CIT(E) cannot reject trust registration renewal by re-agitating

CIT(E) cannot reject trust registration renewal by re-agitating grounds already quashed by the Tribunal.

Issue

Whether the Commissioner of Income-tax (Exemptions) [CIT(E)] is legally justified in rejecting an assessee’s application for renewal of charitable registration under section 12A(1)(ac)(ii) by reviving the exact same grounds that were previously quashed by the ITAT, solely on the basis that the department has challenged the Tribunal’s order before the High Court.

Facts

The assessee is a charitable/religious trust that filed an application for the renewal of its registration under section 12A(1)(ac)(ii) of the Income-tax Act, 1961 (corresponding to the fresh registration provisions under the 2025 Act).
The CIT(E) rejected the trust’s renewal application.
In the rejection order, the CIT(E) relied on the very same adverse grounds and reasons that had already been examined, adjudicated, and knocked down by the Income Tax Appellate Tribunal (ITAT) in an earlier round of litigation.
The sole justification provided by the CIT(E) for re-introducing these rejected grounds was that the Revenue department had filed an appeal before the jurisdictional High Court against the Tribunal’s order.
No stay order had been granted by the High Court against the operation of the Tribunal’s decision at the time the CIT(E) passed the rejection order.

Decision

The issue is decided in favor of the assessee-trust, and the CIT(E)’s rejection order is set aside.
It was held that the mere filing of an appeal before a higher forum does not eclipse, suspend, or dilute the binding nature of a valid judicial order passed by the Tribunal.
The court ruled that unless the operation of a judicial order is specifically stayed by an appellate court, it continues to hold the field and remains fully binding on all subordinate authorities, including the CIT(E).
Therefore, the CIT(E) committed a legal error by ignoring judicial discipline and re-agitating issues already resolved by the Coordinate Bench.
The matter is restored and remanded back to the file of the CIT(E) with a direct instruction to grant the renewal of registration under section 12AB in absolute conformity with the binding directions of the Tribunal.

Key Takeaways

Judicial Discipline is Absolute: Subordinate and tax executing authorities (like the CIT/CIT(E)) are legally bound by the orders of appellate tribunals. They cannot bypass or ignore an active order simply because they disagree with it or have appealed against it.
Appeals Do Not Equate to Stays: Filing an appeal before a High Court or the Supreme Court does not automatically pause or nullify the lower court’s order. A specific, formal stay order must be obtained from the higher court to halt its implementation.
Protection Against Recursive Litigation: The Revenue cannot use administrative renewal application checkpoints (like Section 12AB) to cyclically re-argue past disputes that have already reached a legal conclusion at the tribunal level.

IN THE ITAT MUMBAI BENCH ‘A’

Aditya Birla Education Trust

Commissioner of Income-tax (Exemption)^*

ANIKESH BANERJEE, Judicial Member
and Om Prakash Kant, Accountant Member

IT Appeal No. 3804 (MUM) of 2026

JUNE 16, 2026

Saurabh Soparkar, Sr. Adv., Yogesh Thar, Chaitanya Joshi and Ms. Sejal Nahata for the Appellant. Rajesh Kumar Yadav, CIT DR for the Respondent.

ORDER

Om Prakash Kant, Accountant Member. – The present appeal by the assessee is directed against the order dated 30.03.2026 passed by the learned Commissioner of Income Tax (Exemption), Mumbai [“the Ld. CIT(E)”], whereby the application filed by the assessee for renewal of registration under Section 12AB of the Income-tax Act, 1961 (“the Act”) came to be rejected.

2. The material facts, are that pursuant to the statutory amendments requiring re-registration of charitable institutions, the assessee-trust had filed an application under Section 12A(1)(ac)(i) of the Act on 22.04.2021. Registration under Section 12AB was accordingly granted vide order dated 28.05.2021 for a period of five years up to Assessment Year 2026-27.

2.1 During the subsistence of the aforesaid registration, the trustees passed a resolution on 28.01.2022 seeking modification of certain clauses of the trust deed, principally with a view to expressly incorporate and clarify objects relating to medical relief, which were hitherto being pursued under the broader object of advancement of general public utility. The amended trust deed received approval from the Charity Commissioner on 02.09.2024. Consequently, as required under Section 12A(1)(ac)(v) of the Act, the assessee filed an application on 24.12.2024 seeking approval of the modified objects.

