Tribunal Rules 95% Trust Surplus Not Taxable:

The Tribunal dismissed the Revenue's appeals, affirming that the 95% surplus distributed among trust members is not subject to taxation. The surplus distributed among Self-Help-Groups (SHGs) was deemed not taxable income as it was based on proper accounts, procedures, and principles of mutuality, reflecting collective efforts rather than individual income. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision in favor of the assessee trust, emphasizing the determinate nature of each member's share and the non-arbitrary distribution process.

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Issues:
Whether 95% of surplus of the assessee trust distributed among its members can be taxed at maximum marginal rate in the hands of the assessee treating them as AOPs.

Analysis:
The appeals filed by the Revenue concern M/s. Sarvodaya Mutual Benefit Trust against various orders of the Commissioner of Income Tax (Appeals) for different assessment years. The core issue in all these appeals is whether the surplus distributed among trust members can be taxed at the maximum marginal rate. The Tribunal consolidated these appeals due to the common issue for convenience. The counsel for the assessee argued that a previous decision by the Tribunal supported their position that the surplus should not be taxed. The Departmental Representative, however, supported the Assessing Officer's decision to treat the assessees as AOPs and tax the surplus distributed among members.

Upon examination, the Tribunal found that the assessee trust is a prominent NGO working to raise the living standards of rural communities, especially marginalized groups. The trust manages Self-Help-Groups (SHGs) which undertake income-generating programs. The surplus income generated is distributed among SHG members, with 95% given to the members and 5% retained by the trust. The Tribunal noted that the distribution of surplus is based on proper accounts and procedures, with each beneficiary identified and their share quantified. As such, the Tribunal held that the SHGs and the trust operate under principles of mutuality, and the distributed surplus is not taxable income but the result of their collective efforts.

The Tribunal emphasized that each SHG member's share is determinate, and the distribution is not arbitrary but based on defined roles and proper accounting. Therefore, the Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision that the 95% surplus distributed among SHGs is not taxable income. Citing the previous Tribunal decision, the current Tribunal dismissed the Revenue's appeals and upheld the orders of the Commissioner of Income Tax (Appeals) in favor of the assessee trust.

In conclusion, all the appeals of the Revenue were dismissed, affirming that the 95% surplus distributed among trust members is not subject to taxation.

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