1996 (10) TMI 122 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of the maximum marginal rate under section 167A to "Body of Individuals" (BOI) for the assessment years 1987-88 and 1988-89.
2. Classification of the assessees as BOI or Association of Persons (AOP).
3. Interpretation of tax statutes and the retrospective application of amendments.

Detailed Analysis:

1. Applicability of the Maximum Marginal Rate Under Section 167A to BOI:
The primary issue in these appeals is whether the maximum marginal rate of tax, as stipulated under section 167A, applies to the assessees classified as a "Body of Individuals" (BOI) for the assessment years 1987-88 and 1988-89. The assessees filed returns in the status of BOI, claiming the tax rate applicable to individuals. The Assessing Officer (AO) levied tax at the maximum marginal rate under section 167A, reasoning that the shares of the members were indeterminate and unknown.

2. Classification of the Assessees as BOI or AOP:
The CIT(A) held that section 167A applied only to AOPs and not to BOIs. The CIT(A) directed the AO to charge tax at the rate applicable to individuals, not at the maximum marginal rate. The revenue contended that the assessees should be treated as AOPs, arguing that the activities of the BOIs showed a common purpose and intent, thus qualifying them as AOPs. The revenue cited the Supreme Court decision in CIT v. Indira Balakrishna, which defined the characteristics of an AOP. However, the CIT(A) and the Tribunal found no basis to treat the BOIs as AOPs, emphasizing that the status of the assessees as BOI was not in dispute before the CIT(A).

3. Interpretation of Tax Statutes and Retrospective Application of Amendments:
The Tribunal examined the provisions of section 167A as they stood before being replaced by section 167B, effective from 1-4-1989. Section 167A mentioned only AOPs and not BOIs. The Tribunal agreed with the assessees' argument that words not present in the statute should not be read into it, citing various Supreme Court decisions emphasizing strict interpretation of tax statutes. The Tribunal held that the amendment introducing section 167B, which included BOIs, was prospective and not retrospective. Therefore, section 167A, as it stood during the relevant assessment years, did not apply to BOIs.

Conclusion:
The Tribunal concluded that the additional grounds raised by the revenue, contending that the assessees were AOPs, did not arise from the CIT(A)'s order and were not admitted for consideration. The Tribunal upheld the CIT(A)'s decision that section 167A, as it stood prior to 1-4-1989, applied only to AOPs and not to BOIs. Consequently, the maximum marginal rate was not applicable to the assessees, and the tax rate applicable was that for individuals. The appeals by the revenue were dismissed.