2020 (8) TMI 9 - AT - Income Tax

Applicability of section 167B - taxing at maximum marginal rate - assessee in the status of AOP - HELD THAT - Section 167B(2) prescribe that in case of any Association of Person (not being a case falling under sub-section 1 of 167B) if total income of the any member of the Association of Person (excluding the share from such Association) exceeds the maximum amount, which is not chargeable to tax under the Finance Act of the relevant year, the tax shall be charged on the total income of the Association at maximum marginal rate. CIT(A) held that income of the members being in the slab of maximum rate of tax, the society is not entitled to the benefit of exemption from the minimum amount and liable to the incidence of maximum marginal rate income of section 167B(ii) of the Act. CIT(A) on the issue in dispute is well reasoned. A society registered under the Societies Registration Act, 1860, has been excluded from the provision of section 167B9(1). Thus, in case of any society, which though has been held as Association of Person and income of such Association is indeterminate; such society will be excluded from invoking of maximum marginal rate. But, the provision of section 167B(2) are applicable in case of Association of persons not being a case falling under sub-section 1. Unambiguous provisions of 167B(2), if income of any member (other than the share of such Association) is higher than the basic exemption limit of the relevant year, the income of the Association is chargeable at the maximum marginal rate. Assessee has not disputed the finding of the CIT(A) that income of its member during the year under consideration exceeds the basic exemption limit. - Decided against assessee.

Summary

Issues:
1. Applicability of section 167B on a society registered under the Societies Registration Act, 1860.
2. Assessment of income and claim of expenditure by the Assessing Officer.

Issue 1: Applicability of section 167B on a society registered under the Societies Registration Act, 1860:
The case involved an appeal against the order of the Ld. CIT(A) confirming the assessment order made by the Ld. AO for the assessment year 2013-14. The appellant, a society registered under the Societies Registration Act, 1860, disputed the application of section 167B by the lower authorities. The Assessing Officer assessed interest income from non-members as taxable and held the status of the assessee as Association of Persons (AOP). The Ld. CIT(A) upheld this status. The Tribunal, in the first round of proceedings, restored the matter to the Assessing Officer to examine the applicability of section 167B. The Assessing Officer, in compliance, applied the tax rate applicable to cooperative societies without providing the benefit of the basic exemption limit. The Ld. CIT(A) held that section 167B(2) was applicable to the case, denying the exemption and subjecting the entire income to the maximum marginal rate of tax. The Tribunal, after hearing both parties, upheld the Ld. CIT(A)'s decision, stating that the society was not entitled to the benefit of exemption under section 167B(2) due to its members' income exceeding the basic exemption limit.

Issue 2: Assessment of income and claim of expenditure by the Assessing Officer:
The appellant had filed a return of income declaring a total income of &8377; 37,080, but the Assessing Officer assessed the income at &8377; 1,39,820. The appellant claimed that certain expenditure should be allowed to reduce the income to &8377; 37,081, which was not disputed by the Assessing Officer. However, the Ld. CIT(A) confirmed the income assessed by the Assessing Officer. The appellant raised grounds challenging the assessment and the denial of the claim of expenditure. The Tribunal, after considering the arguments of both parties, dismissed the appeal, upholding the decision of the Ld. CIT(A) regarding the assessment of income and expenditure claim.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the decisions of the lower authorities regarding the applicability of section 167B on the society registered under the Societies Registration Act, 1860, and the assessment of income and claim of expenditure by the Assessing Officer.