Registration and approval granted under Section 12AB

Registration and approval granted under Section 12AB and Section 80G cannot be made conditional on pending Supreme Court proceedings.

Issue

Whether registration granted under Section 12AB and approval granted under Section 80G(5) of the Income-tax Act can be made subject to a contingency based upon the outcome of proposed or future proceedings by the Revenue before the Supreme Court.
Whether the CIT(Exemptions) was justified in inserting conditional clauses curtailing the immediate applicability of statutory tax benefits despite granting registration and approval after examining the merits and applicable High Court precedents.

Facts

The assessee is a public charitable trust registered under the Maharashtra Public Trusts Act, 1950.
The assessee applied for fresh registration under Section 12AB and approval under Section 80G(5) of the Income-tax Act.
The CIT(E) examined the applications and noted the absence of an explicit irrevocability clause in the trust deed.
Relying on the binding Bombay High Court decision holding that a public charitable trust is deemed irrevocable unless expressly revocable, the CIT(E) granted registration under Section 12AB(1)(b) for A.Ys. 2027-28 to 2036-37 and approval under Section 80G(5) for A.Ys. 2027-28 to 2031-32.
However, while issuing the orders, the CIT(E) inserted Condition No. 15 in the Section 12AB annexure and Condition No. 5 in the Section 80G(5) annexure, stating that the registration, approval, and consequential tax benefits with effect from 01/04/2026 would remain subject to the outcome of proceedings proposed to be pursued by the Revenue before the Supreme Court.

Decision

Absolute Nature of Statutory Registration: Once the competent authority, after examining the material on record, decides to grant registration under Section 12AB, such registration cannot be made subject to a contingency based on potential future litigation in a higher forum.
Deletion of Condition No. 15: The condition making the Section 12AB registration and consequential tax benefits contingent upon Supreme Court proceedings was directed to be deleted.
Unjustified Limitation on Section 80G Approval: Having granted approval under Section 80G(5) after following judicial precedent, the CIT(E) was not justified in simultaneously curtailing its operation by attaching conditional riders.
Deletion of Condition No. 5: The condition attached to the Section 80G(5) approval was also directed to be deleted in favor of the assessee.

Key Takeaways

No Conditional Statutory Approvals: Quasi-judicial authorities like the CIT(E) cannot grant statutory benefits with one hand and make them conditional or contingent upon hypothetical future litigation with the other.
Binding Judicial Precedents: Once a authority accepts and applies a precedent (e.g., absence of an explicit irrevocability clause in a public charitable trust deed is not fatal), the approval granted must be unconditional and full-fledged.
Legal Certainty for Taxpayers: Taxpayers granted registration or approval under Sections 12AB and 80G are entitled to immediate statutory benefits without arbitrary clouds of uncertainty hanging over their tax status due to intended Revenue appeals.

IN THE ITAT MUMBAI BENCH ‘C’

Kshitij Foundation

Commissioner of Income-tax (Exemptions)^*

Smt. Beena Pillai, Judicial Member
and Jagadish, Accountant Member

IT Appeal Nos. 8294 & 8295 (MUM) of 2026
[Assessment year 2027-28]

OCTOBER 8, 2026

N. Jayendran, AR for the Appellant. Srinivasa Rao Vona, CIT DR for the Respondent.

ORDER

Smt. Beena Pillai, Judicial Member.- 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, whereafter 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 v. Mst. Katiji [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 v. 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

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.

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 Chamber of Tax Consultants v. CIT (Exemptions) (Bombay)/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. v. 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. v. 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.