RIFAH CHAMBER OF COMMERCE AND INDUSTRY,MAHARASHTRA vs. COMMISSIONER OF INCOME TAX (EXEMPTIONS), MUMBAI, MAHARASHTRA

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ITA 1835/MUM/2026Status: DisposedITAT Mumbai09 July 2026AY 2025-2615 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(Exemptions) did not fully consider the assessee's explanation for the delay or examine actual violations regarding activities outside India or investments. The Tribunal restored the matter for fresh adjudication.

What were the facts?

The assessee applied for regular registration under section 12AB after provisional registration expired. The CIT(Exemptions) rejected the application primarily due to a significant delay in filing and certain clauses in the Memorandum of Association.

What were the issues?

Whether the delay in filing the application for regular registration was justifiable and whether the clauses in the Memorandum of Association warranted rejection of the application without examining actual activities.

Which sections of the Income-tax Act were involved?

Section 12A,Section 12AB,Section 11,Section 11(5)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI SIDDHARTHA NAUTIYAL

For Respondent: Shri Sandeep Lakra CIT DR

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: D BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA 1835/MUM/2026 निर्धारणवर्ा/AssessmentYear:2025-26) RIFAH CHAMBER OF COMMISSIONER OF INCOME COMMERCE AND INDUSTRY TAX (EXCEMPTIONS), 4 C & D, FLOOR, PLOT NO.96, 77C, ROOM NO 601, 6th FLOOR, HAMID BUILDING, HAFIZ ALI CUMBALLA HILL, BAHADURKHAN MARG, MTNL TE BUILDING, PEDDER MOMINPURA, JACOB CIRCLE S.O, ROAD, DR. GOPAL RAO Vs. 400 011- MUMBAI, DESHMUKH MARG, MAHARASHTRA. CUMBALLA HILL, MUMBAI-400026, MAHARASHTRA अपीलधर्थीAppellant प्रत्यर्थी Respondent

Permanent Account Number of Assessee: AAICR1660A

अपीलधर्थीद्वारा/Appellant represented by: Shri Saiyam Khan (Virtually Present) प्रत्यर्थीद्वारा/Respondent represented by: Shri Sandeep Lakra CIT DR.

सुनवाईकीतारीख/Date of conclusion of hearing: 02-Jul-2026 घोषणाकीतारीख/Date of pronouncement: 09-Jul-2026 आदेश / ORDER

PERSHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. The Commissioner of Income Tax (Appeals), NFAC, dated 25-Dec-2025 for the Assessment Year 2025-26. The assessee has raised the following grounds of appeal:

1.

On the facts and in the circumstances of the case and in law the Commissioner of Income tax Exemption Mumbai erred in rejecting the 1 Appellant application for registration under section 12A and 12AB of the Income tax Act 1961 and the impugned order is bad in law and liable to be quashed. 2. On the facts and in the circumstances of the case and in law the Commissioner of Income tax Exemption Mumbai erred in rejecting the application filed under section 12A 1 ac of the Act on the alleged ground of non submission OR non compliance to notices without properly appreciating the submissions and material placed on record. 3. On the facts and in the circumstances of the case and in law the Commissioner of Income tax Exemption Mumbai erred in not condoning the delay in filing Form 10AB even though the delay in filing application under section 12A 1 ac was due to reasonable and sufficient cause. 4. On the facts and in the circumstances of the case and in law the Commissioner of Income tax Exemption Mumbai erred in rejecting the application on the basis of object clauses permitting investment in shares securities OR bullion without bringing any material on record to show that the Appellant has actually made any investment in shares securities bullion OR any mode not permitted under section 11 5 of the Income tax Act 1961 and therefore rejection based on a hypothetical possibility of violation is unjustified and bad in law. 5. On the facts and in the circumstances of the case and in law the Commissioner of Income tax Exemption Mumbai failed to appreciate that at the stage of registration the scope of examination is confined to the genuineness of objects and activities of the Appellant. 6. The Appellant craves leave to add alter amend vary 0R withdraw any of the above grounds of appeal. \

2.

The brief facts of the case are that the Applicant Trust had earlier been granted provisional registration under section 12AB of the Income-tax Act, 1961 (“the Act”) vide order dated 24.09.2021, which was valid from Assessment Year 2022-23 to Assessment Year 2024-25. Thereafter, the Applicant Trust filed an application in Form No.10AB on 30.05.2025 under section 12A(1)(ac)(iii) of the Act seeking regular registration under section 12AB of the Act. During the course of examination of the application, the learned Commissioner of Income- tax (Exemptions) first examined whether the application had been filed within the time prescribed under section 12A(1)(ac)(iii) of the Act. The learned

CIT(Exemptions) observed that as per the statutory provisions, an institution which had been granted provisional registration was required to file Form No.10AB at least six months prior to the expiry of the provisional registration or within six months from the commencement of its activities, whichever was earlier. On verification of the records, the learned CIT(Exemptions) noticed that although the Applicant Trust had obtained provisional registration on 24.09.2021 and had commenced its activities thereafter, the application for regular registration was filed only on 30.05.2025, resulting in a delay of approximately 38 months. The learned CIT(Exemptions), therefore, formed a prima facie view that the application was barred by limitation and issued a show cause notice asking the Applicant Trust to explain why the application should not be rejected on account of delayed filing.

