CBDT Preserves Maharashtra Electricity Regulatory Commission Tax Exemption Across 1961 and 2025 Income-Tax Laws

The Central Board of Direct Taxes has issued two notifications on the same day to keep the income-tax exemption of the Maharashtra Electricity Regulatory Commission (MERC) in place across the switch from the Income-tax Act, 1961 to the Income-tax Act, 2025. Both are dated 25 August 2026 and carry the same file number, F. No. 195/13/2025-ITA-I.

What the two notifications do

CBDT Notification No. 116/2026 notifies MERC for the purposes of section 10(46A) of the 1961 Act, effective for assessment year 2026-27 relevant to financial year 2025-26. It is issued under section 536(2)(a) to (c) and (e) of the Income-tax Act, 2025, the transition provision. The notification records that the 1961 Act continues to apply to proceedings pending when the 2025 Act commenced, and to proceedings started on or after 1 April 2026 for any tax year that began before 1 April 2026. It is signed by Hardev Singh, Under Secretary.

CBDT Notification No. 117/2026 gives MERC the same recognition under the new law. It is issued under Schedule VII, Table Sl. No. 42, read with section 11 of the Income-tax Act, 2025, and takes effect from tax year 2026-27.

Conditions MERC must keep meeting

Both notifications carry the same core condition. MERC must continue to be a Commission constituted under the Electricity Regulatory Commissions Act, 1998 (No. 14 of 1998), with one or more of the purposes specified in section 10(46A) of the 1961 Act or, for the new law, in Schedule VII, Table Sl. No. 42. If that status or purpose changes, the exemption is open to question.

Under the 2025 Act, section 11(3) of the Income-tax Act, 2025 (as amended by the Finance Act, 2026) provides that persons enumerated in Schedule VII are not chargeable to tax on their total income for a tax year, subject to the conditions specified in that Schedule. The Schedule VII route therefore replaces the old section 10 clause for tax year 2026-27 onwards.

Why section 10(46A) and not section 10(46)

Clause (46A) was inserted in section 10 by the Finance Act, 2023, with effect from assessment year 2024-25. The Memorandum explaining the Finance Bill, 2023 shows the difference. Clause (46) exempts only "specified income" of a notified body that is not engaged in commercial activity. Clause (46A) covers bodies, authorities, Boards, Trusts or Commissions (not being companies) set up under a Central or State Act for purposes such as housing, planning and development of cities, towns and villages, regulating or regulating and developing an activity for the benefit of the general public, and regulating any matter for public benefit arising from the object for which the body was created. Such a body must be notified by the Central Government in the Official Gazette.

The Memorandum explains that the change followed the Supreme Court's 2022 ruling in Assistant Commissioner of Income-tax (Exemptions) v. Ahmedabad Urban Development Authority on when fees and charges of public bodies amount to commercial activity. A regulator such as MERC fits the "regulating any activity for the benefit of the general public" purpose.

What practitioners should check

• Match the notification to the period. Use Notification No. 116/2026 and section 10(46A) for assessment year 2026-27 (financial year 2025-26), and Notification No. 117/2026 with Schedule VII for tax year 2026-27 onwards.
• Pending and old-year proceedings. Assessments, reassessments or appeals for years before 1 April 2026 stay under the 1961 Act, as the transition text in Notification No. 116/2026 states.
• Keep the file current. For MERC's return and any exemption review, keep both notifications with the tax records and confirm that the Commission's constitution under the 1998 Act has not changed.
• Do not assume carry-forward. These paired notifications show that CBDT is issuing fresh recognition under the 2025 Act for bodies earlier notified under the 1961 Act. Other statutory bodies relying on section 10(46) or 10(46A) should check whether a matching 2025 Act notification has been issued for them.

For tax teams, the practical point is simple: the entity and the benefit are the same, but the legal reference changes with the year. Returns, tax audit notes and replies to notices should cite the correct Act and notification for each period.

Updated on 27 September 2026: verified both notifications against the CBDT originals, added the section 536(2) transition basis, file number and signatory, the section 11(3) link to Schedule VII, and the Finance Act, 2023 background to section 10(46A).