2025 (7) TMI 1589

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....learned Commissioner of Income Tax (Appeals) [CIT(A)] has erred in upholding levy of Tax at flat rate of 30%, instead of normal slab rates applicable in the case of the appellant. The learned CIT(A) and the learned Assessing Officer failed to appreciate that the appellant is an Association of Persons (AOP)/Charitable Trust not claiming benefits of Section 11 of the Act and is liable to pay tax at the slab rates applicable in the case of an Individual, etc. The appellant prays that the learned Assessing Officer be directed to re-compute the tax liability of the appellant as explained above and reduce the same accordingly. Ground 2 - ERRONEOUS LEVY OF SURCHARGE: The learned CIT(A) erred in upholding levy of surcharge of Rs. 13,12,510....

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.... 'the Act') wherein CPC has accepted the return of income, however the AO levied tax at a flat rate of 30% as against the assessee's applicable tax slab rates in the case of an individual and also levied surcharge @ 37% instead of 15% applicable to the assessee. 3. Aggrieved, assessee preferred an appeal before the ld. CIT (A). Ld. CIT(A) considered the submissions of the assessee and by reference to the return of income filed by the assessee, he observed that the shares of the members of the assessee AOP are not undetermined, therefore, tax shall be charged at the total income of the assessee at the maximum marginal rate as per section 167B of the Act. Similarly, after considering the submissions of the assessee, ld. CIT (A) sustained t....

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....to section 167B (1) of the Act. However, it is brought to our notice that the constitution and functions of the assessee are exactly similar and consistently followed by the assessee. In subsequent assessment year i.e. 2022-23, ld. CIT (A) has considered the similar facts on record and allowed the same by relying on the CBDT circular. For the sake of brevity, the same is reproduced below :- "7.2.5. Section 167(1) of the Act, makes it very clear that this section would not apply to the company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1960), or under any law corresponding to that Act in force in any part of India. The appellant is a charitable trust registered under Charitabl....

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....ph 15. 1 to 15.7 of the Explanatory Notes on the provisions relating to direct taxes in the Finance Act, 1981 [Circular No. 308, dated 29-6-1981] which explain the scope and ambit of section 167 A, as inserted by the Finance Act, 1981. 2. A question has been raise whether the provisions of section 167 A of the Income-tax Act which provide for charging of tax at the maximum marginal rate on the total income of an association of persons where the individual shares of members in the income of such association are indeterminate or unknown would also apply to income receivable by trustees on behalf of provident funds, superannuation funds, gratuity funds, pension funds, etc., created bona fide by persons carrying on business or professi....

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.... Individuals for the AY 2022-23." 8. Similarly, we observe that ITAT, Cochin Bench in the case of Mahakavi Edasseri Smarka Trust (supra) considered the similar issue and held as under:- "4.6 We again find no reason for application of section 167B of the Act, prescribing the maximum marginal rate in the instant case, which is one of a charitable trust. Section 167B, as a reading of the provision would show, is only where the shares of the beneficiaries of the trust are not known. The assessee, registered as a charitable trust, is a public body and, accordingly, there is no question of it's beneficiaries being individual members, whose shares have therefore to be defined. The application thereof in the instant case is wholly misco....