BAI KABIBAI AND HANSRAJ MORARJI CHARITY TRUST,MUMBAI vs. COMMISSIONER OF INCOME TAX(EXEMPTIONS)-MUMBAI, MUMBAI

The facts, in brief, are that the assessee trust had applied for renewal of registration under section 12AB as well as approval under section 80G of the Act. The learned CIT (Exemption), vide separate orders dated 29.03.2026, rejected both the applications primarily on the ground that the trust deed did not contain any specific clause declaring the trust to be irrevocable or providing that the trust property stood irrevocably dedicated for charitable purposes. According to the learned CIT (Exemption), in the absence of an express irrevocability clause, the assessee did not satisfy the statutory requirements contemplated under section 332(2)(b) of the Income Tax Act, 2025, and consequently the applications for registration and approval were liable to be rejected. Aggrieved by the aforesaid orders, the assessee preferred an appeal before the Tribunal.

During the pendency of the aforesaid appeals, the issue relating to rejection of registration applications solely on the ground of absence of an express irrevocability clause in the trust deed came up for consideration before the Hon’ble

In compliance with the aforesaid judgment of the Hon’ble Bombay High Court, the learned CIT (Exemption) subsequently granted registration under section 12AB and approval under section 80G to the assessee trust. However, while granting such registration and approval, the learned CIT (Exemption) recorded certain observations stating that the Revenue was contemplating challenge to the judgment of the Hon’ble Bombay High Court before the Hon’ble Supreme Court and, therefore, by way of abundant caution, the assessee trust, donor entities and other stakeholders were being informed that the registration, approval and consequential benefits flowing therefrom would remain

Before us, the learned counsel submitted that once the jurisdictional High Court had conclusively settled the issue and the learned CIT (Exemption) had acted upon such binding directions by granting registration and approval, no qualification or conditional rider could have been attached to the grant itself. It was submitted that the observations made by the learned CIT (Exemption) create an atmosphere of uncertainty regarding the legal status of the registration and approval and are likely to adversely impact the activities of charitable institutions, particularly in relation to receipt of donations from existing and prospective donors. It was further submitted that charitable organisations depend substantially upon public confidence and statutory recognition and any such cautionary remarks in the order granting approval have the potential of creating unwarranted apprehensions amongst stakeholders. Reliance was also placed upon the decision of the Co ordinate Bench in the case of IAA Rajesh Foundation vs. CIT (Exemption), order dated 15.05.2026, wherein an identical caveat incorporated while granting registration was directed to be deleted.

We find that the observations incorporated by the learned CIT (Exemption) travel beyond the scope of the directions issued by the Hon’ble Bombay High Court. The High Court directed that applications should not be rejected solely on the ground of absence of an express irrevocability clause. The learned CIT (Exemption), while implementing those directions, was required to grant or refuse registration in accordance with law and on the basis of the facts before him. Once registration and approval were granted, the statutory recognition so conferred could not be converted into a tentative or conditional recognition by referring to a possible future challenge. Such observations do not emanate from any

We also find considerable force in the submission of the learned counsel that such caveats have wider practical ramifications. Registration under section 12AB and approval under section 80G are not merely procedural recognitions. They constitute the foundation upon which charitable institutions organise their activities, mobilise resources and secure public participation. Donors, contributors and stakeholders often evaluate the legal status of a charitable institution on the basis of the registration and approvals granted under the Act. An observation by the statutory authority itself suggesting that the approval presently granted may remain subject to an uncertain future outcome is capable of creating avoidable ambiguity and hesitation in the minds of stakeholders. Such uncertainty is neither contemplated by the statutory scheme nor warranted by the judicial directions pursuant to which the approval has been granted.

We also note that an identical issue had come up before the Co ordinate Bench in the case of IAA Rajesh Foundation vs. CIT (Exemption), vide order dated 15.05.2026, wherein the Tribunal observed that once registration has been granted

Having regard to the entirety of the facts and circumstances of the case, we are of the considered view that the observations made by the learned CIT (Exemption) stating that the registration, approval and consequential tax benefits would remain subject to the outcome of proceedings before the Hon’ble Supreme Court cannot be sustained. Such observations neither emanate from the statutory provisions governing registration under section 12AB and approval under section 80G nor can they coexist with a grant made in compliance with a binding judgment of the jurisdictional High Court. The validity and efficacy of the registration granted to the assessee must be examined with reference to the law as it exists on the date of grant and not on the basis of speculative future developments. Needless to state, if at any future point of time any superior judicial forum lays down a different legal position, the consequences, if any, would follow in accordance with law. However, such hypothetical future possibilities cannot furnish a legal basis for qualifying a registration that presently stands validly granted.