2018 (9) TMI 2156 - AT - Income Tax

Societies under Societies Registration Act, 1860 to be taxed at normal rates, not maximum marginal rate per Section 167B.

M/s Anand Educational Society Versus Income Tax Officer, Ward-1, Tadepalligudem.

The Court ruled in favor of the assessee, determining that societies registered under the Societies Registration Act, 1860 should be taxed at normal rates ... Levy of maximum marginal rate on the income assessed instead of normal tax rates applicable to the Society - assessee is a Trust registered under the Societies Registration Act, 1860 - HELD THAT:- 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 rates are applicable in the case of the Society registered under Societies Act. Thus, 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. The issues presented and considered in the judgment are as follows:1. Whether the levy of maximum marginal rate on the income assessed instead of normal tax rates applicable to the Society is justified.2. Interpretation of Section 167B of the Income Tax Act, 1961 in relation to the taxation of income of a society registered under the Societies Registration Act, 1860.Issue-wise detailed analysis:The relevant legal framework and precedents considered in the judgment include Section 11(5) and 13(2)(d) of the Income Tax Act, 1961, as well as Section 167B of the Act. The Court interpreted these provisions to determine the appropriate tax rate applicable to the income of a society registered under the Societies Registration Act, 1860. Key evidence and findings included the registration status of the assessee as a society under the Societies Act.The Court's reasoning involved a comparison of different decisions, specifically highlighting the distinction between the levy of maximum marginal rate and normal tax rates for societies. The Court noted that Section 167B excludes the income of societies registered under the Societies Act from being taxed at the maximum marginal rate, instead requiring them to be taxed at normal rates.The application of law to facts centered on the interpretation of Section 167B and its implications for the taxation of the assessee's income. The Court considered the arguments presented by both parties, with the Appellant relying on relevant case laws and the Respondent failing to provide contradictory decisions from higher courts.The significant holdings of the judgment include the core principle established that societies registered under the Societies Act are to be taxed at normal rates and not at the maximum marginal rate. The final determination on the issue was in favor of the assessee, with the Court setting aside the order of the CIT(A) and allowing the appeal.In conclusion, the judgment clarified the tax treatment of income for societies registered under the Societies Act, emphasizing the application of normal tax rates instead of the maximum marginal rate. The decision was based on the interpretation of Section 167B and consistent with previous rulings by the Tribunal in similar cases.The Court's decision on this issue provides guidance on the appropriate tax treatment for societies under the relevant legal framework, ensuring consistency and compliance with the provisions of the Income Tax Act, 1961.