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2024 (4) TMI 661
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....uru which were passed u/s 143(1) of the Income Tax Act, 1961 wherein the grievance of the assessee is that the CPC, while processing the respective year return charged the tax on the income of the assessee at Maximum Marginal Rate [ herein after "MMR" ]. Even the ld. CIT(A) did not considered the pleas of the assessee trust. Thus, the issue in all these years is similar so as to decide that that whether on the facts of the case, the assessee trust should be charged to tax MMR or as per the normal provision applicable for Individual and AOP. Considering that aspect of the matter we deem it fit to decide all these appeal with a common order. 3. At the outset, the ld. AR has submitted that the matter in ITA No. 121/Jodh/2021 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount of tax disputed in other cases. Therefore, for the purpose of the present discussions, the case of ITA No. 121/Jodh/2021 is taken as a lead case and are disposed by taking lead case facts, grounds, and arguments from the f....
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.... (Rajasthan) has acknowledged receipt of the trust deed filed by the assessee before him and has issued a computerized registration number on 20.07.2011, towards registration of the trust deed filed by the assessee. In that sense, the trust deed was registered on 20.07.2011. Subsequently, the amended trust deed was filed before Deputy Registrar, Nawa, District Nagaur (Rajasthan) and the said amended trust deed was registered on 11.02.2021, a copy of the amended trust deed has also been uploaded by the assessee. 7(ii) It is observed that the appellant is a Religious Trust but it has not obtained Registration u/s 12AA under the Income Tax Act, 1961. The appellant filed its return of income in form ITR 7 on 17/07/2014 by declaring income under the head "income from other sources of Rs. 2,89,183/-, Out of it, the appellant in the ITR claimed deduction u/s 11 and 12 a sum of Rs. 44,135/-as AMOUNT APPLIED TO CHARITABLE PURPOSES IN INDIA DURING THE PREVIOUS YEAR". In this manner, a balance sum of Rs. 2,45,048/- was declared as taxable total income. In the written submissions, the assessee has submitted that income under the head "income from other sources" of Rs. 2,89,183/- compr....
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....r the purposes of this sub-clause, "trust" includes any other legal obligation; Accordingly, in view of inclusive definition of income provided in s * 0.2(24) of the Act, in case of a trust created wholly or partly for the religious purposes voluntary contributions/Interest on bank savings and FDs is its income for the relevant FY. Hence Rs. 2,89,183/- received by the trust is to be included in the income charged under section 56 as Income from other sources. 7(v) A trust is charged to tax in the hands of representative assessee and not in the hands of beneficiaries as defined in Section 160. Definition of representative assessee is as under: "Representative assessee. 160. (1) For the purposes of this Act, "representative assessee" means (1) .. (iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including any wakf deed which is valid under the MussalmanWakf Validating Act, 1913 (6 of 1913),) receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees; (v) in respect of i....
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....ything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable aa representative assessee consists of, or Includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate: Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. (2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a representative assessee, he shall not, in respect of that income, be assessed under any other provision of this Act." 7(vii) The charging sections in case of Trusts (including private) that is assessed in the hands of Trustee as per section 160 r/w 161 of the Act and where share of beneficiaries is unknown is governed by the provisions of Section 164 of the Act which is reproduced as under: "[Charge 6....
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....rson mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, the preceding proviso shall apply only if such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. (2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in subclause (iia) of clause (24) of section 2, or which is of the nature referred to in subsection (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons: Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13 tax shall be charged on the relevant income or part of releva....
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.... circumstances where such relatives or members were mainly dependent on the settlor for their support and maintenance, tax shall be charged on the relevant income as if the relevant income (as reduced by the income, if any, which is exempt under section 11) were the total income of an association of persons: Provided further that where the relevant income consists of, or includes, profits and gains of business, the preceding proviso shall apply only if the income is receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him: Provided also that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. Explanation 1. For the purposes of this section,- (i) any income in respect of which the persons mentioned in clause (iii) and clause (iv) of sub-section (1) of section....
