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TMI Blog2025 (2) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... in the learned AO has erred in not rectifying the mistake apparent from records by charging tax at Maximum Marginal Rate by invoking the provisions of section 167B of Act instead of the tax rates applicable to an AOP. He failed to appreciate the fact that, the assessee is an AOP-Trust registered I as a charitable trust, is a public body and, accordingly, there is no question of its beneficiaries being individual members, whose shares have therefore to be defined. He failed to appreciate the facts, the law involved as well as the CBDT's Circular No.320 dated 11/01/1982 that is binding on the department. 2. The learned CIT (A) erred on facts and in law in upholding the order u/s 154 of the Act by citing the belated filing of the application for rectification of mistake u/s 154 of the Act filed after the time limit as prescribed under the Act. He failed to appreciate the fact that, the return was processed on 26.03.2012 and the assessee trust had already filed its first rectification application well within the prescribed time limit. 3. Without prejudice to the other grounds of appeal, the learned CIT(A) has erred on facts and in law in denying relief to the assessee by not re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or the Maximum Marginal Tax rates. The assessee is a Trust registered on 16.05.2007 formed with the following objects : "1. To bring orthopaedic Surgeons of similar interest in interlocking nailing together. 2. To discuss and diffuse knowledge of interlocking nailing techniques. 3. To conduct seminar & conferences. 4. To give fellowships to upcoming Doctors in interlocking nailing techniques. 5. To carry out newsletter/brochures of interlocking related subjects. 6. To carry out Research & Development programs/activities in the field of interlocking nailing techniques." 8. I have perused the Trust Deed dated 16.05.2007. I observe that there are Five trustees and the individual share of the Members of the Trust is not specified in the said deed. CPC processed the return of income for the year under appeal charging the income of the assessee at Maximum Marginal Rate. Assessee filed the Rectification application u/s. 154 of the Act which has been rejected. Before us, ld. DR has stated that the application u/s. 154 filed by the assessee u/s. 154 was delayed. I have gone through the record and notice that the assessee had filed the application u/s. 154 for rectifying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an association of persons and not at the maximum marginal rate. 10. In the above circular, the last four lines indicate that in cases of registered societies, trade and professional associations, social and sports clubs, charitable or religious trusts, etc, where the members or trustees are not entitled to any share in the income of the association of persons, the provisions of new section 167A will not be attracted and tax will not be payable at the Maximum Marginal rate. However, section 167A of the Act was replaced by section 167B from 01.04.1989 and the same reads as under : "Charge of tax where shares of members in association of persons or body of individuals unknown, etc. 167B. (1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate : P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Foundation Vs. ITO (supra) was placed where also similar issue was for consideration and the finding of the Tribunal reads as under : "We have perused the submissions advanced by both the sides in the light of the records placed before us. 5. The assessee has raised a preliminary issue challenging the validity of intimation under Section 143(1) of the Act passed without granting opportunity to the assessee, wherein an adjustment was made that was debatable in nature. The Ld. AR placed reliance on the decision of Hon'ble Bombay High Court in the case of Bajaj Auto Finance Ltd. vs. CIT Pune reported in (2018) 404 ITR 564 (Bom) and the decision of Hon'ble Rajasthan High Court in the case of JKs Employees Welfare Fund vs. ITO reported in (1993) 199 ITR 765 (Raj). 5.1 It is noted that, Hon'ble Rajasthan High Court in case of JKs Employees Welfare Fund (supra) considered what amounts to a prima facie adjustment by observing as under: "A bare perusal of section 143(1)(a) contemplate that the ITO has to accept the return as it is and in the proviso, three exceptions have been given, which confer the jurisdiction on him for making adjustment. The action under this section cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 143(1)(a), which would lead to an arbitrary and unreasonable intimation being issued leading to chaos. In our view the above proposition by Hon'ble Bombay High Court as well as Hon'ble Rajasthan High Court squarely is applicable to the present facts of the case. Accordingly ground no.1 of the assessee stands allowed. (B) Ground No.2 raised by the assessee, is on the applicability of the maximum marginal rate, for which reliance was placed on the decision of Hon'ble Bombay High Court in the case of CIT vs. Marsons Beneficiary Trust (supra). It is noted that present assessee before us is admittedly a public charitable trust, where the shares of the beneficiaries are in determinate are not known, unlike an AOP, where the beneficiaries have a defined share in the income. It is noted that Section 164 is a special provision that prevails over the general provision of Section 167B. The decision of Hon'ble Bombay High Court in case of CIT vs. Marsons Beneficiary Trust (supra) has considered the fact in a case of a Trust, where the beneficiaries in the share was determinate and therefore, Hon'ble Court held that the earnings on behalf of such Trust would be taxed as an AOP. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that normal rates are applicable in the case of the Society registered under Societies Act. For the sake of clarity and convenience, we extract relevant part of the order of this Tribunal in para No.10-11 which reads as under: 10. The next submission of the assessee is taxing the income at maximum marginal rate. 4s per section 167B of the Act, in case of an assessee registered under Societies Act, the same is excluded for taxing the income at for maximum marginal rate. For ready reference we extract relevant part of Section 167B(1) of the Act which reads as under: 167B. (1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of1860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate : Plain reading of section 167B of the Act indicates that the income of company or cooperative society or a society regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SOT 163]. 11. Facts being identical following the above decisions. I hold that the provisions of section 167B have no application to the Assessee and the income of the assessee cannot be taxed at maximum marginal rates. Ground nos. 1.a, 1.c to 1.e are allowed." 13. I also find the Cochin Bench of Tribunal in the case of Mahakavi Edasseri Smaraka Trust Vs. ITO (supra) had dealt with identical issue and has observed as under : "4. We have heard the party before us, and perused the material on record. 4.1 The issue arising in the instant case, and toward which we have perused the impugned order and also the grounds raised before the first appellate authority, is the manner in which the income of such an Institution is to be computed in the absence of any application of income, i.e., if the allowance for 15% of the income from property held under trust is to be allowed u/s. 11(1)(a) of the Act or not. The relevant part of the impugned order read as under: '7.2 Thus it is seen that the appellant has claimed a deduction of Rs. 15429/- from its total gross receipt of Rs. 1,02,862/- and offered an adjusted total income of Rs. 87,433/- in its return of income. However, the ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of income, which extends to the shortfall w.r.t. eighty-five percent of income derived from property held under trust, shall not apply: Explanation 1.--For the purposes of clauses (a) and (b),-- (1) in computing the fifteen per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income; (2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount- (i) for the reason that the whole or any part of the income has not been received during that year, or (ii) for any other reason, Mahakavi Edasseri Smaraka Trust v. Income Tax Officer then-- (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in sub-clause (ii), so much of the income applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rginal rate in the instant case, which is one of a charitable trust. Section 167B, as a reading of the provision would show, is only where the shares of the beneficiaries of the trust are not known. The assessee, registered as a charitable trust, is a public body and, accordingly, there is no question of it's beneficiaries being individual members, whose shares have therefore to be defined. The application thereof in the instant case is wholly misconceived. The matter in fact stands clarified by the Board per it's Circular No. 320, dated 11/01/1982, also binding on the Revenue. The tax rate accordingly is to be computed as per the normal rates as applicable to Association of Persons. The same, in our view, is again an apparent mistake and, where contested, outside the ambit of s. 143(1)((a) in the first instance, so that it could not have been effected there-under." 14. The decisions of Coordinate Benches referred (supra) having dealt the very same issue as has been raised in the instant bunch of appeals, I find that the ratio laid down by the Coordinate Benches in the decisions referred (supra) are squarely applicable on the facts of the instant case and therefore, respec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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