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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI V. DURGA RAO & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
In the aforesaid appeal by assessee for Assessment Year (AY) 2016-17, the only grievance of the assessee is applicable rate of tax. The Centralized Processing Center (CPC), while processing the return 2 - of income u/s 143(1) on 05.05.2018, computed tax at Maximum Marginal rates (MMR). This is so because the assessee has not specified the percentage of shares held by each of the constituents and therefore, the tax has been calculated at MMR. The assessee is assessed as Association of Person (AOP) and it has filed its return of income in ITR-5 as applicable to such entities.
The Registry has noted the delay of 316 days in the appeal, the condonation of which has been sought by Ld. AR. Considering the fact that the impugned order was passed on 27.08.2021 which fall during lockdown situation arising out of Covid-19 Pandemic, we condone the delay and admit the appeal for adjudication on merits.
The Ld. CIT(A), considering the provisions of Sec.167B as well as the decision of Delhi Tribunal in Air Force Navy Farm Owners Welfare Association v/s ITO (117 Taxmann.com 906) observed that the assessee is an association of alumni of an engineering college. It could not be disputed that the income of its members during the year would have exceeded the basic exemption limit and therefore, in terms of sub-section (2) of Sec.167B, tax would be charged at MMR. Aggrieved, the assessee is in further appeal before us.
Upon perusal of documents, it could be seen that the assessee is registered u/s 10 of The Tamil Nadu Societies Registration Act, 1975 (Tamil Nadu Act 27 of 1975) since 15.11.2006. This act provides for registration of literary, scientific, religious and other societies in state of Tamil Nadu which correspond to The Societies Registration Act, 1860.
The relevant provisions of Sec.167B read 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: 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 sub-section (1)],— (i) the total income of any member thereof for the previous year (excluding his share from such association or body) exceeds the maximum amount which is not chargeable to tax in the case of that member under the Finance Act of the relevant year, tax shall be charged on the total income of the association or body at the maximum marginal rate; (ii) any member or members thereof is or are chargeable to tax at a rate or rates which is or are higher than the maximum marginal rate, tax shall be charged on that portion or portions of the total income of the association or body which is or are relatable to the share or shares of such member or members at such higher rate or rates, as the case may be, and the balance of the total income of the association or body shall be taxed at the maximum marginal rate.
Upon perusal, we find that the provisions of sub-section (1) apply to Association of Persons or body of individuals subject to certain exclusions. These exclusions are 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. Thus, in case of excluded entities, these provisions would have no application. Further, sub-section (1) applies in a case where the individual shares of the members of association of persons or body of individuals is un-determinate or unknown. The sub-section (2) applies in rest of the cases i.e., where the share of members is determinate or known. The sub-section, in our considered opinion, uses expressions ‘aforesaid’ and accordingly, appliesonly to those entities which are covered under sub-section (1) and the same do not enlarge the scope of coverage of entities.
4 - 7. Considering the same, since the assessee is covered under excluded category, the provisions of sub-section (1) and (2) would have no application to the case of the assessee as held by Hyderabad Tribunal in KMR Educational Society vs. ACIT (55 Taxmann.com 218) rendered on similar factual matrix. The bench held that the provisions of Section 167B would have no application to the society registered under the Societies Act or any other society formed on similar lines. We concur with the ratio of this decision. It could also be seen that for all the subsequent years from AYs 2017-18 to 2020-2021, the returned filed by the assessee has been accepted u/s 143(1). In these returns, the assessee has computed tax at normal rates as applicable to an individual. The subsequent decision of Delhi Tribunal as referred to by Ld. CIT(A), in the impugned order, do not consider this decision of Hyderabad Tribunal and we are not in agreement with this decision. Considering the facts of the case, we direct revenue to re-compute the tax payable by the assessee by applying normal rates as applicable to an individual.
The appeal stand allowed. Order pronounced on 12th October, 2022.