2023 (1) TMI 1475 - AT - Income Tax

Educational society wins against incorrect tax classification under Section 167B provisions

Air Force Navy Farm Owners Welfare Association Versus ITO, Ward 1 (1), Noida.

The ITAT Delhi ruled in favor of the assessee, holding that provisions of Section 167B do not apply to societies registered under the Societies ... Applicability of provisions of Section 167B - Assessee agitated against the action of the AO in determining the status of the assessee as Association of Person (AOP) as against Artificial Juridical Person (AJP) - HELD THAT:- The issue has been decided in the case of M/s Anand Educational Society [2018 (9) TMI 2156 - ITAT VISAKHAPATNAM] wherein the Tribunal following its earlier order in the case of Vidyodaya Educational Society [2018 (4) TMI 2007 - ITAT VISAKHAPATNAM] 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. Thus hold that the provisions of section 167B have no application to the Assessee and the income of the assessee cannot be taxed at maximum marginal rates. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The core issues raised in the appeal were the applicability of Section 167B to the assessee and the determination of the assessee's status as either an Association of Persons (AOP) or an Artificial Juridical Person (AJP).The facts revealed that the assessee, a Society registered under the Societies Registration Act, 1860, declared a total income of Rs. 37,080 for the relevant assessment year. The Assessing Officer determined the assessee's status as AOP and taxed the interest income at the maximum marginal rate. The assessee contended that it was an AJP and the income was not taxable based on the principle of mutuality. Additionally, the assessee argued that being a registered society under the Societies Registration Act, the tax rate provided in Section 167A should not apply.The Tribunal, in a previous decision, directed the Assessing Officer to re-examine the applicability of Section 167B to the assessee. Upon reassessment, the Assessing Officer once again taxed the interest income but applied the tax rates for cooperative societies. The Commissioner of Income Tax (Appeals) upheld the application of Section 167B to the assessee, resulting in taxation at the maximum marginal rate.The assessee argued that it had consistently filed returns as an AJP, supported by the issuance of a PAN recognizing it as such. The assessee relied on a decision of the Karnataka High Court to support its position that once a PAN is issued recognizing the assessee as an AJP, the Assessing Officer cannot assess it as an AOP.Regarding the applicability of Section 167B, the assessee cited decisions of the Hyderabad Bench of the ITAT and the Visakhapatnam Bench in support of the contention that the provision does not apply to societies registered under the Societies Registration Act, 1860.The Tribunal held that based on precedents and the specific provisions of Section 167B, the income of societies registered under the Societies Registration Act should not be taxed at the maximum marginal rate. The Tribunal referred to previous decisions and concluded that the provisions of Section 167B did not apply to the assessee. Consequently, the appeal was partly allowed.In conclusion, the Tribunal ruled in favor of the assessee, holding that the provisions of Section 167B were not applicable, and the income should not be taxed at the maximum marginal rates. The Tribunal's decision was based on the specific legal framework and precedents related to the taxation of societies registered under the Societies Registration Act, 1860.