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Facts
The assessee, a public charitable trust, applied to discontinue its registration, which was subsequently cancelled effective March 20, 2015. Section 115TD of the Income Tax Act, which levies tax at the Maximum Marginal Rate (MMR) on accreted income of trusts whose registration is cancelled, became effective from June 1, 2016. The tax department, via an intimation under Section 143(1), applied Section 115TD and calculated tax at MMR for A.Y. 2022-23 & 2023-24, despite the assessee having calculated it at slab rates.
Held
The Tribunal, relying on its own coordinate bench decisions, held that since the trust's registration was cancelled prior to the effective date of Section 115TD, the provisions of Section 115TD are not applicable. Consequently, the tax on the total income should be calculated at slab rates applicable to an individual, along with prevailing surcharge and cess, and not at the Maximum Marginal Rate.
Key Issues
Whether Section 115TD and Maximum Marginal Rate (MMR) are applicable to a trust whose registration was cancelled before the effective date of Section 115TD.
Sections Cited
250, 115TD, 12A(a), 143(1), 234A, 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN
Assessee by Shri Sukhsagar Syal and Shri Atul Suraiya Revenue by Shri Sunny Kachhwaha, Sr. DR Date of Hearing 21.01.2025 Date of Pronouncement 28.01.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeals have been filed by the assessee challenging the different impugned orders 23.02.2024, passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (‘Ld. CIT(A)’) for the assessment year 2022-23 & 2023-24. Since all the issues involved in these appeals are common and identical, therefore, they have been clubbed, heard together and consolidated order is being passed for the sake of convenience and brevity. We shall take as lead case and facts narrated therein
Ground No.1 raised by the assessee is not pressed and in this regard is separate endorsement has been made by Ld. Ld.AR, therefore, this ground raised by the assessee stands dismissed as not pressed.
3. Ground No. 2 (a) & (b) raised in the present appeal are interconnected and interrelated and relates to challenging the order of Ld. CIT(A) in upholding the invocation of provisions of section 115TD of the Act. Therefore we have decided to take up these issues together and dispose of the same through the present consolidated order
4. The issue involved in the present appeal is in respect of applicability of provisions of section 115TD and charging tax at maximum marginal rate on accreted income when the provisions of section 115TD were introduced by finance act, 2016 with effect from 1.06.2016 and when registration of the trust was surrendered for cancellation by it on 20. 03. 2015.
5. Ld. AR submitted that the issue in the present appeal are fully covered by the decision of coordinate bench of ITAT in assessee’s his own case for the A.Y 2021-22 in where in it was held that once the registration of the trust is cancelled with effect from 20 at MMR. Similarly surcharge and cess have to be calculated at prevailing rate. The operative portion of the order of the coordinate bench of ITAT is reproduced herein below:
Brief facts of the case are that assessee is a public charitable trust created by trust deed dated 14.02.1975. It was registered under section 12A(a) of the Act on 10.03.1976 with registration number as TR/10904 issued by the Income-tax Department. Later assessee filed an application on 12.03.2015 before the Id. CIT(E), Mumbai for discontinuing to avail the benefits of registration taken by it in 1976. Pursuant to this, a show cause notice dated 13.03.2015 was issued by ld. CIT(E), Mumbai for which the proceedings were recorded in the order sheet on 20.03.2015 with the noting 'heard'. Matter travelled before the coordinate bench of ITAT Mumbai for Assessment Year 2019-20 in assessee's own case vide appeal no. ITA 7240/Mum/2019 with various grounds relating to cancellation of registration of the Trust including ground on application of section 115TD when matter for its cancellation of registration was heard on 20.03.2015. The said order was pronounced on 24.03.2021wherein in para 6 it was held that order for cancellation of registration of the Trust will have effect from 20.03.2015 i.e. the date on which hearing in respect of show cause notice requiring the assessee to show cause as to why registration under section 12A not be cancelled, was concluded.
3.1. Thus, cancellation of registration was held to be effective from 20.03.2015. While holding so, reliance was placed on the decision of another trust Navajbai Ratan Tata Trust v. PCIT in ITA No. 7238/Mum/2019. 3.2. Identical issues as in the present case, came up before coordinate bench of ITAT Mumbai in the case of Tata Education Trust v. DCIT in dated 08.08.2024 which inter alia relied on the decisions in its own case in ITA No. 7241/Mum/2019 dated 24.03.2021 and Navajbai Ratan Tata Trust (supra). It was held that once the registration of Trust is cancelled w.e.f. 20.03.2015, the Trust lost its status of a registered Trust and therefore, tax on total income has to be calculated at slab rates applicable to an individual and not at MMR. Similarly, surcharge and cess have to be calculated at prevailing rate.
Both the parties were heard. Material placed on record is perused. Thoughtful consideration given to the submissions made before us, including judicial precedents referred above. In the present case, facts are undisputed and uncontroverted. Assessee had filed its return of income in form ITR-5 on 29.09.2021, reporting total income at Rs.50,08,440/-. In the said return, tax on total income was calculated at slab rates at Rs.13,15,032/-. Surcharge was calculated at the rate of 10% amounting to Rs.1,31,503/- which was restricted to Rs.5,908/- after considering the benefit of marginal relief under the Act. Cess was calculated at 4% amounting to Rs.52,838/-. Credit for taxes paid was claimed, interest u/s 234A, 234B and 234C was levied and net tax payable was arrived at Rs.4,94,746/-. Self-assessment tax of Rs.7,35,000/- was paid and a refund of Rs.2,40,250/- was claimed 4.1. Intimation u/s 143(1) dated 13.10.2022 was issued by the Department on processing of return wherein the total income reported was accepted as such but tax liability including surcharge and cess was computed at MMR, resulting into demand payable by the assessee.
4.2. Assessment year in the present case is 2021-22 and assessee had surrendered its registration in financial year 2014- 15 whereas section 115TD became effective from Assessment Year 2016-17. Issue in the present case in the given set of facts is squarely covered by the assessee's own case whereby cancellation of registration was held to be effective from 20.03.2015. Further, in another case of Tata Education Trust (supra), it is held that once the registration of Trust is cancelled w.e.f. 20.03 2015, the Trust lost its status of a registered Trust and therefore, tax on total income has to be calculated at slab rates and not at MMR. Similarly, surcharge and cess have to be calculated as prevailing rate. Respectfully, following the aforesaid judicial precedents, ground no. 02 raised by the assessee on the issue of applicability of section 115TD is held in its favour, i.e. the said ground is allowed. Other ground is rendered academic and does not need separate adjudication.
In the result, appeal of the assessee Trust is allowed.
In view of the discussion made above and respectfully, following the decision cited above, I decide ground No. 2 in favour of assessee by holding that since the trust has lost its status of a registered trust with effect from 20th March 2015, therefore tax on total income has to be calculated at slab rates and not at MMR. Similarly surcharge and cess have to be calculated at prevailing rate.
ITA No. 1948/Mum/2024, A.Y 2023-24
As the facts and circumstances in these appeals are identical to A.Y 2022-13 (except variance in figures) and the decision rendered in above paragraph would apply mutatis mutandis for these appeals also. Accordingly, the grounds of appeal
of the assessee are allowed for statistical purposes.
8. In the result, both the appeasl of the assessee stands, partly allowed with no orders as to cost.