GOLLA'S EDUCATIONAL AND RESEARCH TRUST,,VIJAYAWADA vs. ACIT(CPC), BENGALURU

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the assessee is directed against order of the

Commissioner of Income Tax, Vijayawada vide ITA

No.408/CIT(A)/VJA/2015-16 dated 31.8.2017 for the assessment year

2014-15.

ITA No.541 /Vizag/2017 M/s. Golla’s Educational & Research Trust, Vijayawada 2. The assessee is an educational research trust registered under

Trust Act. The assessee filed return of income on 6.1.2015 admitting

total income of ` 65,526/-. The return was processed u/s 143(1) of the

Income Tax Act, 1961 (hereinafter called as 'the Act') and the income of

the assessee was taxed under maximum marginal rate.

went on appeal before the CIT(A) and the Ld. CIT(A) upheld the

charging of income under maximum marginal rate.

before this Tribunal. During the appeal hearing, the Ld. A.R. argued

that the return was processed u/s 143(1) of the Act and as per section

164(2) of the Act the income of a Charitable Trust required to be taxed

at normal rates. The only ground pressed by the Ld. A.R. in this appeal

is ground No.(d) with regard to charging of tax at normal rates.

143(1) of the Act.

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 2

ITA No.541 /Vizag/2017 M/s. Golla’s Educational & Research Trust, Vijayawada 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:

[Charge 31 of tax where share of beneficiaries unknown. 32 164. (1) 33[Subject to the provisions of sub-sections (2) and (3), where] any income in respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of31any one person31 or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as "relevant income", "part of relevant income" and 31"beneficiaries", respectively), 34[tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate35 :] ……………….. 44[(2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, 45[or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2,] 46[or which is of the nature referred to in sub-section (4A) of section 11,] tax shall be charged on so much of the relevant income as is not exempt under section 1145[or section 12], as if the relevant income not so exempt were the income of an association of persons : 47[Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate.]]

derived from the property held under the Trust wholly for charitable

purposes required to be taxex at normal rates. On the similar facts,in

the case of ITO Vs. Shri Hanuman Mandir Trust (2003) 84 ITD 0083 the

Pune Tribunal has held as follows:

“I have considered the rival submissions and perused the facts on record. I have perused the terms and contents of the trust deed which have been reproduced (supra) and after doing so, I hold that the assessee trust has to be considered as a public religious trust in view of the judgement of the Hon’ble Supreme Court in the case of Devki Nandan Vs. Murlidhar (supra). The submission of the assessee before the CIT(A) that it is the deity who is the assessee and that, therefore, the status should be that of individual is not correct, in view of the observations of the Hon’ble Supreme Court reproduced (supra). Accordingly, I direct that the status of the assessee has to be taken as that of AOP. But since the assessee’s income is one derived from property held under the trust wholly for 3

ITA No.541 /Vizag/2017 M/s. Golla’s Educational & Research Trust, Vijayawada charitable or religious purposes, provisions of s. 164(2) will come into operation, but since under Schedule to Finance Act, rates of income-tax for AOP were the same as those of individual and, therefore, the assessee even though assessable under the status of AOP is still to be taxed as per the rates applicable to an individual. I further hold that proviso to s. 164(2) was wrongly applied in the present case to tax the assessee at the maximum marginal rate, because maximum marginal rate could be applied only if there was failure on the part of the trust under s. 13 (1)(c) or 13(1)(d) of the Act, which is not the reason for denying benefits of s. 11 in the present case. In view of the above legal position, I hold that s. 164(2) applies and the tax is to be calculated on the AOP on the minimum marginal rate.” 8. 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:

Income derived from property held under Trust wholly for charitable or religious purpose (including voluntary contributions received from donors), to the extent it is not exempt under Sections 11 and 12, is liable to tax at the normal rates applicable to an Association of Persons (AOP), except for anonymous donations discussed in Para 5.4 above. .

Therefore, we hold that the income of the assessee required to be

taxed at normal rates of AOP but not at maximum marginal rate.

Accordingly, we direct the A.O. to tax the income of the assessee at

normal rates.

at maximum marginal rate is an issue of debate and require verification

of facts which cannot be decided u/s 143(1) of the Act. The A.O. u/s

143(1) of the Act taxed the assessee’s income at maximum marginal

rate though the assessee claimed the same at normal rates. The issue

is a debatable which has to be decided after taking into consideration

ITA No.541 /Vizag/2017 M/s. Golla’s Educational & Research Trust, Vijayawada facts and merits of the case and the relevant facts and case laws.

Therefore, such adjustments assessments are not permissible u/s 143(1)

of the Act, hence, we set aside the orders of the lower authorities and

allow the appeal of the assessee.

A.R. during the appeal hearing. Hence, ground Nos. 1(a), (b), (c) and

(e) are dismissed as not pressed.

The above order was pronounced in the open court on 26th Apr’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 26.04.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:- 1. अपीलाथ� / The Appellant – M/s. Golla’s Educational and Research Trust, 26-25-9, Durgi Vari Street, Gandhinagar, Vijayawada 2. ��याथ� / The Respondent – The ACIT (CPC), Bengaluru. 3. आयकर आयु+त / The CIT, Vijayawada 4. आयकर आयु+त (अपील) / The CIT (A), Vijayawada 5. #वभागीय ��त�न.ध, आय कर अपील�य अ.धकरण, #वशाखापटणम / DR, ITAT, Visakhapatnam 6. गाड� फ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM