SAMVARDHAN,GHAZIABAD vs. ITO (EXEMPTION), GHAZIABAD

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ITA 6896/DEL/2017Status: DisposedITAT Delhi06 May 2020AY 2014-153 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that in the absence of registration under Section 12AA, the amounts received by the trust were rightly taxed at the maximum marginal rate as per Section 167B(2) of the IT Act. The CIT(A) had correctly confirmed the Assessing Officer's action.

What were the facts?

The assessee trust received donations and life membership fees which were added to its income. This was because the trust's application for registration under Section 12AA of the Income Tax Act had been rejected. The Assessing Officer taxed this amount at the maximum marginal rate applicable to an AOP.

What were the issues?

Whether donations and membership fees received by a trust without Section 12AA registration can be taxed at the maximum marginal rate. Whether Section 167B(2) is applicable in such cases.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 167B(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘I-2+SMC’, NEW DELHI

Before: Ms. Suchitra KambleDr. B. R. R. Kumar

For Appellant: Ms. Vanshika Taneja, Adv
Hearing: 27.02.2020Pronounced: 06.05.2020

Per Dr. B.R.R. Kumar, Accountant Member:

1.

The present appeal has been filed by the assessee against the order of ld. CIT (A), Ghaziabad dated 31.08.2017.

2.

Following grounds have been raised by the assessee: “1. That the order of the ld. CIT (A) dated 31.08.2017 is bad in law and on facts.

2. That the ld. Assessing Officer has erred in law in not issuing any show cause notice before making addition.

3. That the ld. CIT (A) has erred in upholding the addition of Rs.1,55,480/- by merely relying on the order of Ld. AO and without recording his own satisfaction in relation to rejection of the claim of the appellant.

4. The ld. CIT (A) has erred in applying the provisions of Section 167B(2) of the Act regarding applicability of maximum marginal rate of tax despite the fact that appellant trust is covered under clause (I) of the First schedule of the Finance Act.”

Samvardhan 3. During the year, the assessee trust received donation of Rs.1,26,200/- and life membership fee of Rs.29,280/- has been added to the income of the assessee on the grounds that the assessee is not eligible for the deduction as the application for registration u/s 12AA of the Income Tax Act, 1961 has been rejected by the ld. CIT(Exemption), Lucknow on 22.06.2015. Having rejected the AO taxed the amount at the maximum marginal rate applicable to AOP. The ld. CIT (A) confirmed the action of the Assessing Officer on the grounds that the benefits of the provisions of Section 167B(2) are not applicable to the assessee. The provisions of Section 167B 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 :

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 Samvardhan 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.

Explanation.—For the purposes of this section, the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such association or body or at any time thereafter.]”

4.

Having heard the arguments of both the parties and on perusal of the record, we find that in the absence of registration u/s 12AA, the ld. CIT (A) has rightly treated the amount to maximum marginal rate in accordance with the provisions of Section 167B(2) of the IT Act.

5.

In the result, the appeal of the assessee is dismissed. Order Pronounced in the Open Court on 06/05/2020.

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