2020 (1) TMI 919 - AT - Income Tax

Assessment as individual or AOP - whether trust was assessable as an individual? - HELD THAT - As relying on SHARDABEN BHAGUBHAI MAFATLAL PUBLIC CHARITABLE TRUST 2000 (9) TMI 45 - BOMBAY HIGH COURT wherein the trust was treated as individual, therefore, the Assessing Officer is directed to tax the assessee by treating individual instead of AOP. - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Incorrect computation of tax at the maximum marginal rate.
2. Erroneous calculation of income tax including interest.
3. Non-consideration of the old registration certificate under section 12A by the Commissioner of Income Tax (Appeals).

Detailed Analysis:

Issue 1: Incorrect Computation of Tax at Maximum Marginal Rate
The appellant, a charitable trust, contested the assessment order where the income was taxed at the maximum marginal rate of 30% instead of the applicable Income Tax slabs. The trust, although registered under section 12A of the Income Tax Act, did not claim exemption under section 11 in its return of income. The appellant argued that it should be assessed as an individual and not as an Association of Persons (AOP), relying on the precedent set by the Bombay High Court in DIT(Exem) vs. Sharadaben Bhagubhai Mafatlal Public Charitable Trust, which held that a trust could be assessed as an individual for tax purposes.

Issue 2: Erroneous Calculation of Income Tax Including Interest
The appellant also challenged the calculation of income tax, which included an interest amount of ?6,63,365/- on the returned income. The appellant maintained that the status of the trust as a charitable entity was not appropriately considered, leading to an incorrect tax computation.

Issue 3: Non-Consideration of Old Registration Certificate under Section 12A
The appellant criticized the Commissioner of Income Tax (Appeals) for considering only the new registration certificate under section 12A dated April 30, 2015, and not the old registration certificate dated August 8, 1975. The appellant argued that the old certificate should have been taken into account for the assessment year 2012-13.

Judgment Analysis:

Analysis of Issue 1:
The tribunal reviewed the appellant's contention and the supporting precedent from the Bombay High Court. It was noted that the trust, while filing the return, had offered its income considering its status as an individual and had not claimed exemption under section 11. The tribunal agreed with the appellant's reliance on the Bombay High Court's decision, which established that a trust could be assessed as an individual. Consequently, the tribunal directed the Assessing Officer to tax the appellant as an individual, not as an AOP.

Analysis of Issue 2:
The tribunal acknowledged the appellant's argument regarding the erroneous calculation of tax and interest. Given the directive to assess the trust as an individual, the tribunal implicitly addressed the issue of incorrect tax computation, as the tax rate applicable to an individual would differ from that of an AOP.

Analysis of Issue 3:
The tribunal noted the appellant's criticism of the Commissioner of Income Tax (Appeals) for not considering the old registration certificate under section 12A. However, the tribunal's decision to direct the Assessing Officer to tax the appellant as an individual, based on the Bombay High Court's precedent, effectively resolved the appellant's concerns about the registration certificates.

Conclusion:
The tribunal allowed the appeal, directing the Assessing Officer to tax the appellant as an individual, thereby addressing the issues of incorrect tax computation and erroneous calculation of income tax including interest. The tribunal's decision implicitly acknowledged the relevance of the old registration certificate under section 12A for the assessment year in question. The appeal was thus resolved in favor of the appellant.