MOHAMMEDALLY NOORBHOY BANDUKWALLA TRUST,MUMBAI vs. ADD/JOINT/DEPUTY/ACIT/ITO, NFAC, DELHI

This appeal is filed by assessee, a charitable trust against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] for A.Y. 2014-15 dated 15th February, 2023, where in appeal of assessee preferred against the order under Section 143(1) of the Income-tax Act, 1961 (the Act) dated 12th March, 2016 passed by the Central Processing Centre was partly allowed.

The brief facts of the case show that assessee is a public charitable trust registered with charity commissioner. It filed its return of income on 26th September, 2014, declaring gross total income of ₹8,47,167/-. The above income was offered under the head income from other sources, assessee computed tax at a normal rate of ₹99,434/- and aggregate income tax liability was

This return of income was processed under Section 143(1) of the Income Tax Act by passing intimation on 12 March 2016, wherein there is no addition to the total income of the assessee. Thus there was no adjustment u/s 143 (1) (a) of The Act. It was assessed at ₹8,47,170/-. However, the tax liability computed was at ₹2,54,151/- (assessee computed it at ₹99,434/-) and thereafter, tax payment was computed after granting credit for tax deduction at source at ₹2,05,645/-. Thus, there was difference in tax computed on total income by the assessee and CPC.

The fact also shows that assessee is a charitable trust registered with the Charity Commissioner since 20 August 1952. Assessee made an application for registration under Section 12AA of the Act on 3 November 2010 and once again on 20 September 2013. As assessee could not produce 'change report' of the trustees because of the reason that the office of the charity commissioner has lost the relevant papers during the transfer of State Board of Wakfs, registration under Section 12AA of the Act was denied. The trust has once again filed a fresh application for registration on 25 May 2016. On 3 April 2016, the relevant details of change report are now available. Fate of this application is not known.

Meanwhile, Assessee trust continued to earn income on fixed deposit receipt with banks and offering same as income. As per ROI, income of assessee was taxed at

On appeal, the learned CIT (A) held that according to him, generally the tax rate on AOP or Body of Individuals (BOI) is charged at normal rate for individual as when income of none of the members exceeds the maximum amount not chargeable to tax, the Income of AOP shall be taxable at a rate applicable to an individual. However, income of AOP is assessed at maximum margin rate only where income of members of AOP or BOI exceeds the maximum amount, which is not chargeable to income tax. He directed the learned Assessing Officer to work out the tax liability in view of this. The appellate order was passed on 15 February 2023. The assessee is aggrieved with that order and is in appeal before us.

The grievance of the assessee is that the order of the learned CIT (A) directed the learned Assessing Officer to work out the tax liability without naming any section and indirectly upholding the charge of income tax at maximum marginal rate of 30% instead of normal tax rate for Association of Person.

The learned Departmental Representative vehemently submitted that it is necessary to note Assessee trust is not registered under Section 12AA of the Act and therefore, the tax rate applicable is only maximum marginal rate. Assessee has computed the tax rate of an individual, which is not correct. It was further stated that it is a mere processing of the return of income based on the status of the assessee and therefore, it is incorrect to argue that CPC does not have such right. There is no provision to intimate assessee in variation in taxes u/s 143(1)(b) but only u/s 143(1)(a). There is no adjustment u/s 143 (1)(a) but u/s 143(1)(b), so there is no need of any intimation.

Further ld AR was asked to show specific requirement of giving notice to assessee by CPC. No such provisions were shown. On our reading, it is only with respect to any adjustment u/s 143(1) (a) and not u/s 143(1) (b) of The Act that CPC should intimate assessee. The ld AR could not show us any reason to substantiate how the assessee has offered tax at the rate applicable to individual.

We have carefully considered rival contention and perused order of the ld CIT (A) as well as Intimation issued u/s 143 (1) of The Act. Assessee is a charitable trust not registered under section 12AA of the Act. Therefore, a public charitable trust not registered would be chargeable to tax as Association of persons. The tax incidence of Association of Persons would depend on the Provisions of Section 167B of the Act. According to that, section where shares of the members are indeterminate then tax is to be charged at the maximum marginal rate. The CPC according to Provisions of Section 143(1) (b) of the Act is required to compute the tax on the basis of total income computed under clause (a). There is no adjustment to the total income of the assessee u/s 143 (1)(a) of the Act. Thus, no intimation should be given to assessee as per provision of The Act. Assessee has also failed to substantiate that why it is not chargeable to tax at MMR.

Further, the ld CIT (A) has merely directed ld AO to charge the tax at correct rate. Naturally, ld AO will provide necessary opportunity and consider whether the trust is registered u/s 12AA of the Act. Ld AO will also look in to the fact whether in the ROI assessee has claimed that it is chargeable to tax at different rate then MMR.

In view of this, we do not find any infirmity in the order of the ld CIT (A), who has merely directed the ld AO to apply correct rate of tax. Hence, appeal of assessee is dismissed.