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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO, HON’BLE & SHRI D.S. SUNDER SINGH, HON’BLE
Assessee by : Sri G.V.N. Hari, Advocate Department By : Sri B.Satyanarayan Raju, Sr.DR Date of hearing : 24/02/2020. Date of pronouncement : 28/02/2020. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER
These appeals by the assessee are directed against the separate orders of Commissioner of Income Tax (Appeals), Kurnool, both dated 18/03/2019 for the Assessment Years 2014-15 & 2015-16. Since facts and issues are common, clubbed and heard together and disposed of by way of this consolidated order.
Facts of the case in brief are that assessee is a society registered under the Societies Act to setup for welfare of the persons associated with film filed. The assessee filed its return of income by declaring total income of Rs. 1,76,698/-. The return has been processed by the CPC, Bangalore and raised a demand of Rs. 69,724/-.
Against the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) by submitting that Assessing Officer has made the adjustments by calculating the tax at Maximum Marginal Rate (MMR) which is not correct. However, ld. CIT(A) not accepted the explanation and dismissed the appeal of the assessee on the ground that the issue is debatable and is outside the scope of section 143(1) of the Act. 4. On appeal before us, ld. counsel for the assessee has submitted that CPC, Bangalore has made the adjustment in respect of return of income filed by the assessee without giving any opportunity to the assessee, is not correct. He further submitted that assessee being a registered society, if at all tax liability is there, it has to be calculated by applying normal rate and not MMR and submitted that order passed by the ld. CIT(A) may be set aside and appeal of the assessee may be allowed.
On the other hand, ld.DR strongly supported the orders of the authorities below.
In this case, CPC, Bangalore made an adjustment and raised a demand by taxing the assessee at MMR. As per the decision of the coordinate bench of this tribunal in the case of Vidyodaya Educational Society Vs. DCIT in dated 26/04/2018, the CPC has no power to make adjustment u/sec. 143(1)(a) of the Act, if any adjustment has to be made the Assessing Officer has to give intimation before making such adjustment. Apart from that, the assessee is a registered society under the Registrar of Societies Act on 11/09/2008 and as per section 167B(1), the assessee cannot be taxed at MMR. For the sake of convenience, the relevant portion of the order is extracted as under:- “10. The next submission of the assessee is taxing the income at maximum marginal rate. As per section 167B of the Act, in case of an assessee registered under Societies 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 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:
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 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 CIT 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.”
The assessee is a society registered under Societies Act, 1860 as evidenced from the registration certificate. The facts are similar in this case, therefore, following the decision of coordinate bench and section 167B of the Act, we hold that the income of the assessee is to be taxed at normal rates but not at maximum marginal rate, accordingly, we set aside the order of the Ld. CIT(A) and allow the appeal of the assessee on this ground.
In view of the above, the order passed by the ld. CIT(A) is set aside and remit the matter back to the Assessing Officer with a direction to, if at all tax liability is there, it has to be calculated on normal rate and not MMR and pass the orders in accordance with law. Thus, this appeal filed by the assessee is allowed for statistical purpose.
The facts involved in this appeal are similar to the facts involved in ITA No. 315/VIZ/2019. Therefore, our decision in shall apply mutatis mutandis to this appeal also.
In the result, appeals filed by the assessee are allowed for statistical purpose. Order Pronounced in open Court on this 28th day of Feb., 2020. Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 28th February, 2020. vr/- Copy to:
1. 1. The Assessee - M/s. Filmnagar Co-operative Welfare Society, C/o Ammananna Oldage Home, D.NO. 3-103, Satyanarayanapuram,Kethanakonda Post, Ibrahimpatnam Mandalam, Krishna District.