Society taxation under section 167B: Maximum Marginal Rate not applicable, with TDS credit left for factual verification.

A society registered under the Societies Registration Act, 1860 was treated as falling within the statutory exception in section 167B of the Income-tax Act, so its income could not be taxed at the Maximum Marginal Rate merely on an AOP footing; tax was to be recomputed at the rates applicable to an individual. The claim for credit of tax deducted at source depended on verification of the relevant factual material and the income offered or assessed, so it was remitted to the Assessing Officer for examination. The assessment was therefore set aside to the extent it applied the Maximum Marginal Rate and required recomputation and TDS verification.

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Issues: (i) Whether a society registered under the Societies Registration Act, 1860 could be subjected to tax on its income at the Maximum Marginal Rate under section 167B of the Income-tax Act, 1961. (ii) Whether the claim for credit of tax deducted at source required factual verification.

Issue (i): Whether a society registered under the Societies Registration Act, 1860 could be subjected to tax on its income at the Maximum Marginal Rate under section 167B of the Income-tax Act, 1961.

Analysis: The income of the assessee society had been taxed at 30% on the footing that it was an Association of Persons with indeterminate shares. The registration certificate placed on record showed that the assessee was registered as a society under the Societies Registration Act, 1860. On that basis, the statutory exception in section 167B was held applicable, and the assessee could not be taxed at the Maximum Marginal Rate. The tax liability was, therefore, required to be determined at the rates applicable to an individual.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether the claim for credit of tax deducted at source required factual verification.

Analysis: The claim for TDS credit depended on verification of the relevant factual material and the corresponding income offered or assessed. The matter was not decided on merits and was directed to be examined by the Assessing Officer.

Conclusion: The claim was restored to the Assessing Officer for verification.

Final Conclusion: The impugned assessment was set aside to the extent it applied the Maximum Marginal Rate, and the matter was sent back for recomputation of tax liability at the applicable individual rates with examination of the TDS credit claim.

Ratio Decidendi: A society registered under the Societies Registration Act, 1860 is outside the sweep of the Maximum Marginal Rate under section 167B of the Income-tax Act, 1961, and any claim for TDS credit requiring factual verification must be examined on remand.

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