Charitable trust income taxed at ordinary association-of-persons rates where trustees have no defined share in income.

A public charitable trust assessed as an association of persons was held not liable to tax at the maximum marginal rate under section 167B where the trustees or members had no defined share in the income. Relying on CBDT Circular No. 320 dated 11.01.1982 and prior similar decisions, the Tribunal noted that such trusts are to be taxed at the ordinary rates applicable to an association of persons. The circular was treated as binding on the Revenue, and section 167B was held inapplicable on these facts.

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Issues: Whether the assessee trust, assessed as an association of persons, was liable to tax at the maximum marginal rate and surcharge under section 167B of the Income-tax Act, 1961, or at the normal rates applicable to an association of persons.

Analysis: The assessee was a charitable trust whose income had been processed under section 143(1) of the Income-tax Act, 1961. The Tribunal noted that the issue had already been decided in similar matters in favour of the assessee, and that CBDT Circular No. 320 dated 11.01.1982 clarifies that where the members or trustees are not entitled to any defined share in the income, the maximum marginal rate is not attracted and tax is payable at the ordinary rate applicable to an association of persons. Following that view, the Tribunal held that section 167B was not applicable to the assessee's case.

Conclusion: The assessee was not liable to tax at the maximum marginal rate, and its income was to be taxed at the normal rates applicable to an association of persons.

Ratio Decidendi: A public charitable trust whose members or trustees have no defined share in the income is not chargeable at the maximum marginal rate under section 167B, and the CBDT circular clarifying tax at ordinary association-of-persons rates is binding on the Revenue.

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