2.2 The said application was rejected by the Ld. CIT(E) vide order dated 30.06.2025, and the registration of the assessee-trust was also cancelled, primarily on the grounds that: (i) the assessee had allegedly applied funds outside India for carrying out charitable activity outside India;; (ii) its activities were purportedly intended to benefit a particular Marwadi community; and (iii) certain workshops, training programmes and allied activities did not constitute “education” within the meaning of the Act.

2.3 Aggrieved thereby, the assessee preferred an appeal before the Coordinate Bench of the Tribunal. Vide order dated 19.09.2025, the Tribunal set aside the order of the Ld. CIT(E), approved the modification of objects and directed continuation of registration under Section 12AB of the Act. The Tribunal categorically held that the foreign remittances were made solely in furtherance of educational activities carried on in India; that preference, if any, accorded to Hindi-speaking or Marwadi students did not amount to conferring benefits upon a particular religious community or caste within the meaning of Section 13(1)(b); and that workshops, seminars and developmental programmes were merely ancillary and incidental to the principal charitable object of education. The Tribunal further observed that at the stage of considering an application under Section 12A(1)(ac)(v), the scope of enquiry is confined to examining whether the amended objects are charitable in nature and does not extend to adjudication upon alleged violations of Sections 11 or 13 of the Act. Consequently, the order of rejection was set aside and the Ld. CIT(E) was directed to grant approval to the modified objects and continue the registration. The relevant finding of the Tribunal is reproduced as under:-

“22. We have carefully considered the rival submissions, the paper book filed, and the impugned order of the Ld. CIT(E). The rejection of registration is due modification of object of the trust deed in object clause 7(II)(A)(k), 7(1)(A)(1) and 7(iii). The Ld. CIT(E) has taken this as gross violation of sections 11 & 13 of the Act in result the application for registration is rejected. Here, the following findings emerge:

On Expenditure Outside India:

22.1. The assessee trust is imparting Cambridge and IB curriculum in India, and the foreign remittances are essentially for exam fees, subscriptions, and training of educators, all for the purpose of imparting education within India. Reliance placed by the Ld. CIT(E) on Section 11(1)(c) of the Act is misplaced, since the assessee claims exemption u/s 11(1)(a) of the Act. The Ld. DR specifically relied on the fact that the assessee paid foreign remittance Rs. 6.5 crore to university outside India which gross violation of the Section 11 of the Act. We note that the assessee promotes advancement of educational institutional activities in all its branches such as kindergarten, primary, secondary and high school and colleges, both of Indian and international curriculum, leading up to and teaching degree courses in Arts, Science, Commerce, Law, Management, Engineering, Medicine, Pharmacy, Music, Fine Arts, Architecture and such other educational subjects which are at large general public utility. We find that the payment to foreign education institution for expenses towards the charitable activities carried out in India cannot be disallowed. If such an interpretation is taken, then, no charitable hospital will be able to import any equipment, machinery or medicines from a foreign country. Considering, the National Education Policy, 2020 (supra) the students should get the knowledge in foreign education befitting for their future development. Jurisprudence Ohio University Christ College (supra), Gem & Jewellery Export Promotion Council (supra), J.N. Tata Endowment (supra) and Dedhia Music Foundation (supra) clearly establishes that the activities carried out by the assessee are wholly undertaken within India and any collaboration with international institutions is solely to support and promote advancement of education in India and therefore, entering into such collaborations does not constitute a violation of section 11 of the Act. The payments made to overseas institutions are exclusively towards activities in connection with educational and charitable activities carried out in India and therefore, the same do not amount to application of funds outside India. We respectfully follow the orders mentioned above. Accordingly, it does not constitute violation of section 11 of the Act.