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.... of an unclear word or phrase should be determined by the words immediately surrounding it. In other words, the meaning of a word is to be judged by the company it keeps. The questionable meaning of a doubtful word/phrase can be derived from its association with other words. It can be used wherever a statutory provision contains a word or phrase that is capable of bearing more than one meaning. It is seen that the subsection uses the phrase tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12'. This means that tax is charged on so much of income which is not exempt u/s 11/12. Benefit of 11/12 is applicable only if the Trust is Registered u/s 12A. Further, the proviso to the subsection refers to violation of Section 13(1)(c) and 13(1)(d). These are also applicable in case of trusts Registered u/s 12A. By applying this Rule of Interpretation, it can be conclude that Subsection 2 is not applicable in the case Trusts that are not registered u/s 12A, the case of appellant. It is applicable in cases where 12A registration was available and some income is treated as not exempt or where available 12A registration is forfeited or cancell....
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....funds, gratuity funds, pension funds, etc., created bona fide by persons carrying on business or profession exclusively for the benefit of the persons employed in such business. The Board have been advised that cases where income received by the trustees on behalf of a recognised provident fund, approved superannuation fund and approved gratuity fund is governed by section 10(25) of the Income-tax Act, the question of their being charged to tax does not arise. So far as cases where Income is receivable by the trustees, on behalf of an unrecognized provident fund or an unapproved superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession are concerned, they will continue to be charged to tax in the manner prescribed by section 164(1)(iv) of the Income-tax Act, as hitherto. Similarly, in the cases of registered societies, trade and professional associations, social and sports clubs, charitable or religious trusts, etc., where the members or trustees are not entitled to any share in the income of the association of persons, the provi....
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....be taxed as AOP, as per the tax slab provided in the finance act, after providing benefit of basic exemption limit. However CPC computed tax at maximum marginal rate. So, the question involved is the appellant, who got its trust deed registered before Deputy Registrar, whether its income will get benefit of basic exemption lime and tax slab or it will be taxed at maximum marginal rate. An identical issue has been decided by ITAT, Delhi on 16.07.2020, in this case of 'Air Force Navy Farm Owners Welfare Association vs ITO'. The Honourable ITAT has held as under: *5.3 In our opinion, the finding of the Learned CIT(A) on the issue in dispute is well reasoned. A society registered under the Societies Registration Act, 1860, has been excluded from the provision of section 167B(1). Thus, in case of any society, which though has been held as Association of Person and income of such Association is indeterminate; such society will be excluded from invoking of maximum marginal rate. But, the provision of section 1678(2) are applicable in case of Association of persons not being a case falling under sub-section 1. The relevant provision is reproduced as under: "Charge....
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....gistered u/s 12A/12AA, deduction for application of income utilized for charitable purposes u/s 11 are not available to Act. it. It will only be allowed deduction of expenses as per section 57 of the INCOME TAX DEPARTMEN Nes 7(xii) Section 143(1) allows the AO to make prima-facie adjustments in case of in correct claims as defined therein. In the present case, appellant claims tax to be charged at normal rate but has not claimed to be registered u/s 12A which is inconsistent with the provision of law as analyzed above. 7(xiii) In view of the above, I direct the AO to treat the Income of the appellant trust as Income from other Sources and allow the expenses made solely to earn that Income u/s 57. Amount spent, if any, for application (Relief for poor) related to the objectives of the trust are not allowable, as the Trust is unregistered u/s 12A and hence provisions of section 11 & 12 are not applicable in its case. The net income of the trust shall be chargeable to tax at maximum marginal rate u/s 164(1) / 143 * (1) of the Act as discussed above. Thus the action of the AO, CPC is upheld. The ground of appeal is dismissed." 7. As the assessee did not find any fa....
