TaxTMI 
2026 (11) TMI 409
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (hereinafter referred to as "the Act"), arising out of the orders passed by the Income Tax Officer, Exemption Ward 1, Jaipur (hereinafter referred to as "the AO") under section 154 of the Act dated 19.02.2025 for the assessment year 2018-19 (ITA No. 632/JPR/2026) and dated 13.08.2024 for the assessment year 2019-20 (ITA No. 633/JPR/2026). The issue in both the appeals is the same and they are disposed of by this consolidated order, with ITA No. 632/JPR/2026 taken as the lead case. 2. The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 in ITA No. 632/JPR/2026 read as under: "1. The Ld. CIT(A) has erred on facts and in law in holding that surplus is to be taxed at MMR u/s 167B of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mputed on the gross receipts of Rs 7,88,172 without allowing the expenditure. The AO rejected both the applications. 4. The learned CIT(A), following the order of this Tribunal for the assessment year 2019-20, directed the AO to allow the expenditure for the assessment year 2018-19 and to recompute the tax on the net surplus of Rs 1,53,756. That direction is not in challenge before us. On the rate of tax, however, the learned CIT(A) held in both the years that the Assessee is an association of persons governed by sections 160 to 167 of the Act, reproduced section 167B of the Act, observed that "it is presumed that the Appellant falls within the purview of section 167B of the Act and is subject to tax at MMR without basic exemption", and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to the Assessee and that the income liable to tax is the net surplus. The only question is whether that income is to be taxed at the maximum marginal rate under section 167B of the Act or at the rates ordinarily applicable to an association of persons under section 164(2) of the Act. Section 164(1) of the Act, which charges tax at the maximum marginal rate where the beneficiaries or their shares are indeterminate, opens with the words "Subject to the provisions of subsections (2) and (3)". Section 164(2) of the Act reads as under: "(2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... go with it. * Thirdly, Parliament has itself specified when the maximum marginal rate is to apply to such income: only where the exemption is lost by virtue of section 13(1)(c) or section 13(1)(d) of the Act. Having stated the exception expressly, Parliament cannot be taken to have intended the general provision in section 167B of the Act to impose the maximum marginal rate in every other case, for that would make the proviso to section 164(2) of the Act meaningless. A specific provision prevails over a general one. 9. Section 167B of the Act does not lead elsewhere. It presupposes an association or body which has "members" and in which those members have "shares" in the income, whether determinate or indeterminate, and sub-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 taxmann.com 9 (Pune Trib.), the latter in an appeal arising, as here, from the rejection of an application under section 154 of the Act. 11. Air Force Navy Farm Owners Welfare Association (supra), relied upon by the learned CIT(A), does not assist the Revenue. The assessee there was an association of Air Force and Naval officers formed to manage the farmhouses allotted to them, which claimed mutuality. It was not a charitable trust, no question under section 164(2) of the Act arose, and section 167B(2) of the Act was applied because the assessee had not disputed that the income of its members exceeded the basic exemption limit. There is no such member and no such finding here. 12. We therefore hold that the net income of the Assesse....