3.

Apart from the issue of limitation, the learned CIT(Exemptions) also examined the Memorandum of Association of the Applicant Trust and noticed certain clauses which, according to him, were not consistent with the provisions of the Income-tax Act. The learned CIT(Exemptions) observed that clauses 3(A)(2), 3(A)(3) and 3(B)(28) of the Memorandum of Association appeared to permit application of funds and charitable activities outside India, which according to him were contrary to the provisions of section 11 of the Act. He further observed that clauses 3(B)(29) and 3(B)(36) empowered the Applicant Trust to invest its funds in shares, securities, debentures and other investments

without restricting such investments to the modes prescribed under section 11(5) of the Act. On the aforesaid two issues also, show cause notices were issued requiring the Applicant Trust to explain why its application for regular registration under section 12AB should not be rejected.In response to the notices issued by the learned CIT(Exemptions), the Applicant Trust submitted that the delay in filing Form No.10AB was neither deliberate nor intentional. The Applicant Trust submitted that the provisional registration had been granted immediately after the Covid-19 pandemic, during which period the activities of the Trust were severely affected. It was submitted that the Trust suffered financial hardship, there was a decline in turnover and operational difficulties during the financial years following the pandemic and, therefore, the management genuinely believed that it may not be in a position to continue its charitable activities on a substantial scale. The Applicant Trust further submitted that its activities revived only during the Financial Year 2024-25, after which it realised that the provisional registration had expired and immediately filed Form No.10AB along with a request for condonation of delay.

4.

The learned CIT(Exemptions), however, was not satisfied with the explanation furnished by the Applicant Trust. According to him, the reasons cited by the Applicant Trust were general in nature and were not supported by any documentary evidence showing genuine hardship or circumstances beyond its control. The learned CIT(Exemptions) observed that financial constraints,

operational slowdown and internal management decisions could not constitute sufficient cause for condonation of delay and held that the explanation was based merely upon subjective assertions without any objective material. He further held that filing Form No.10AB within the prescribed period was a Statutory requirement and not merely a procedural formality. According to the learned CIT(Exemptions), since exemption under the Act is a Statutory benefit, the conditions prescribed by the Legislature were required to be strictly complied with. Accordingly, the learned CIT(Exemptions) rejected the request for condonation of delay and held that the application filed by the Applicant Trust was not maintainable on account of delay in filing. The learned CIT(Exemptions) thereafter examined the explanation furnished by the Applicant Trust regarding the object clauses contained in its Memorandum of Association. The Applicant Trust clarified that clauses 3(A)(2) and 3(A)(3) were merely enabling provisions describing the broad charitable scope of its activities and did not authorise any activity outside India in violation of the Income-tax Act, FEMA or any other law. The Applicant Trust also submitted that all charitable activities were being carried out within India and no funds had ever been applied outside India. Similarly, with regard to clause 3(B)(28), it was submitted that the provision merely enabled the Trust to interact with Government authorities or other organisations for advancement of its charitable objects and did not authorise application of funds outside India.

5. The learned CIT(Exemptions), however, did not accept the aforesaid explanation. He held that the language employed in clauses 3(A)(2), 3(A)(3) and 3(B)(28) was wide enough to permit activities beyond the territorial limits of India and, therefore, reflected an intention to utilise the funds of the Trust outside India. According to the learned CIT(Exemptions), such clauses were not consistent with the statutory scheme of section 11 of the Act. He further observed that if the Applicant Trust intended to comply with the provisions of the Income-tax Act, it ought to have amended the relevant clauses of the Memorandum of Association by passing an appropriate Special Resolution. Since no such amendment had been carried out, the learned CIT(Exemptions) held that the objects of the Trust were not in conformity with the provisions of the Act.

6.

