2017 (4) TMI 1657 - AT - Income Tax

Welfare association's tax exemption under section 167B remanded for proper examination of registration status

All Force Navy Farm Owners Welfare Association Versus ITO Ward-1 (1), Noida

The Appellate Tribunal condoned a 91-day delay in filing the appeal and partially allowed it for statistical purposes. The case involved a welfare ... Applicability of provisions of Section 167B - Whether assessee is to be taxed as AOP? - HELD THAT:- We find that the assessee an Air Force, Navy Farm owner’s welfare association has been registered under the Societies Registered Act 1860. Vide certificate dated 23.10.2000 this fact has been acknowledged by the ld. Assessing Officer also in the second para of the assessment order. The only dispute is that whether the assessee should be taxed @ maximum marginal rate applicable, AOP or not. Assessee has also claimed that status is of an artificial juridical person and not AOP. However the Learned CIT(Appeals) has rejected this contention and held that the assessee is an AOP. Neither the AO nor CIT(Appeals) have examined the aspect from the provisions of section 167B which provide exception for application of maximum marginal rate in the case of society which is registered in the Societies Registered Act 1860. Accordingly the only falls limited purposes the matter is set aside to the file of the Assessing Officer to examine the applicability of section 167B in the case of the assessee accordingly to decide the issue in accordance with the law. Appeal of the assessee is partly allowed for statistical purposes. The appeal in the case before the Appellate Tribunal concerned the assessment order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The key issues raised by the assessee included the taxability of income, the application of the principle of mutuality, the tax rate applicable as an Association of Persons (AOP), and the levy of interest under section 234B of the Income Tax Act.The Tribunal first addressed the issue of the appeal being filed beyond the statutory limitation period. The assessee sought condonation of the delay, citing advice from their Chartered Accountant and the ill health of the association's president. The Tribunal, after considering the reasons provided, condoned the delay of 91 days and allowed the appeal to be heard on its merits.The Tribunal then delved into the facts of the case, highlighting that the assessee was a welfare association of air force navy farm owners registered under the Societies Registration Act, 1860. The association had declared a surplus in its income tax return, but the Assessing Officer assessed the income at a higher amount, primarily taxing the interest income from non-members. The Assessing Officer applied the maximum marginal rate under section 167B.The Commissioner of Income Tax (Appeals) upheld the assessment treating the assessee as an AOP, disregarding the exception provided under section 167B for societies registered under the Societies Registration Act, 1860. The assessee contended that they should not be taxed at the maximum marginal rate due to their registration status as a society under the said Act. The Tribunal noted that this aspect had not been adequately examined by the lower authorities and remanded the matter back to the Assessing Officer to consider the applicability of section 167B in light of the assessee's registration under the Societies Registration Act, 1860.Ultimately, the Tribunal partially allowed the appeal for statistical purposes, indicating that the matter would be reconsidered by the Assessing Officer in accordance with the law and the provisions of section 167B. The decision was pronounced in open court on 12.04.2017.In summary, the key issues considered by the Tribunal included the taxability of income, the application of the principle of mutuality, the classification of the assessee as an AOP, and the levy of interest under section 234B. The Tribunal highlighted the importance of examining the specific provisions of section 167B in relation to the registration status of the assessee under the Societies Registration Act, 1860, and directed a reevaluation of the tax treatment accordingly.