TaxTMI 
TaxTMI 
2026 (9) TMI 854
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....39;] and the scheme and as otherwise also is not in accordance with the law. 1.2 Without prejudice to the generality of the above, the appellate order so passed is bad in law, illegal and void as the same is arbitrary and perverse and without application of mind to the facts and the legal position. 2. VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE 2.1 In the facts and the circumstances of the case, and in law, the appellate order so framed in bad in law and illegal, as the same is framed in breach of the principles of Natural Justice. 2.2 Without prejudice to the generality of the above ground, in the facts and the circumstances of the case, the Ld. CIT (A) erred in not granting proper, sufficient and fair opportunity of being heard to the Appellant while passing the appellate order. WITHOUT PREJUDICE TO THE ABOVE 3. ADDITION WITHOUT JURISDICTION 3.1 The Ld. CIT (A) erred in failing to appreciate that - (a) The rectification order u/s. 154 of the Act passed by the Assistant Commissioner of Income tax, Exem. Circle 2, Mumbai ['the A.O.'] was beyond the scope and the power of the A.O. and, consequently, w....
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.... for the assessee. In the case of National Association of Interlocking Surgeons vs. ITO, (supra), the Pune Tribunal, after examining CBDT Circular No. 320 dated 11.01.1982 and various decisions, including the decision of the Mumbai Bench of the Tribunal in Dr. Shalmali Khasbardar Foundation vs. ITO (Exemption), in ITA No. 3811/MUM/2024 dated 30.09.2024, held that the provisions of section 167B of the Act have no application to an assessee which is a public charitable trust/ organisation. The Pune Bench of the Tribunal observed as under: "9. In so far as the chargeability of the income of the assessee at the Normal Tax Rate or the Maximum Marginal Rate, my attention was drawn to CBDT Circular No.320 dated 11.01.1982 which is placed at page 47 of the paper book, the contents of which read as under: "2. A question has been raise whether the provisions of section 167A 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 of unknown would also apply to income receivable by trustees on behalf of provid....
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....) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate: Provided that, where the total income of any member of such association or body is chargeable to tax at a rate which is higher than the maximum marginal rate, tax shall be charged on the total income of the association or body at such higher rate. (2) Where, in the case of an association of persons or body of individuals as aforesaid [not being a case falling under subsection (1)], - (i) the total income of any member thereof for the previous year (excluding his share from such association or body) exceeds the maximum amount which is not chargeable to tax in the case of that member under the Finance Act of the relevant year, tax shall be charged on the total income of the association or body at the maximum marginal rate; (ii) any member or members thereof is or are chargeable to tax at a rate or rates which is or are higher than the maximum marginal rate, tax shall be charged on that portion or portions of the total income of the association or body which is or ....
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....acie adjustment by observing as under: "A bare perusal of section 143(1)(a) contemplate that the ITO has to accept the return as it is and in the proviso, three exceptions have been given, which confer the jurisdiction on him for making adjustment. The action under this section cannot be taken beyond the power permitted by these three exceptions. The third exception provides that where any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed. The question is whether the application of rate of tax can be covered by the term 'relief claimed in the return because application of a different rate of tar will not fall under the category of loss carried forward, deduction, allowance. There is another provision in clause (i) regarding arithmetical errors in the return. There may be a case where the rate of tax is not disputed but while calculating the tax there is an error which could be corrected under this clause, i.e., while calculating the tax on the normal rate or maximum marginal rate there is a mistake which coul....
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....rovision that prevails over the general provision of Section 167B. The decision of Hon'ble Bombay High Court in case of CIT v. Marsons Beneficiary Trust (supra) has considered the fact in a case of a Trust, where the beneficiaries in the share was determinate and therefore, Hon'ble Court held that the earnings on behalf of such Trust would be taxed as an AOP. As a corollary in the present facts, the share of the beneficiaries are not known though the assessee in the return of income mentioned itself to be an AOP and therefore provisions of Section 167B are not applicable. If we analyze the alternative plea raised that the assessee had not claimed any exemption under Sections 11 and 12 for the year under consideration therefore, there not being a situation of denial of exemption under Sections 13(1)(c) or 13(1)(d) the assessee come within the ambit to subject that portion of income to the maximum marginal rate. Accordingly, in our view assessee cannot be subjected to maximum marginal rate for the year under consideration merely becaus it filed its return of income in form ITR - 7 as against ITR - 5. Accordingly, Ground No.2 raised by the assessee stands allowed." ....
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....s Registration Act, 1860 (21 of1860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate : Plain reading of section 167B of the Act indicates that the income of company or cooperative society or a society registered under Societies Act of 1860 are excluded from charging the tax at maximum marginal rate (MMR) and would be chargeable at normal rates. In the similar facts and circumstances, the coordinate bench of ITAT in ITA Nos.212 to 215/vizag/2014 in the case of Sri Lakshmiganapathi Seva Samithi v. C 1T dated 26.8.2016 held that in case of society, the application of maximum marginal rate does not arise. For ready reference, we reproduce the extract of relevant part of the order of the Tribunal in para No.13 which reads as under: "13. As regards the applicability of maximum marginal rate of tax is concerned, the C1T was of the opinion that the A.O. ought to have applied maximum marginal rate of tax to the income of the society. But, the fact is that o....
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....hority, is the manner in which the income of such an Institution is to be computed in the absence of any application of income, i.e., if the allowance for 15% of the income from property held under trust is to be allowed u/s. 11(1)(a) of the Act or not. The relevant part of the impugned order read as under: '7.2 Thus it is seen that the appellant has claimed a deduction of Rs. 15429/- from its total gross receipt of Rs. 1,02,862/- and offered an adjusted total income of Rs. 87,433/- in its return of income. However, the deduction claimed by the appellant for Rs. 15,429/- being 15% of the gross receipts accumulated or set apart for application to charitable or religious purposes is not allowable to the appellant because the appellant has not reflected any application of funds for its purposes in respect of the remaining 85% of the gross receipts. Therefore, the adjustment made by the CPC is upheld and the grounds nos. 2 & 3 are dismissed.' (emphasis, ours) 4.2 Section 11(1)(a) of the Act, also read out during hearing, reads as under: Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sectio....
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....or, as the case may be, held under trust in part, by any amount- (i) for the reason that the whole or any part of the income has not been received during that year, or (ii) for any other reason, Mahakavi Edasseri Smaraka Trust v. Income Tax Officer then-- (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income, in such form and manner as may be prescribed) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into ....