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TMI Blog2025 (4) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer at MMR instead of calculating tax as if it were an individual assessee in the facts and circumstances of the case. 4. The CIT (Appeal) has failed to adhere to the principles of natural justice in providing proper opportunity of hearing on the case in the facts and circumstances of the case. 5. That appellant prays for justice and may please be allowed to add/amend/alter further or any ground/s of appeal on or before hearing on the case. 2. The brief facts of the case are that the assessee is a public charitable trust and duly constituted under its constitution under Indian Trust Act. The assessee e-filed its return of income on 10.01.2018 in ITR-7 along with audit report in Form 10B declaring total income of Rs. Nil. The case was selected for scrutiny under compulsory criteria, accordingly first notice under section 143(2) of the IT Act, 1961 was issued on 24.9.2018 which stands served upon the assessee as per record. In response to the statutory notices, the assessee furnished written submissions and required information and documents through e-proceedings. Further, the ld. A/R of the assessee attended the proceedings and produced books of account consisting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 1,92,751/- taking the status of the assessee Trust as 'AOP' instead of 'Trust', to be taxed MMR and interest under section 234A and 234B have been charged as per the provisions of the IT Act, 1961. Aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) vide his order dated 16.03.2024 by upheld the order of the Assessing Officer, by observing as under :- "6. Decision : I have gone through the facts of the case, the Grounds of appeal, and the submissions made by the appellant. The grounds of appeal raised in this appeal is that the Assessing Officer erred in denying the claim of exemption u/s 11 & 12AA of the Act and also the excess of income over expenditure has been brought to tax at MMR rate by wrongly applying the provisions of Section 13(8) of the Income-tax Act. The assessee's submission was carefully considered. As per the provisions of Section 11 and 12AA of the Income-tax Act, the registration of the trust under Section 12AA is mandatory in order to claim the exemption under Section 11 of the Act. In the absence of the registration u/s 12AA of the Income Tax Act, the assessee is not eligible to claim exemption under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has preferred the present appeal before the Tribunal on the grounds as reproduced herein above. In support of the grounds raised by the assessee, the ld. A/R has filed the written submissions and the same are reproduced herein below :- "The assessee trust filed its ITR on 10.01.2018 for the AY 17-18 alongwith audit report in Form 10B declaring total income of Rs. NIL. The case was selected for scrutiny assessment and consequently completed u/s 143(3). The Assessing Officer in want of registration u/s 12A(a) denied the claim of exemption u/s 11 of the Income Tax Act, 1961. The CIT (Exemption) rejected the registration u/s 12A of the Act and against which assessee is in appeal before Hon'ble ITAT which is pending to be decided. The Assessing Officer mentioned in his order that trust is for the benefit of a particular community and caste, therefore there is violation of section 13(1)(b) of the Act. The Assessing Officer further mentioned that the said trust is not registered under any Act or Law. He further stated that provision of section 11 & 12 shall not operate in accordance with the provisions of section 13(8) of the Act and income tax shall be computed at the MMR. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. We can take the support of decisions of Hon'ble SC reported in 82 ITR 704 and 101 ITR 234. Sir, for wrong interpretation made by the Assessing Officer as well as by CIT (Appeal) when trust has been formed for the benefit of public at large and both the authorities either confused with the word or arbitrarily interpreted have decided the case dehors the objectives sought to be achieved for public at large. The word cannot be dubbed as belonging to a particular community or caste therefore the entire finding dehors the material available on record. By no stretch of imagination the income computed by the Assessing Officer can be subject to MMR but the individual taxation rate should be applied and CIT (Appeal) has also erred in upholding the order of the Assessing Officer in these facts." 4. On the other hand, the ld. D/R relied on the findings of the revenue authorities and submitted that the assessee is not registered trust and, therefore, the benefit of sections 11 and 12 cannot be given. Based on these arguments, the ld. D/R supported the orders of the lower authorities. 5. We have heard the rival contentions and perused the material placed on record. Ground no.1 of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (iia) of clause (24) of section 2, or which is of the nature referred to in sub-section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons : Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. So the Maximum Marginal Rate (MMR) is applicable if the clause (c) or clause (d) of sub-section (1) of section 13. Thus, 13(1)(c) deals where the money spent for the related party and 13(1)(d) deals religious trust or institution. The ld. AR of the assessee submitted that the assessee subsequently already registered u/s. 12A with effect from 22.03.2022 and thus it does not come under the provision of section 13(1)(c) and (d) of the Act and therefore, based on that set of facts the assessee trust shall be charged to tax u/s. 164(2) at the rate as applicable to Individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee merely on the ground that benefit of section 11 cannot be given without registration under section 12AA/12AB of the Income tax Act, 1961. We agree to the same but here we are dealing with the issue of rate of tax chargeable in case of a trust which is not registered u/s 12AA/12AB of the Income tax Act, 1961 whether it is to be charged at MMR or at normal rate as applicable to individual. We find that in case of charitable trust wherein there is no provision of share of any surplus and there is no provision of distribution of assets, provisions of section 164(2) can only be applied and we, therefore, following the decision of the coordinate bench of the Tribunal, Jodhpur, allow ground No. 3 of the appeal of the assessee and hold that the tax rate as applicable to section 164(2) will apply to the rate of the AOP/Individual and the initial exemption is also available to such assessee. 6. As regards the ground no. 4 and ground 5 are concerned, since nothing has been provided by the appellant before us and hence we reject both these grounds 7. In the result, appeal of the assessee is partly allowed in above terms. Order pronounced under Rule 34(4) of the Income Tax (Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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