TaxTMI 
TaxTMI 
2026 (5) TMI 1861
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....tional Association of Interlocking Surgeons Vs. ITO (Exemption), Pune in ITA Nos. 2816, 2817 and 2560/Pun/2024 dated 12.02.2025. 4. On the other hand ld. DR supported the order of 1d. CIT(A). 5. We have heard the rival contentions and perused the material placed before us. We observe that the assessee is a public charitable trust registered under Bombay Charitable Trust Act, 1950. The trust is not having registration u/s 12A of the Act and had filed the return under the status of AOP on 05.07.2024 declaring income of Rs. 49,710/-. Since the income of the assessee is below taxable limit no tax liability is shown in the return filed by the assessee. However CPC while processing the return applied MMR charging the assessee tax at 30% on the income declared i.e without giving any basic exemption limit applicable to individuals and AOPs. Though the assessee filed the rectification u/s 154 of the Act but failed to get any relief and subsequently before ld. CIT(A) also the action of CPC taxing the assessee at MMR as per Sec. 167B(1) of the Act has been upheld. 6. We note that the assessee is a charitable religious trust and there is no determinate share of trustees. We note that ....
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....ormal 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 provident funds, superannuation funds, gratuity funds, pension funds, etc created bono 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....
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.... 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 are relatable to the share or shares of such member or members at such higher rate or rates, as the case may be, and the balance of the total income of the association or body shall be taxed at the maximum marginal rate. Explanation .- For the purposes of this section, the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such as....
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....hether 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 could be corrected and will fall in the category of arithmetical mistake, but whether maximum marginal rate is to be applied or the normal rate is applicable is not covered by any of the too clauses of the proviso to section 143(1)(a). The matter has also to be considered from another angle that the word prima facie which has been used therein means on the face of and refers to the items, on which there cannot be two opinions. If the matter is arguable one or debatable then the same cannot be disallowed under the proviso." 5.2 It is noted that Hon'ble Bombay High Court while considering the issue of what amounts to a....
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.... 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 because it filed its return of income in form ITR - 7 as against ITR - 5. Accordingly, Ground No.2 raised by the assessee stands allowed." 12. I find the Delhi Bench of Tribunal in the case of Air Force Navy Farm Owners Vs. ITO (supra) dealing with the similar issue has held as under : "8. Heard rival submissions, perused the orders of the authorities below and the materials placed before me. 9. On reading of the directions of the Tribunal, it is very much clear that the Tribunal for limited purpose of examining the applicability of provisions of Section 167B the matter was set aside to Assessing Officer to decide the issue in accordance with law. Ld. CIT(A) held that the provisions of Section 167B are applicable to the Asse....
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....e coordinate bench of ITAT in ITA Nos.212 to 215/vizag/2014 in the case of Sri Lakshmiganapathi Seva Samithi Vs. CIT 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 once the society is registered under the Societies Registration Act, the applicability of maximum marginal rate does not arise, it is because the societies are registered under the Societies Registration Act are prohibited from distribution of any surplus to its members. Once the distribution of profit to its members is prohibited, the question of determination of share of each individual member does not arise. Hence, the CIT was not correct in coming to the conclusion that the rate of tax applicable to the assessee is maximum marginal rate of tax without understanding the provisions." 11. The assessee ....
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....n 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 sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; (b) to (d) ......... 4.3 The issue arising, in fine, is the applicability of section 11(1)....
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.... 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 account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived. The application in the instant case being nil, the shortfall extends to the entire 85%. 4.4 We are conscious that the assessee did not file an appeal against the Intimation u/s. 143(1)(a) of the Act raising the impugned demand, preferring ....