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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 ..... evenue authorities are directed to calculate the tax liability of the assessee as per the Normal Tax rates. Accordingly, we set aside the impugned order of CIT(A) and allow the grounds of appeal raised by the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... nded provisions of section 167B of the Act. 5. Facts of the case in brief are that the assessee is an AOP taxable under the Normal rate of Income-tax. It filed the return of income for the A.Y. 2010-11 which was processed by CPC on 26.03.2012 by calculating the tax payable at Maximum Marginal Rate. The assessee filed the rectification application u/s. 154 requesting the AO to calculate the tax payable under Normal Tax rate, which came to be rejected. Now the assessee is in appeal before the Tribunal. 6. The ld. Departmental Representative on the other hand supported the orders of the lower authorities and also submitted that the assessee's applications u/s. 154 was delayed and there was no mistake apparent in the rectification application and that section 167B of the act is applicable in the instant case and assessee is not falling in the exceptions mentioned therein. Therefore, the ld.CIT(A) was justified in charging the income of the assessee at Maximum Marginal Rate. 7. I have heard the rival contentions and perused the record placed before me. The only issue that arises for my consideration is whether the income of the assessee is chargeable to Normal Tax rates or the Maximu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. The Board have been advised that cases where income received by the trustees on behalf of a recognised provident fund, approved superannuation fund and approved gratuity fund is governed by section 10(25) of the Income-tax Act, the question of their being charged to tax does not arise. So far as cases where income is receivable by the trustees, on behalf of an unrecognized provident fund or an unapproved superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession are concerned, they will continue to be charged to tax in the manner prescribed by section 164(1)(iv) of the Income-tax Act, as hitherto Similarly, in the 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, accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the purposes of this section, the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such association or body or at any time thereafter." 11. Now in the above provision, section 167B(1), only the Company or Cooperative Societies registered under the Societies Registration Act are excluded and the remaining association of persons or body of individuals where individual share of the members are not known are indeterminate, tax is leviable at the Maximum Marginal Rate. Before me, Ld. Counsel for the assessee has stated that assessee is a registered Charitable Trust and it is carrying out the charitable activity as per the Trust deed and even if share of the trustees are not defined, still the assessee being a Charitable Registered Trust engaged in the charitable activity is liable to taxed at the Normal Tax rate. To buttress his arguments, reliance was placed in the case of Dr. Shalmali Khasbardar Foundation Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ie which has been used therein means on the face of and refers to the items, on which there cannot be two opinions. If the matter is arguable one or debatable then the same cannot be disallowed under the proviso." 5.2 It is noted that Hon'ble Bombay High Court while considering the issue of what amounts to a prima facie adjustment that could be made under Section 143(1)(a), relied on Instruction No.1814 dated 04.041989. Hon'ble Bombay High Court also referred to the decision of its Co-ordinate Bench in Khatau Junkar Ltd. And Another vs K.S. Pathania reported in (1992) 196 ITR 157 (Bom) and held that the word "prima facie inadmissible" in clause (iii) of Section 143(1)(a)' means, 'on the face of it the claim is not admissible'. Hon'ble High Court observed that, it means the claim does not require any further inquiry before deemed disallowed. 5.2 Hon'ble Court further observed that where a claim was made which require further inquiry, it cannot be disallowed without hearing the parties and / or giving the opportunity to submit proof in support of its claim. Hon'ble Bombay High Court thus observed that, debatable issues cannot be adjusted by way of intimation under Section 143(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of provisions of Section 167B the matter was set aside to Assessing Officer to decide the issue in accordance with law. Ld. CIT(A) held that the provisions of Section 167B are applicable to the Assessee. 10. The issue of whether the provisions of Section 167B of the Act are applicable to the assessee society which is registered under the Societies Registration Act, 1860 is concerned, I find that the issue has been decided by the Visakapatnam Tribunal in the case of M/s Anand Educational Society vs. ITO (supra), wherein the Tribunal following its earlier order in the case of Vidyodaya Educational Society vs. DCIT held that once the society is registered under the Societies Registration Act the applicability of maximum marginal rates u/s 167B of the Act would not arise. While holding so, the Tribunal observed as under: "5. We have heard both the parties and perused the material placed on record. Though the Ld.CIT(A) held that the maximum marginal rate is applicable in the case of the assessee, who is having exempt income as well as taxable income, but there is no such distinction provided under section 167B of the Act. This Tribunal in the case cited supra held that normal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that the rate of tax applicable to the assessee is maximum marginal rate of tax without understanding the provisions." 11. The assessee is a society registered under Societies Act, 1860 as evidenced from the registration certificate. The facts are similar in this case, therefore, following the decision of coordinate bench and section 167B of the Act, we hold that the income of the assessee is to be taxed at normal rates but not at maximum marginal rate, accordingly, we set aside the order of the Ld. CIT(A) and allow the appeal of the assessee on this ground. 6. During the appeal hearing, the Ld. DR did not bring any other decision of the higher court to controvert the case laws relied upon by the Ld.AR. Since, the facts are identical, respectfully following the rule of consistency and the view taken by this Tribunal in the case cited supra, we hold that the income of the assessee is to be taxed at normal rates, but not at maximum marginal rates. Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee." Similar view has been taken by the Hyderabad Bench of ITAT in the case of KMR Educational Society vs. ACIT [68 SOT 163]. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising, in fine, is the applicability of section 11(1)(a) of the Act in the absence of any application of its income for it's objects by the assessee, a charitable trust, during the relevant year. We see no reason for it being not so, and neither has any been stated by the Revenue at any stage. The language of the provision is unambiguously clear, so that an assessee is not entitled to, save where an option is specifically exercised in its respect, and before expiry of the time allowed for furnishing the return of income u/s. 139(1) of the Act, accumulate or set aside for application in excess of 15% of it's income from the property held under trust. That is to say, it is necessarily to, save where an option is specifically exercised in its respect - which is not so in the instant case, apply 85% of it's income for charitable purposed during the relevant year. The assessee, as afore-said, having not done so, it's income is accordingly to be limited thereto, i.e., 85% of it's total income. A reading of Explanation 1 to section 11(1), reproduced hereunder, makes it abundantly clear that in the absence of option being exercised, the deeming qua application of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rectification thereof, scope of which is severely limited. This, to our mind, would not constrain us inasmuch as the Revenue itself has made the impugned adjustment under summary proceedings u/s. 143(1)(a), the scope of which is, again, limited to apparently incorrect claims, which is not the case. The assessee shall accordingly be assessed at the returned income of Rs. 87,430. 4.5 Continuing further, even as observed by the Bench during hearing, the principal issue arising in the instant case, inasmuch as it is this that leads to the impugned demand, is the tax rate applied, which has been by the Revenue at the maximum marginal rate, duly raised by the assessee per its grounds of appeal before us. The assessee surely did not raise this issue before the ld. CIT(A), whose adjudication accordingly does not include the same. We, nevertheless, consider the Mahakavi Edasseri Smaraka Trust v. Income Tax Officer same, being a legal issue, with the relevant facts available on record, adjudicating the same in disposal of the appeal, upon hearing Smt. Devi, the ld. Sr. DR. 4.6 We again find no reason for application of section 167B of the Act, prescribing the maximum marginal rate in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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