SRI NOOKALAMMA AMMAVARI DEVASTHANAM,PEDDAPURAM vs. THE ITO, TUNI

The assessee is a religious institution running the temple of Goddess Sri Nookalamma Ammavaru at Kandrakota Village, Peddapuram Mandal. For the assessment year 2009-10, the assessee filed return of income in the status of AOP on 27.08.2010 admitting Nil income. The return was processed u/s 143(1) and subsequently taken up the case for assessment. The assessee claimed exemption u/s 11 of Income Tax Act (hereinafter called as ‘Act’) in respect of ‘excess of income over expenditure’. During the assessment proceedings, the assessee was asked to produce the copy of the proceedings issued by the CIT granting registration u/s 12A/12AA of the Act, for granting exemption of income u/s 11 of the Act, but the assessee failed to produce the evidence. However, the assessee produced the registration proceedings of the CIT dated 31.1.2013 granting registration w.e.f. 1.4.2013 relating to the assessment year 2013-14. Since there was no registration u/s 12A for the impugned assessment year, the Assessing Officer (AO) adopted the status of the assessee as ‘AOP’ and taxed the surplus income at maximum marginal rate.

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and raised the grounds for extension of benefit and for exemption u/s 11 and also against charging the tax at maximum marginal rate. The Ld.CIT(A) dismissed the appeal of the assessee on both the grounds.

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld. AR pressed only the ground relating to charging of tax at maximum marginal rate. Therefore, ground Nos.1, 2, 3, 4 and 6 are dismissed as not pressed.

We have heard both the parties, perused the material placed on record on the issue of charging the tax at maximum marginal rate on surplus income. During the appeal hearing, the Ld.AR argued that the assessee is charitable religious association registered in terms of Section 43 of Andhra Pradesh Charitable and Hindu Religious Institutions Endowment Act. The assessee devasthanam is run by Endowment Department, managed by staff of endowments and headed by Executive Officer. The assessee devasthanam derives income by way of jatara collections, sale of prasada, hundi collections, interest on bank FDs and agricultural income. The fact that the assessee is religious charitable institution is not disputed by the AO. The Ld.AR argued that even if the income of the Trust is not exempt the income of the Trust is required to be taxed at normal rates but not at the maximum marginal rate. The similar issue has come up before this Tribunal in the case of M/s Golla’s Educational and Research Trust, Vijayawada in ITA No.541/Viz/2017 dated 26.04.2018 and the Coordinate Bench held that the income of the assessee is required to be taxed at normal rates of AOP but not at maximum marginal rate. For the sake of clarity and convenience we extract relevant part of order of the coordinate Bench which reads as under:

We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. In this case, even if the income of the assessee not exempt u/s 11 & 12 of the Act as per section 164(2) of the Act, the income of the Trust required to be taxed at normal rates. For ready reference, we extract relevant part of Section 164(2) of the Act of the proviso which reads as under:

Plain reading of section 164(2) of the Act, shows that the income derived from the property held under the Trust wholly for charitable purposes required to be taxed at normal rates. On the similar facts, in the case of ITO Vs. Shri Hanuman Mandir Trust (2003) 84 lTD 0083 the Pune Tribunal has held as follows:

Tax Payers Information Series -37, Assessment of Charitable Trusts and Institutions published by the Income tax Department clarifies the position in para No.5.7 as follows:

Since the facts of the case are identical, respectfully following the view taken by the coordinate bench, we hold that the surplus income of the assessee should be taxed at normal rates but not at maximum marginal rate. Accordingly, we set aside the order of the Ld.CIT(A) on this issue and partly allow the appeal of the assessee.

In the result, appeal of the assessee is partly allowed. The above order was pronounced in the open court on 25th July, 2018. (िी.दुगाा राि) (धड.एस. सुन्दर ससह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER धिशाखापटणम /Visakhapatnam ददिांक /Dated : 25.07.2018 L.Rama, SPS आदेश की प्रधिधलधप अग्रेधर्ि/Copy of the order forwarded to:- 1. ननर्ााररती/ The Assessee- Sri Nookalamma Ammavari Devasthanam, Kandrakota 2. राजस्व/ The Revenue –Income Tax Officer, Ward-1, Tuni

The Pr.Commissioner of Income Tax-2, Visakhapatnam

The Commissioner of Income Tax(Appeals)-1, Guntur 5. धिभागीयप्रधिधिधि, आयकरअपीलीयअधिकरण, धिशाखापटणम /DR, ITAT, Visakhapatnam 6.गाडाफ़ाईल / Guard file आदेशािुसार / BY ORDER ////