The learned CIT(Exemptions) also examined clauses 3(B)(29) and 3(B)(36) of the Memorandum of Association relating to investment of funds. Although the Applicant Trust submitted that these clauses were merely enabling provisions and all investments would always be made strictly in accordance with section 11(5) of the Act, the learned CIT(Exemptions) was not satisfied with the explanation. According to him, the language of the said clauses empowered the Trust to invest its funds in assets, shares, securities, debentures and other modes without restricting such investments to the modes specified under section 11(5) of the Act. The CIT(Exemptions), therefore, held that the Memorandum of

Association itself contemplated investments contrary to the Statutory provisions. The learned CIT(Exemptions) further observed that despite the defects having been pointed out during the proceedings, the Applicant Trust had not taken any steps for amendment of the Memorandum of Association by passing a Special Resolution so as to bring its objects and investment clauses in conformity with the provisions of the Income-tax Act.

7.

The learned CIT(Exemptions) held that the Applicant Trust had failed to satisfy the conditions necessary for grant of regular registration under section 12AB of the Act. The CIT(Exemptions) held that the application filed in Form No.10AB was liable to be rejected not only because it had been filed beyond the prescribed time limit without sufficient cause but also because the Memorandum of Association contained clauses which, according to him, were not consistent with the provisions of sections 11 and 11(5) of the Act. Accordingly, the learned CIT(Exemptions) rejected the application for registration under section 12AB of the Act while observing that the Applicant Trust would be at liberty to pursue such remedies as may be available under the Act.

8.

The assessee is in appeal before us against the order passed by CIT(Exemptions) dismissing the application of the assessee.

9. We have heard the rival contentions and perused the material available on record.

10.

On a careful consideration of the material available on record, we find that the learned CIT(Exemptions) has rejected the application primarily on three grounds. Firstly, according to him, the application filed under section 12A(1)(ac)(iii) of the Act was beyond the prescribed period by about 38 months and, therefore, was not maintainable. Secondly, the learned CIT(Exemptions) held that certain clauses contained in the Memorandum of Association were not in conformity with section 11 of the Act as they permitted activities and application of funds outside India. Thirdly, the learned CIT(Exemptions) observed that certain clauses of the Memorandum of Association conferred unrestricted powers regarding investment of funds and, therefore, were inconsistent with the provisions of section 11(5) of the Act.

11.

So far as the issue relating to delay in filing Form No.10AB is concerned, we find that the Applicant Trust had explained before the learned CIT(Exemptions) that the delay had occurred due to the unprecedented disruption caused by the Covid-19 pandemic, severe financial difficulties, decline in turnover and operational constraints, coupled with the bona fide belief that the charitable activities of the Trust may not continue on a substantial scale. It was also explained that only after revival of the activities during the Financial

Year 2024-25 did the management realise that the provisional registration had expired, whereupon the application in Form No.10AB was immediately filed. However, the learned CIT(Exemptions) rejected the explanation by holding that the reasons furnished were general in nature and unsupported by documentary evidence.

12.

In our considered opinion, while dealing with an application seeking condonation of delay, the CIT(Exemptions) is expected to adopt a pragmatic and justice-oriented approach rather than a hyper-technical approach. The Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others [(1987) 167 ITR 471 (SC)] has held that a liberal approach should ordinarily be adopted while considering applications for condonation of delay so that substantial justice prevails over technical considerations. The Hon'ble Supreme Court has further observed that ordinarily a litigant does not stand to benefit by lodging proceedings belatedly and that refusal to condone delay may result in a meritorious matter being defeated at the threshold. We also find merit in the contention of the Applicant Trust that the proviso inserted to section 12A(1)(ac) by the Finance (No.2) Act, 2024 with effect from 01.10.2024 empowering the Commissioner to condone delay on sufficient cause being shown shows the legislative intent that such procedural delay is curable and should not automatically defeat the substantive claim for registration. However, the impugned order proceeds mainly on the premise that the explanation was not

sufficient without examining the surrounding circumstances and the subsequent legislative amendment in its proper perspective.

13.

The next objection of the learned CIT(Exemptions) relates to clauses 3(A)(2), 3(A)(3) and 3(B)(28) of the Memorandum of Association on the ground that they enable application of funds outside India. The contention of the Applicant Trust before us is that these are only enabling clauses and no activity has ever been undertaken outside India. It has also been contended that the scope of enquiry at the stage of registration under section 12AB of the Act is confined to examining the charitable objects and the genuineness of the activities of the trust and not the hypothetical possibility of future violation of the provisions of section 11 of the Act.

14.

Also, the learned CIT(Exemptions) has objected to clauses 3(B)(29) and 3(B)(36) of the Memorandum of Association on the ground that they empower the Applicant Trust to invest its funds in a manner contrary to section 11(5) of the Act. The contention of the Applicant Trust is that these clauses are merely enabling provisions and that no investment has ever been made contrary to the provisions of section 11(5). It has further been submitted that the provisions of the Income-tax Act would prevail over any general clause contained in the Memorandum of Association. This contention also deserves examination by the learned CIT(Exemptions) in the light of the actual facts and applicable legal

position instead of proceeding merely on the basis of the wording employed in the Memorandum of Association.

