TaxTMI 
TaxTMI 
2026 (9) TMI 1166
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....liable to be taxed at the rate applicable to an Association of Persons (AOP). He submitted that assessee-AOP provides bhawan to the public at large at a reasonable and nominal cost and the building of the AOP is also used to provide educational requirement for needy students. He submitted that the case of the assessee is squarely covered by the decision of Coordinate Bench of Pune Tribunal in the case of Fajle Rabbi Chand Charitable Trust vs. ITO in ITA No. 3114/PUN/2025, dt. 15.05.2026. 4. On the other hand, Ld.DR support the order of Ld.CIT(A). 5. I have heard the rival submissions and perused the material placed before me. I observe that assessee a charitable organization is only aggrieved with the application of MMR u/sec. 167B of the Act and claim of the assessee is that its income of chargeable to normal tax rate applicable to AOP it does not fall under the provisions of section 167B of the Act. I find that this issue has been dealt with by the Coordinate Bench of Pune Tribunal in the case of Fajle Rabbi Chand Charitable Trust (supra) observing that even the registered trust engaged in the charitable activity for public at large is also liable to be taxed at normal tax ....
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....s." 8. I have perused the Trust Deed dated 16.05.2007. I observe that there are Five trustees and the individual share of the Members of the Trust is not specified in the said deed. CPC processed the return of income for the year under appeal charging the income of the assessee at Maximum Marginal Rate. Assessee filed the Rectification application u/s.154 of the Act which has been rejected. Before us, ld. DR has stated that the application u/s.154 filed by the assessee u/s.154 was delayed. I have gone through the record and notice that the assessee had filed the application u/s.154 for rectifying the mistake apparent from record to the CPC for having wrongly charged the Maximum Marginal Rate as against the Normal Tax Rate. However, the applications filed by the assessee u/s.154 were combined together and a consolidated order was passed on 12.01.2023. Therefore, the application u/s.154 of the Act for the impugned assessment year was filed within the prescribed time limit. 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....
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....the same reads as under : "Charge of tax where shares of members in association of persons or body of individuals unknown, etc. 167B. (1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860) 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 : 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 a....
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....laced reliance on the decision of Hon'ble Bombay High Court in the case of Bajaj Auto Finance Ltd. vs. CIT Pune reported in (2018) 404 ITR 564 (Bom) and the decision of Hon'ble Rajasthan High Court in the case of JKs Employees Welfare Fund vs. ITO reported in (1993) 199 ITR 765 (Raj). 5.1 It is noted that, Hon'ble Rajasthan High Court in case of JKs Employees Welfare Fund (supra) considered what amounts to a prima facie 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 ....
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....laced on the decision of Hon'ble Bombay High Court in the case of CIT vs. Marsons Beneficiary Trust (supra). It is noted that present assessee before us is admittedly a public charitable trust, where the shares of the beneficiaries are in determinate are not known, unlike an AOP, where the beneficiaries have a defined share in the income. It is noted that Section 164 is a special provision that prevails over the general provision of Section 167B. The decision of Hon'ble Bombay High Court in case of CIT vs. 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....
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.... Act, the same is excluded for taxing the income at for maximum marginal rate. For ready reference we extract relevant part of Section 167B(1) of the Act which reads as under: 167B. (1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies 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 Vs. C1T dated 26.8.2016 held that in case of society, the application of maximum marginal rat....
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.... Smaraka Trust Vs. ITO (supra) had dealt with identical issue and has observed as under : "4. We have heard the party before us, and perused the material on record. 4.1 The issue arising in the instant case, and toward which we have perused the impugned order and also the grounds raised before the first appellate authority, 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 rec....
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.... be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income; (2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, 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 ....
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....sessee, 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 misconceived. The matter in fact stands clarified by the Board per it's Circular No. 320, dated 11/01/1982, also binding on the Revenue. The tax rate accordingly is to be computed as per the normal rates as applicable to Association of Persons. The same, in our view, is again an apparent mistake and, where contested, outside the ambit of s. 143(1)((a) in the first instance, so that it could not have been effected there-under." 14. The decisions of Coordinate Benches referred (supra) having dealt the very same issue as has been raised in the instant bunch of appeals, I find that the ratio laid down by the Coordinate Benches in the decisions referred (supra) are squarely applicable on the facts of the instant case and therefore, respectfully following the judicial precedents I am inclined to hold that the income of the assessee is not chargeable to tax at Maximum Marginal Rate but is chargeable to tax at Normal Rate. The Revenue....