory obligations continuing alongside it.
Cases Discussed
- The Chamber of Tax Consultants & Others Vs CIT(E) (Bombay High Court) — Writ Petition (L) No. 7587 of 2026; [2026] 184 taxmann.com 374. The jurisdictional High Court ruling concerning the irrevocability of public charitable trusts and the absence of an express irrevocability clause. The Tribunal followed its binding legal effect and held that a proposed Supreme Court challenge could not justify the contingent registration condition.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 04/04/2026 passed by the Ld. Commissioner of Income Tax (Exemptions), Mumbai [“Ld. CIT(E)”] u/s 12AB(1)(b) of the Income- tax Act, 1961, granting registration to the assessee subject to the conditions contained in the annexure thereto.
2. The assessee has raised various grounds of appeal; however, the CIT(E) while granting registration u/s 12AB, whereby the registration and consequential tax benefits have been made subject to the outcome of the proceedings proposed to be carried before the Hon’ble Supreme Court against 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.
2.1. Brief facts of the case are that the assessee had applied for registration u/s 12AB. The Ld. CIT(E), vide Form No. 10AD dated 04/04/2026, granted registration u/s 12AB(1)(b) bearing Registration No. AAATS0670E27MB01 for A.Ys. 2027-28 to 2036-37. The registration was, however, made subject to the conditions specified in the annexure to the said order.
2.2. Condition No. 15 records that the instrument of trust does not contain an explicit clause affirming that the transfer of property under trust is irrevocable for all times. The Ld. CIT(E) further obse rved that although the Hon’ble Bombay High Court in The Chamber of Tax Consultants & Ors. v. CIT(E) (supra) had held that a public charitable trust is deemed to be irrevocable by operation of law unless the instrument expressly provides a power of revocation, the Revenue proposed to carry the matter before the Hon’ble Supreme Court. Accordingly, while granting registration in compliance with the decision of the Hon’ble jurisdictional High Court, the Ld. CIT(E) further observed that the applicability and con sequential tax benefits of such registration w.e.f. 01/04/2026 would remain subject to the outcome of the decision of the Hon’ble Supreme Court.
3. Before us, the Ld.AR submitted that the assessee is not aggrieved by the grant of registration as such and its grievance is confined only to the aforesaid conditional observation contained in Condition No. 15. He submit ted that once the Ld. CIT(E) accepted the binding decision of the Hon’ble jurisdictional High Court and had granted registration in accordance therewith, there was no justification for making the efficacy of such registration or the consequential tax benefits contingent upon the outcome of a proposed challenge before the Hon’ble Supreme Court.
3.1. The Ld.AR further submitted that the mere filing o r proposal to file a Special Leave Petition against a judgment of the Hon’ble jurisdictional High Court does not render the said judgment inoperative unless the same is stayed or reversed by the Hon’ble Supreme Court. He further drew our attention to the relevant clause of the Trust Deed providing for transfer of the trust property to another institution having similar objects in the event of impossibility of carrying out the trust and submitted that, even otherwise, the trust property could not revert to t he settlor. He accordingly prayed that Condition No. 15 and the observations making the registration conditional upon the outcome before the Hon’ble Supreme Court be expunged.
3.2. The Ld.DR relied upon the impugned order passed by the Ld. CIT(E).
We have perused the submissions advanced by both sides in light of the record placed before us.
4. It is an undisputed position that the Ld. CIT(E) has granted registration to the assessee u/s 12AB(1)(b). The controversy before us is, therefore, narrow and is confined to whether such registration could have been subjected to the qualification contained in Condition No. 15. We note that in the very same condition, the Ld. CIT(E) has himself taken cognizance of the decision of the Hon’ble jurisdictional Bombay High Court in The Chamber of Tax Consultants & Ors. v. CIT(E) (supra), wherein it has been held that a public charitable trust is deemed to be irrevocable by operation of law unless the instrument of trust expressly provides for a power of revocation and that registration/renewal cannot be rejected merely for absence of an explicit irrevocability clause. It is precisely in compliance with the aforesaid binding judicial pronouncement that registration has been granted to the assessee.
4.1. Having granted registration in compliance with the binding judgment of the Hon’ble jurisdictional High Court, in our considered opinion, the same could not simultaneously be rendered conditional or uncertain merely because the Revenue proposed to carry the matter before the Hon’ble Supreme Court. Unless and until the judgment of the Hon’ble jurisdictional High Court hold the field and is binding upon the authorities functioning within its territorial jurisdiction. Nothing has been brought on record before us to demonstrate that the aforesaid decision stood stayed or reversed so as to justify the impugned qualification.
4.2. Further, any consequence arising from a subsequent binding pronouncement of the Hon’ble Supreme Court would operate in accordance with law and would be governed by the statutory provisions applicable thereto. There was, therefore, no necessity for the Ld. CIT(E) to incorporate a separate contingent condition in the registration order making the very applicability and consequential benefits of the registration dependent upon the outcome of prospective litigation. In view of the above, Condition No. 15 contained in the annexure to the impugned order dated 04/04/2026 is hereby expunged. Consequently, the observations therein 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 shall also stand expunged. The registration already granted to the assessee u/s 12AB(1)(b), bearing Registration No. AAATS0670E27MB01, shall otherwise remain undisturbed, subject to the other statutory conditions applicable in accordance with law.
Accordingly, Grounds Nos. 1 to 5 raised by the assessee are allowed in the aforesaid terms. Ground No. 6 being general in nature requires no separate adjudication.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 08/10/2026.
