ITAT Mumbai: CIT(E) Cannot Attach Supreme Court Challenge as Condition to Section 12AB Registration or Section 80G Approval

Background and Context

A significant ruling has emerged from the Income Tax Appellate Tribunal, Mumbai, in the matter of S R Foundation Vs CIT (Exemptions) (ITA Nos. 7265/MUM/2026 and 7266/MUM/2026), pronounced on 8 October 2026. The appeals arose from two separate orders, both dated 7 April 2026, passed by the Commissioner of Income-tax (Exemptions), Mumbai ["CIT(E)"], granting registration under Section 12AB and approval under Section 80G(5) of the Income-tax Act, 1961 — but attaching a condition that made those benefits contingent upon the outcome of proceedings proposed to be initiated before the Supreme Court of India.

The core question before the Tribunal was not whether registration or approval had been granted — both had indeed been granted — but whether the CIT(E) possessed any statutory authority to suspend the operative effect of such registration or approval pending a legal challenge that the Revenue itself intended to pursue before a higher forum.

The Tribunal answered that question in the negative and deleted the impugned condition in both appeals.

Facts Leading to the Dispute

The Assessee and Its Application

S R Foundation is a public charitable trust that filed an application seeking renewal of its registration under Section 12AB of the Income-tax Act, 1961. By an order dated 7 April 2026, passed in Form No. 10AD, the CIT(E) granted registration under Section 12AB(1)(b) covering Assessment Years 2027-28 to 2036-37. The nature of the trust's activities was recorded as "Charitable" in the impugned order itself.

The CIT(E)'s Observation on Irrevocability

In the course of examining the renewal application, the CIT(E) observed that the trust deed lacked an express clause affirming that the transfer of property to the trust was irrevocable in perpetuity. The CIT(E) referred to Section 332(2)(b) of the Income Tax Act, 2025, which contemplates an irrevocable trust, and treated the absence of such a declaration as a matter warranting scrutiny.

Jurisdictional High Court Decision Acknowledged

However, the CIT(E) simultaneously acknowledged the position laid down by the jurisdictional High Court — that a public charitable trust is regarded as irrevocable by operation of law unless the trust instrument itself expressly confers a power of revocation upon the trustees. On this basis, the absence of an express irrevocability clause could not, standing alone, justify refusal or rejection of registration. Accordingly, the CIT(E) proceeded to grant registration.

The Conditional Rider

Despite granting registration, the CIT(E) attached a condition: that the applicability of the registration and all consequential tax benefits flowing from it, with effect from 1 April 2026, would remain subject to the outcome of proceedings before the Supreme Court, given that the Revenue proposed to file a Special Leave Petition against the jurisdictional High Court's decision. An identical condition was appended to the approval granted under Section 80G(5) for Assessment Years 2027-28 to 2031-32.

S R Foundation challenged both conditions before the ITAT Mumbai.

Grounds Raised by the Assessee

The assessee, through its Authorised Representative, pressed the following submissions: