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2024 (4) TMI 661 - AT - Income TaxDenial of exemption u/s 11 12 - Assessment of trust - Rate of Tax - Maximum Marginal Rate (MMR) - Charging the assessee as per the provisions of section 164(1) or 164(2) - assessee argued that beneficiary are the general public so there is no share of beneficiaries whether known or unknown as the assessee is trust so charging the assessee as per the provisions of section 164(1) as held by the CIT(A) is incorrect and the relevant facts has not been appreciated - HELD THAT - Section 13(1)(c) deals where the money spent for the related party and 13(1)(d) deals religious trust or institution. The ld. AR of the assessee submitted that the assessee subsequently already registered u/s. 12A with effect from 22.03.2022 and thus it does not come under the provision of section 13(1)(c) and (d) of the Act and therefore based on that set of facts the assessee trust shall be charged to tax u/s. 164(2) at the rate as applicable to Individual and AOP. The decision of the ld. CIT(A) to charge the assessee u/s. 164(1) is not correct it should be charged based on the specific provision of the Act u/s. 164(2) of the Act and the tax rate as applicable to that 164(2) will apply to the rate of the AOP/Individual and the initial exemption is also available to such assessee. Ground no. 2 raised by the assessee is allowed. Amount claimed to had been used for the purposes of the trust - CIT(A) has not granted the benefit of deduction of expenditure only on the reason that the assessee is not registered u/s. 12 A of the Act. Assessee placed on record the registration certificate issued to the trust on 22.03.2022 and therefore considering that aspect of the matter we direct the ld. AO to grant the benefit of the deduction of the expenditure claimed by the as per object of the trust. Based on these observation ground no. 1 raised by the assessee is allowed.
Issues Involved:
1. Whether the assessee trust should be charged to tax at Maximum Marginal Rate (MMR) or as per the normal provision applicable for Individual and Association of Persons (AOP). 2. Disallowance of expenditure claimed by the assessee trust for the purposes of the trust. Summary of Judgment: Issue 1: Tax Rate Applicability The core issue in these appeals is whether the assessee trust should be taxed at MMR or as per the normal provisions applicable to Individuals and AOPs. The assessee trust, not registered u/s 12A of the Income Tax Act, 1961, filed returns declaring income and calculating tax as applicable to individuals. The CPC processed the returns and charged tax at MMR, creating a demand. The CIT(A) upheld the CPC's decision, stating that the trust, being unregistered, is subject to sections 164(1) and 167B, which mandate MMR. However, the Tribunal noted that the beneficiaries are the general public, and there are no determinate shares of beneficiaries. Therefore, the trust should be taxed u/s 164(2), which applies to trusts where income is not exempt under sections 11 and 12, and tax should be charged as if it were the income of an AOP. The Tribunal concluded that the specific provision u/s 164(2) should apply, and the trust should be taxed at the rates applicable to an AOP/Individual, including the initial exemption. Thus, the decision of the CIT(A) to charge the assessee u/s 164(1) was incorrect. The ground raised by the assessee was allowed. Issue 2: Disallowance of ExpenditureThe assessee claimed an expenditure of Rs. 44,130 for the maintenance of the temple, which was disallowed by CPC u/s 143(1) and upheld by CIT(A) on the grounds that the trust was not registered u/s 12A. The Tribunal directed the AO to grant the benefit of the expenditure claimed, considering the trust's registration u/s 12A obtained on 22.03.2022. The ground raised by the assessee was allowed. ConclusionThe appeals were allowed, and the Tribunal directed that the income of the trust should be charged to tax as per the provisions of section 164(2) at the rates applicable to an AOP/Individual, including the initial exemption. The disallowance of expenditure was also overturned, and the AO was directed to grant the benefit of the claimed expenditure. The decision in ITA No. 121/Jodh/2021 was applied mutatis mutandis to the other appeals (ITA Nos. 122 to 124-Jodh-2021 and 237/Jodh/2023). Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.
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