15.

The learned Counsel for the Applicant Trust further submitted before us that, without prejudice to the contentions raised in the appeal, the Applicant Trust is willing to suitably amend the Memorandum of Association so as to remove the objections pointed out by the learned CIT(Exemptions) with regard to the object clauses relating to activities outside India as well as the investment clauses referred to in the impugned order. It was submitted that the Applicant Trust undertakes to convene the appropriate meeting and pass the necessary Special Resolution for carrying out suitable amendments to the Memorandum of Association so as to ensure that the objects are in complete conformity with the provisions of the Income-tax Act. The learned Counsel, therefore, prayed that liberty may be granted to the Applicant Trust to carry out such amendments and thereafter place the amended Memorandum of Association before the learned CIT(Exemptions) for fresh consideration of its application.

16.

We are of the considered opinion that the interest of substantial justice would be served if one more opportunity is granted to the Applicant Trust. We are conscious of the fact that registration under section 12AB is a beneficial provision intended to facilitate genuine charitable institutions in carrying out their charitable activities. At the same time, the Commissioner is also required to

satisfy himself regarding the objects of the trust and the genuineness of its activities before granting registration. Therefore, where the CIT(Exemptions) notices certain clauses in the Memorandum of Association which according to him require modification for bringing them in conformity with the provisions of the Act, and the Applicant Trust itself expresses its willingness to suitably amend those clauses, it would be appropriate that such opportunity is granted instead of rejecting the application finally.

17.

We also find that the learned CIT(Exemptions) has not examined whether the Applicant Trust has actually undertaken any activity outside India or whether it has in fact made any investment contrary to the provisions of section 11(5) of the Act. The rejection is primarily founded on the wording of certain clauses contained in the Memorandum of Association. Similarly, while rejecting the request for condonation of delay, the learned CIT(Exemptions) has not examined the explanation furnished by the Applicant Trust in the light of the principles laid down by the Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others (1987) 167 ITR 471 (SC) wherein a liberal approach while dealing with procedural requirements relating to charitable institutions has been emphasised.

18.

Considering the totality of the facts and circumstances of the case, we are of the view that the ends of justice would be met if the matter is restored to the

file of the learned CIT(Exemptions) for fresh adjudication. We accordingly set aside the impugned order and restore the matter to the file of the learned CIT(Exemptions) with a direction to examine afresh the Applicant Trust's request for condonation of delay in accordance with law after considering the explanation furnished by the Applicant Trust, the legislative intent underlying the proviso to section 12A(1)(ac) of the Act, and the judicial precedents relied upon by the Applicant Trust. The learned CIT(Exemptions) shall also reconsider the objections relating to clauses 3(A)(2), 3(A)(3), 3(B)(28), 3(B)(29) and 3(B)(36) of the Memorandum of Association after taking into consideration the amended Memorandum of Association, if filed, and after examining whether the objects and activities of the Applicant Trust satisfy the requirements of section 12AB of the Act.

19.

We further grant liberty to the Applicant Trust to amend its Memorandum of Association by passing the necessary Special Resolution and to place the amended Memorandum of Association together with all supporting documents before the learned CIT(Exemptions). The learned CIT(Exemptions) shall consider such amended Memorandum of Association, if filed, and shall decide the application afresh on its own merits in accordance with law after affording adequate opportunity of being heard to the Applicant Trust. We make it clear that we have not expressed any opinion on the merits of the rival contentions and all issues are left open to be adjudicated by the learned CIT(Exemptions) in accordance with law.

20.

Accordingly, the impugned order passed by the learned Commissioner of Income-tax (Exemptions) is set aside and the matter is restored to his file for de novo adjudication in the light of the observations made hereinabove.

21.

The appeal filed by the Applicant Trust are allowed for statistical purposes. Order pronounced in the open court on 09.07.2026.

Sd/- Sd/- VIKRAM SINGH YADAV SIDDHARTHA NAUTIYAL ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: Sharath PS Copy to: RIFAH CHAMBER OF COMMERCE AND INDUSTRY 4 C & D, FLOOR, PLOT NO.96, 77C, HAMID BUILDING, 1 HAFIZ ALI BAHADURKHAN MARG, MOMINPURA, JACOB CIRCLE S.O, 400 011- MUMBAI, MAHARASHTRA. COMMISSIONER OF INCOME TAX (EXCEMPTIONS), ROOM NO 601, 6th FLOOR, CUMBALLA HILL, 2 MTNL TE BUILDING, PEDDER ROAD, DR. GOPAL RAO DESHMUKH MARG, CUMBALLA HILL, MUMBAI-400026, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE

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