TaxTMI 
TaxTMI 
2026 (7) TMI 480
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....n for conducting marriages, social functions and other public activities for the benefit of the general public irrespective of caste, creed or religion. The trust charges concessional rent for use of the community hall with the intention of maintaining the premises and carrying out charitable activities without any profit motive. The trust has not obtained registration under section 12AA/12AB of the Act and, therefore, it does not claim exemption under sections 11 to 13 of the Act. The surplus income earned by the trust is offered to tax under the normal provisions of the Act. 4. For the A.Y. 2024-25, the assessee filed its return of income declaring total taxable income of Rs. 15,25,529/- only. The return was processed under section 143(1) of the Act by CPC, Bengaluru. While processing the return, CPC levied tax at the Maximum Marginal Rate (MMR), resulting in a tax demand of Rs. 6,06,520/- only. The assessee filed an application under section 154 of the Act contending that the income had wrongly been subjected to tax at MMR and that normal rates of tax ought to have been applied. However, the rectification application was rejected and the demand remained unchanged. 5. Aggri....
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....ncome of a trust or AOP is not specifically receivable on behalf of any one person or where the individual shares of the persons on whose behalf such income is receivable are indeterminate or unknown, such income shall be chargeable to tax at the Maximum Marginal Rate. Applying the aforesaid provision, the learned CIT(A) concluded that since the shares of the beneficiaries/members were indeterminate, the CPC was justified in levying tax at the Maximum Marginal Rate. Accordingly, the contentions advanced by the assessee were rejected and all the grounds of appeal were dismissed. Consequently, the appeal filed by the assessee was dismissed. 7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 8. The learned AR submitted that the assessee is a public charitable trust established for the benefit of the general public and not a discretionary trust. He contended that no member or trustee is entitled to any share in the income of the trust and, therefore, section 164(1) of the Act is not applicable. It was argued that the assessee has not claimed exemption under sections 11 and 12 and has voluntarily offered its income to tax under the normal p....
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....e distributed amongst the members in their individual capacity. 10.2 In our considered view, this distinction assumes great significance. The provisions of section 164 of the Act were enacted primarily to deal with cases where income is receivable by trustees on behalf of beneficiaries whose shares are indeterminate or unknown. The legislative intent behind the provision was to prevent avoidance of tax through the medium of discretionary private trusts where beneficiaries may enjoy the income without determination of their respective shares. The said provision cannot be mechanically extended to every public charitable trust merely because there are no determinate shares of beneficiaries. At this juncture, it would be relevant to refer to CBDT Circular No. 320 dated 11.01.1982. The CBDT clarified 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 ....
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....fact that the benefit of the exemption as provided under section 11 of the Act shall not be available to the assessee. 9.1 The controversy arises for our adjudication whether the rate of an individual should be applied or the maximum marginal rate of tax in the manner as provided under the provisions of section 164 of the Act. Admittedly, the person has filed the return of income in the representative capacity in the manner as provided under clause (iv) of section 160 of the Act. To this proposition, there is no dispute. It is also not under challenge that the trust on hand is a non-discretionary trust meaning thereby the beneficiaries of the trust are not known. In other words the trust being public trust was formed to carry out the charitable activities. This fact was not controverted by the learned CIT-A. Indeed learned CIT-A accepted that the assessee as public charitable trust, the relevant observation of the learned CIT-A reads as under: I have carefully considered the facts of the case as well as the submission filed by the appellant. It is observed that the appellant is a Public Charitable Trust registered under the Bombay Charitable Trust Act. 9.....
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....sions of section 164(1) were attracted. 10.8 The facts of the present case stand on an entirely different footing. Here, the assessee is not a private family trust created for the benefit of identified family members. The assessee is a public charitable trust established for public welfare. No member or trustee has any right, vested or contingent, to receive any portion of the income of the trust. There is no question of distribution of income amongst members. The income remains with the charitable objects of the trust and can only be utilized towards such objects. Thus, the fundamental premise which weighed with the Hon'ble Gujarat High Court in Gosar Family Trust, namely the existence of beneficiaries entitled to the trust income with indeterminate shares, is completely absent in the present case. Accordingly, in our humble understanding, the decision of the Hon'ble Gujarat High Court in Gosar Family Trust (supra) is clearly distinguishable on facts and does not advance the case of the Revenue. 10.9 Having regard to the totality of facts and circumstances of the case, the CBDT Circular No. 320 dated 11.01.1982 and respectfully following the decision of the Coordinat....