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2024 (4) TMI 933 - AT - Income TaxAssessment of trust - Rate of Tax - Maximum Marginal Rate (MMR) - Charging the assessee as per the provisions of section 164(1) or 164(2) - rate as applicable to Individual and AOP - issue raised by the assessee that the trust has not issued any exemption u/s 12A of the Act. Though the assessee s income can be charged to tax at maximum marginal rate or as per the normal provisions of the Income Tax Act 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 - On going through the trust deed it is apparent that there is no share of beneficiary whether no one or unknown as the assessee trust is so charging the assessee as per provisions of Section 164(1) is incorrect and the relevant provisions of section 164(2) of the Act which is specific charging of section for a trust. Thus, when the specific provisions of charging tax, the general provisions cannot be made applicable in this case. The ld. AR of the assessee also submitted that similar issue has been dealt with by the Revenue for assessment years 2015-16, 2016-17 2018-19 as per provisions of Section 164(2) of the Act. As decided in SHRI DIGAMBAR JAIN MANDIR TRUST CHARANWAS VERSUS AO, MAKRANA, ITO, WARD-1, MAKRANA 2024 (4) TMI 661 - ITAT JODHPUR assessee trust shall be charged to tax u/s. 164(2) at the rate as applicable to Individual and AOP - 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. Thus we direct the ld. Assessing Officer to charge the assessee as per provisions of Section 164(2). Appeal of the assessee is allowed.
Issues Involved:
1. Rejection of application filed u/s 154 of the Income Tax Act. 2. Applicability of tax rates under Section 164(1) and 164(2) of the Income Tax Act. 3. Determination of tax liability based on the status of the assessee as "AOP" or "Artificial Juridical Person". Summary: 1. Rejection of Application Filed u/s 154 of the Income Tax Act: The assessee filed a rectification application u/s 154 claiming eligibility for the basic exemption of Rs. 2,50,000 and asserting that the provisions of audit u/s 12A(1)(B) were not applicable as the trust was not charitable or religious. The ITO rejected the application, stating that there was no prima facie error in the order and that the tax was computed correctly by the system. The CIT(A) upheld the ITO's decision, emphasizing that Section 154 has a limited scope for rectifying mistakes apparent from the record and that the issues raised by the assessee were beyond the purview of the said section. 2. Applicability of Tax Rates under Section 164(1) and 164(2) of the Income Tax Act: The assessee contended that it should be taxed as an "Artificial Juridical Person" under Section 164(1) and not at the Maximum Marginal Rate (MMR) applicable to an "AOP". The CIT(A) rejected this argument, noting that the return was filed in the status of "AOP" with determinate shares of members, and the provisions of Section 167B(2) justified the flat tax rate of 30%. The Tribunal, however, found that the trust should be taxed under Section 164(2), which applies to trusts where the whole or any part of the relevant income is not exempt under Sections 11 or 12. The Tribunal held that the specific provisions of Section 164(2) should prevail over the general provisions, and the tax should be charged at the rate applicable to an "Individual" or "AOP". 3. Determination of Tax Liability Based on the Status of the Assessee: The Tribunal emphasized that the status of the assessee as an "Artificial Juridical Person" should be considered for tax purposes, and the tax rate applicable should be as per Section 164(2). The Tribunal also noted that the assessee had been granted similar tax treatment in previous assessment years and directed the Assessing Officer to charge the assessee accordingly. The Tribunal allowed the appeal, directing the Assessing Officer to apply the provisions of Section 164(2) and charge the tax at the rate applicable to an "Individual" or "AOP". Conclusion: The appeal of the assessee was allowed, with the Tribunal directing the Assessing Officer to charge the tax as per the specific provisions of Section 164(2) of the Income Tax Act, treating the assessee as an "Artificial Juridical Person" and applying the tax rate applicable to an "Individual" or "AOP".
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