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....ses can not be allowed u/s 11 and hence the same can be allowed after examining compliance to section 57. Submissions of the appellant : Main ground of appeal is against charging of tax at MMR on the income of the appellant trust which has been charged on the premise that the appellant trust was not registered under the provisions of section 12A of the Income Tax Act, 1961. The CPC had applied MMR without specifying any reason but the ld. CIT (A) has stated that provisions of section 164(1) and 167B are only applicable in the instant case and hence MMR is justifiable. Such action of the ld. AO as well as ld. CIT (A) is not in accordance with provisions of Income Tax Act, 1961 on account of the reasons that as per provisions of section 164(1) tax at MMR is applied on such income which is received by a representative assessee for the benefit of many persons without any determinate shares and section 167B of the Act states for charging MMR on income of AOP where shares of members are indeterminate. In the instant case which relates to a trust maintaining a Jain temple which has been constituted as Public Charitable Trust vide deed dated 21.....
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.... of trust or through registration under Societies Registration Act and there can not be any discrimination in the institutions whether formed as a trust or as a sanstha. Further your reference is also drawn on Circular no. 320 of the CBDT dated 11.01.1982 (APB 36) which contains the following (in last seven lines) as under :- "Similarly, in the cases of registered societies, trade and professional associations, social and sports clubs, charitable or religious trusts, etc., where the members or trustees are not entitled to any share in the income of the association of persons, the provisions of new section 167A will not be attracted and, accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the MMR. Although section 167A as was existing in the Income Tax Act, 1961 had been deleted from the stature book w.e.f. 1-4-1989 and section 167B was inserted in the statute book w.e.f. 1-4-1989 but the spirit of the CBDT is very clear on this aspect that in case of charitable or religious trusts where there is no provision of sharing of profits of the trust amongst the members or tr....
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....is wrong as before enhancing the income he has not issued any notice to the appellant and further in a way he has disallowed the claim of the assessee for expenditure for Rs. 64,808 which had been spent only for the maintenance of temple which is prime object of the assessee and in view of spending the same for the basic object of the trust same deserves allowance. Your honour is sincerely requested to consider the above submissions favourably and allow the appeal in toto and oblige. 8. In this appeal the ld. AR of the assessee submitted a detailed paper book and the same is extracted here in below : SN Description Page No. 1 ITRV, Computation of Income and Intimation order u/s 143(1) for the AY 2013-14 1-6 2 ITRV, Computation of Income and Intimation order u/s 143(1) for the AY 2015-16 7-14 3 ITRV, Computation of Income and Intimation order u/s 143(1) for the A.Y 2016-17 15-23 4 ITRV, Computation of Income and Intimation order u/s 143(1) for the A.Y 2017-18 24-32 5 Registration Certificate u/s 12A 33-35 6 CBDT Circular No. 320 dated 11.01.1982 36 7 Bombay HC Judgment in the case of DIT(E) v/s Shardabe....
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....ision of section 164(2) specially deals to charge the tax of those trust where the whole or any part of the relevant income is not exempt under section 11 and 12, the relevant provision of the Act is reiterated herein below : Provision of section 164(2) of the Act (2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2, or which is of the nature referred to in sub-section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons : Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. So the Maximum Marginal Rate (MMR) is applicable if the clause (c) or clause (d) of sub-section (1) of se....
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....e matter we are of the considered view that the decision of the ld. CIT(A) to charge the assessee u/s. 164(1) is not correct it should be charged based on the specific provision of the Act u/s. 164(2) of the Act and the tax rate as applicable to that 164(2) will apply to the rate of the AOP/Individual and the initial exemption is also available to such assessee. Based on these observations the ground no. 2 raised by the assessee is allowed. 12. As regards the ground no. 1 raised by the assessee the bench noted that the ld. CIT(A) has not granted the benefit of deduction of expenditure only on the reason that the assessee is not registered u/s. 12 A of the Act. The ld. AR of the assessee placed on record the registration certificate issued to the trust on 22.03.2022 and therefore, considering that aspect of the matter we direct the ld. AO to grant the benefit of the deduction of the expenditure claimed by the as per object of the trust. Based on these observation ground no. 1 raised by the assessee is allowed. In terms of these observations, the appeal of the assessee in ITA no. 121/Jodh/2021 is allowed. 13. The fact of the case in ITA No. 122 to 124-Jodh-2023 and 237/Jodh/....