On “Marwari” Community Preference:

22.2. The trust deed merely provides discretion to give preference to deserving Hindi-speaking or Marwari students. This does not amount to restriction for the benefit of a particular religious community or caste u/s 13(1)(b). Marwari is not a religion but an ethnolinguistic/regional group, and the data on record shows that scholarships and admissions are widely given to students of varied religions and communities. The activities of developmental programs, workshops, seminars, webinars etc. are also an extension of the main activity of ‘education’ or at best activities in the nature of general public utility and cannot be read in isolation thereof. The Hon’ble Apex Court in Dawoodi Bohra Jamat (supra) and Ahmedabad Rana Caste Association (supra) has clarified that advancement of benefit to a section of public does not fall foul of section 13(1)(b). Respectfully, following the order of the Hon’ble Apex Court we find that the denial of registration on this ground is legally untenable.

On Scope of Educational Activities:

22.3. The Id. CIT(E) respectfully relied on the order of New Noble Educational Society (SC). We respectfully follow the said order which is distinguishable. As that ruling was under section 10(23C) of the Act which requires activity solely of education. Under section 11, charitable purposes include education and also general public utility. Training, workshops, and development programmes for teachers, parents, and even employees in mental health awareness, menstrual health, etc., are incidental and in alignment with National Education Policy, 2020. Hence, these cannot be a ground for denial of registration. At the stage of considering application for modification of objects u/s 12A(1)(ac)(v), the Ld. CIT(E) is only required to examine whether the amended objects are charitable. Detailed examination of application of income u/s 11 or violation u/s 13 is beyond the scope of such proceedings. Courts have consistently held in Critical Art and Media Practices (supra) and Jamiatul Banaat Tankaria (supra) that even if certain applications of income are questioned, that would affect exemption in assessment and not registration.

24. In view of the above discussion, we hold that the rejection of the assessee’s application for modification of objects and the consequential denial of registration u/s 12AB is unjustified and bad in law. The impugned order of the Ld. CIT(E) is hereby set aside. The Ld. CIT(E) is directed to grant approval to the modification of the objects and continue the registration u/s 12AB of the Act, subject to verification of procedural compliance.”

2.4 Thereafter, since the original registration granted on 28.05.2021 was approaching expiry, the assessee filed an application dated 29.09.2025 under Section 12A(1)(ac)(ii) seeking renewal of registration under Section 12AB of the Act.

2.5 While considering the said application, the Ld. CIT(E) once again adverted to the very same allegations which had formed the basis of the earlier order dated 30.06.2025 and concluded that the assessee had violated Sections 11 and 13(1)(b) of the Act and had committed specified violations contemplated under the Explanation to Section 12AB(4). Although the Ld. CIT(E) acknowledged that the Coordinate Bench of the Tribunal had set aside the earlier rejection order and directed grant of registration, he nevertheless rejected the renewal application on the sole premise that the Department had preferred an appeal before the Hon’ble High Court against the Tribunal’s order and that, in the interest of consistency, the application deserved to be rejected on the same grounds. The relevant finding of the Ld. CIT(E) is reproduced as under:-

“3.2 It is further observed that the applicant has filed appeal against the aforesaid order before the Income Tax Appellate Tribunal. The Tribunal has set aside the rejection order dated 30.06.2025 and directed the CIT(Exemptions) to grant registration to the applicant. However, it is pertinent to mention that in consequence to such direction by the Tribunal, the department is preferring an appeal to the Hon’ble High Court. As there is no change in the material facts and following the law of consistency, the current application is liable to rejected on the same facts and ground as mentioned above.

4. Since registration under section 12AB is to be granted in terms of the provisions of section 12AB(1)(b) of the Act after being satisfied about the objects of the trust or institution, the genuineness of activities, and the compliance of any other law for the time being in force as are material for the purposes of achieving its objects. In view of the above mentioned violations by the applicant, the undersigned is left with no other option but to reject the application seeking registration under section 12AB of the Act. However, the applicant is at liberty to pursue the remedies available in Statute, without any prejudice.

5. In the view of the above, the application for renewal of registration in Form 10AB filed by the assessee is not allowable on the ground of violation of provisions of section 11, section 13(1)(b) and “specified violation” as per Explanation to section 12AB(4) of the Act. In conclusion, this application for renewal of registration stands rejected.”

