2021 (5) TMI 861 - AT - Income Tax

Charging maximum marginal rate - Charitable society - validity of action of the CPC in calculating the tax at Maximum Marginal rates instead of the slab rates - non claiming any exemption u/s. 11/12/10(23C)(iiiad)/10(23C)(vi) as the society is neither registered u/s. 12A nor approved u/s. 10 (23C) (vi) - infirmity/defect in filing of ITR before processing the return u/s. 143(1) - it is the contention of the assessee that the assessee's society is not registered u/s. 12A of the Act, is not approved u/s. 10(23C)(iiiad) and 10(23C)(vi) of the Act. It is also contended that CPC failed to give an opportunity in terms of Section 139(9) of the Act - HELD THAT - CIT(A) has held in favour of the assessee claim of exemption under section 10(23C)(iiiad) is not allowable since the aggregate receipts exceed ₹ 1 Crore (Rule 2BC of the Income Tax Rules, 1962). Further, in the return of income it has been mentioned that the assessee is not registered under section 12A and no other details regarding registration under any other Act has been given. Since exemption has not been claimed under sections 11 and 12 and no details regarding registration under the Societies Registration Act have been given in the return of income, there appears to be no infirmity in the action of the CPC in calculating tax at the maximum marginal rate instead of the slab rate. Revenue could not rebut the fact that the Ld. CIT(A) has taken contradictory view. I therefore, considering the totality of facts of the present case hold that Ld. CIT(A) was not justified in taking contrary stand in this case of the assessee. Hence, the Assessing Officer is hereby directed to charge tax at normal rates.

Summary

Issues:
1. Assessment Year 2014-15 - Charging of tax at maximum marginal rate without allowing basic exemption limit.
2. Assessment Year 2017-18 - Similar issue of charging tax at maximum marginal rate without allowing basic exemption limit.

Analysis:
1. Assessment Year 2014-15:
- The appellant, a registered society with charitable objectives, filed its return without claiming exemptions under relevant sections due to not being registered under specific Acts.
- The Central Processing Centre (CPC) calculated tax at the maximum marginal rate, resulting in a higher tax liability.
- The CIT(A) partly allowed the appeal, directing CPC to consider income under specific heads and deleting the amount considered twice.
- However, the CIT(A) did not accept the explanation regarding the maximum marginal rate application, leading to the appeal before the Tribunal.
- The appellant argued for basic exemption citing a previous decision in a similar case, emphasizing difficulties faced in filing returns due to registration status.
- The Tribunal found merit in the appellant's contentions, noting the CIT(A)'s contradictory view in a previous case and directed the Assessing Officer to charge tax at normal rates.

2. Assessment Year 2017-18:
- Similar to the previous year, the appellant faced the issue of tax being charged at the maximum marginal rate without allowing basic exemption.
- The arguments and grounds raised were identical to the previous year.
- The Tribunal applied its decision from the earlier year to this case as well, directing the Assessing Officer to charge tax at normal rates.

Conclusion:
Both appeals for Assessment Year 2014-15 and 2017-18 were allowed by the Tribunal, directing the Assessing Officer to charge tax at normal rates instead of the maximum marginal rate. The Tribunal emphasized the importance of consistency in decisions and the need to provide opportunities to taxpayers in case of filing defects or infirmities.