The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has set aside the assessment order against the Fees Regulating Authority and remanded the matter back to the Assessing Officer (AO) for fresh adjudication, keeping open the crucial question of taxability of its income in light of a pending exemption application before the Central Board of Direct Taxes (CBDT).
The bench of Sandeep Singh Karhail (Judicial Member) and Bijayananda Pruseth (Accountant Member) observed that Section 10(46) provides exemption to statutory bodies established under law for public purposes, subject to notification in the Official Gazette. Once notified, the entire income of such an authority becomes exempt from taxation. The assessee’s application for such notification is actively under consideration.
The appeal arose from an order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, for the Assessment Year 2017–18, wherein exemption claims made by the assessee under Sections 10(46) and 11 of the Income Tax Act, 1961 were denied.
The assessee, Fees Regulating Authority, is a statutory body constituted under the Maharashtra Unaided Private Professional Educational Institutions (Regulation of Admission and Fees) Act, 2015. Its primary function is to regulate and determine the reasonableness of fees charged by unaided professional educational institutions.
For AY 2017–18, the Authority filed its return declaring nil income, claiming exemption under Section 10(46) of the Income Tax Act. Alternatively, it also claimed exemption under Section 11, being registered as a charitable institution under Section 12AA.
However, during scrutiny, the AO rejected both claims. The exemption under Section 10(46) was denied on the ground that the Authority had not been notified by the Central Government, which is a mandatory requirement. The alternative claim under Section 11 was also rejected due to non-compliance with procedural requirements such as filing Form 10 and meeting accumulation conditions.
The CIT(A) affirmed the AO’s findings, holding that the assessee had not received notification from CBDT for Section 10(46) exemption. The governing Act had not been notified in the State Gazette. The assessee failed to file audit reports within prescribed timelines for Section 11 exemption.
Consequently, the income of the Authority was taxed as business income and subjected to maximum marginal rate.
The ITAT took note of the fact that the assessee had already applied for notification under Section 10(46) as early as January 2018, and the matter is still pending before the CBDT, with multiple correspondences exchanged even as recently as January–March 2026.
The Tribunal also noted that the argument regarding the assessee being an “instrumentality of the State” (and thus inherently non-taxable) was raised but not adjudicated by the CIT(A).
The ITAT held that it would be appropriate to restore the matter to the AO for de novo adjudication, directing that the outcome of the CBDT’s decision on the Section 10(46) notification must be considered.
The Tribunal further allowed the assessee to furnish additional documents supporting exemption under Section 11; and raise all legal contentions, including the claim of being a State instrumentality.
The impugned order was set aside, and the appeal was allowed for statistical purposes.
Case Details
Case Title: Fees Regulating Authority Versus Assistant Commissioner of Income Tax (Exemption), Circle – 1
Citation: JURISHOUR-1057-ITA-2026(MUM)
Case No.: ITA No. 4865/Mum./2025
Date: 30/04/2026
Counsel For Appellant: Mihir Naniwadekar
Counsel For Respondent: Ajay Modi, CIT-DR