3. The learned counsel appearing for the assessee assailed the impugned order by contending that the action of the Ld. CIT(E) was in violation of settled principles of judicial discipline. The Ld. Counsel for the assessee relied on the decision of the Coordinate Bench of Tribunal in the case of the assessee in Aditya Birla Education Trust v. CIT(Exemption) (Mumbai – Trib.) ITA No.4474/Mum/2025 dated 19.09.2025. It was submitted that once the Coordinate Bench had adjudicated the controversy and issued specific directions, the Ld. CIT(E) was duty-bound to faithfully implement the same unless the operation of the Tribunal’s order had been stayed or suspended by a competent superior forum. The Ld. Counsel reiterated the submissions made during arguments in ITA No.4474/Mum/2025 and contended that all issues concerning foreign remittances, alleged community preference and modification of objects already stood conclusively decided by the Tribunal in favour of the assessee and, therefore, could not have been reopened by the Ld. CIT(E). The Ld. Counsel submitted that issue of modification of the object have already been considered by the Tribunal (Supra) and held to be not in violation of the provisions of section 11 and 12 of the Act.

4. Per contra, the Ld. CIT-DR referred to the decision of the Coordinate Bench of the Tribunal in the case of Shree Sanand Jamaliya Patidar Panch v. CIT(Exemption) and Sila for Change Foundation v. CIT (Exemption) (Mum-Trib) to contend that providing scholarships or any welfare measure for a particular Marwadi community amounted to specific violation under clause (d), of the Explanaation of Section 12AB(4), and subject to other organizations in India and outside India in social sector amounted to violation of section 11.

5. We have carefully considered the rival submissions and perused the material available on record. The controversy lies in a narrow compass. The Coordinate Bench of this Tribunal, vide order dated 19.09.2025, had already examined the very grounds which formed the basis of the rejection order dated 30.06.2025 and, after detailed consideration, directed continuation of registration under Section 12AB of the Act. The findings recorded therein have attained binding force inter partes unless modified, reversed or stayed by a superior judicial forum.

5.1 The impugned order reveals that the Ld. CIT(E) consciously declined to follow the directions of the Tribunal solely because the Department had preferred an appeal before the Hon’ble High Court. Such an approach, in our considered view, is wholly unsustainable in law. Mere filing of an appeal does not eclipse, suspend or dilute the binding nature of a judicial order. Unless the operation of such order is specifically stayed by the appellate forum, it continues to hold the field and remains binding upon all subordinate authorities.

5.2 During the course of hearing, a specific query was put to the learned Departmental Representative as to whether any stay had been granted by the Hon’ble High Court against the operation of the Tribunal’s order dated 19.09.2025. No material whatsoever was placed before us to demonstrate the existence of any such stay. In the absence thereof, the Ld. CIT(E) could not have disregarded the binding directions issued by the Coordinate Bench.

5.3 In the present case, the rejection of the registration in view of modification in the object clause, already stood adjudicated by the Coordinate Bench while deciding the assessee’s appeal against rejection of approval under Section 12A(1)(ac)(v). Once those findings had attained operative finality and remained unstayed, the Ld. CIT(E) was not justified in resurrecting the same grounds for rejecting the assessee’s application for renewal under Section 12A(1)(ac)(ii). The Tribunal (supra) has already ruled on the issues other than the issue of modification of object clause raised by the ld CIT(E) viz., (i) the assessee had allegedly applied funds outside India for carrying out charitable activity outside India; (ii) its activities were purportedly intended to benefit a particular ‘Marwadi’ community; and (iii) certain workshops, training programmes and allied activities did not constitute “education” within the meaning of the Act. The impugned order, therefore, cannot be sustained.

5.4 Accordingly, respectfully following the binding precedent of coordinate Bench in the case of the assessee, the impugned order passed by the Ld. CIT(E) is set aside. The matter is restored to his file with a direction to grant renewal of registration under Section 12AB of the Act in conformity with the binding directions contained in the order of the Coordinate Bench dated 19.09.2025 and in accordance with law, preferably, within a period of eight weeks from receipt of this order, after affording the assessee a reasonable opportunity of being heard.

6. The appeal of the assessee is accordingly allowed for statistical purposes.