ITAT Mumbai Restores Fees Regulating Authority Matter Pending Section 10(46) Notification Outcome

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 30 April held that the taxability of the Fees Regulating Authority cannot be conclusively decided while its application for notification under Section 10(46) of the Income-tax Act, 1961 remains pending before the Central Board of Direct Taxes (CBDT).

A Bench comprising Accountant Member Bijayananda Pruseth and Judicial Member Sandeep Singh Karhail allowed the appeal for statistical purposes and set aside the impugned order. It held:

"As per Section 10(46), exemption is available to a body or authority constituted under law or by the Government for public regulatory functions, provided it is not engaged in commercial activity and is notified in the Official Gazette. Once such notification is granted, the income of the entity becomes exempt from taxation under the provision," stated the Bench.

The Fees Regulating Authority is constituted under the Maharashtra Unaided Private Professional Educational Institutions Act, 2015. It had filed its return declaring nil income and claimed exemption under Section 10(46), and alternatively under Section 11, while also being registered under Section 12AA.

The Assessing Officer, in proceedings under Section 143(3), denied exemption under Section 10(46) on the ground that no notification had been issued in the Official Gazette, which is a mandatory requirement under the provision.

The alternative claim under Section 11 was also rejected for non-compliance with statutory conditions, including filing of Form 10 and proper accumulation of income, and the surplus was taxed as business income. The CIT(A) upheld this view.

Before the Tribunal, the Fees Regulating Authority submitted that its application for notification under Section 10(46), filed in January 2018, remained pending before the CBDT, with correspondence continuing even in 2026. It was argued that once notified, its entire income would stand exempt.

The Bench observed that notification under Section 10(46) is a statutory precondition for exemption and noted that the application was still under active consideration. It held that any conclusive determination at this stage would be premature.

Accordingly, the ITAT restored the matter to the file of the Assessing Officer for fresh adjudication after considering the outcome of the pending application.

For Appellant: Shri Mihir Naniwadekar, Advocate

For Respondent: Shri Ajay Modi, CIT-DR