Loading judgment…
Facts
The assessee, Narmada Trust, a charitable trust, surrendered its Section 12A registration and did not claim Section 11 exemption. It filed returns as an 'Association of Persons' (AOP) for AYs 2021-22 and 2022-23. The Assessing Officer processed the returns under Section 143(1) and levied tax at the Maximum Marginal Rate (MMR) of 30%, instead of normal slab rates, based on an erroneous interpretation of the assessee providing 'particulars of members of the AOP'.
Held
The Tribunal, following its earlier decision in the assessee's own case and relying on CBDT Circular No. 320 dated 11-01-1982, held that Section 167A is not attracted in cases of charitable trusts where members or trustees are not entitled to shares in the income of the AOP. Therefore, tax should be levied at the normal slab rates applicable to an AOP, not at the Maximum Marginal Rate.
Key Issues
Whether a charitable trust, treated as an AOP, which has surrendered Section 12A registration and not claimed Section 11 exemption, should be subjected to tax at the Maximum Marginal Rate (MMR) or at normal slab rates when its beneficiaries are the public at large and shares of members are indeterminate.
Sections Cited
143(1), 12A, 11, 167A, 10(25), 164(1)(iv)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI C. N. PRASAD & SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: The appeal in & 2531/Del/2025 for AYs 2021-22 and 1. 2022-23, arises out of the order of the ld Jt. Commissioner of Income Tax (Appeals)-1, Kolkata [hereinafter referred to as „ld. JCIT(A)‟, in short] dated 05.03.2025 against the order of assessment passed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 16.11.2022 by the Assessing Officer, (hereinafter referred to as „ld. AO‟). Identical issues are involved in both these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience.
The facts of Assessment Year 2021-22 are taken up for adjudication 2. and the decision rendered thereon shall apply mutatis mutandis for Assessment Year 2022-23 also in view of identical facts except with variance in figures.
The only effective issue to be decided in these appeals is as to 3. whether the assessee (AOP) could be subjected to levy of tax at maximum marginal rate (MMR) and levy of surcharge thereon.
We have heard the rival submissions and peruse the materials 4. available on record. The assessee is a charitable trust engaged in carrying out charitable activities by granting donations to other trusts / institutions holding valid eligibility certificates and carrying on charitable activities for the public at large. The assessee had surrendered its certificate of registration granted to it under section 12A of the Act and had not claimed the benefit of exemption under section 11 of the Act. The return of income for the assessment year 2021-22 had been filed by the assessee on 21-7-2022 in the capacity of „Association of Persons‟ (AOP) declaring total income of Rs 4,13,45,280/-. The said return was processed under section 143(1) of the Act determining refund of Rs 16,05,390/- as against the refund of Rs 185,7,920/- claimed in the return of income by the assessee. The said demand has arose as the tax has been levied on the entire income of the assessee at flat rate of 30% instead of normal slab rates applicable.
The Learned CITA had heavily relied on the details furnished by the 5. assessee in the Return of Income - Audit information of the ITR in Para (E) which is for “particulars of persons who were partners / members in the Firm/AOP/ BOI or Trustees in the Trust”. It was submitted that the said details are “the particulars of Trustees” and the Learned CITA had erroneously held the same to be “Particulars of Members of the AOP”. This erroneous interpretation on the part of the Learned CITA had led to the dismissal of the appeal of the assessee. The assessee is a charitable trust not claiming any benefit of exemption under section 11 of the Act, wherein the entire public at large are the beneficiaries through the activities of the assessee. Similarly though it is treated as an AOP, it does not have any specific members. It was submitted that the appellate order is based on incorrect interpretation of the information given in the Return of Income.
We find that the issue in dispute is squarely covered by the decision 6. of this Delhi Tribunal in assessee‟s own case for Assessment Year 2023-24 in / DEL / 2025 dated 28-10-2025. For the sake of convenience, the relevant portion of the said order is reproduced below:-
The Ld. AR of the assessee submitted that assessee is a charitable trust and is engaged in the charitable activities for the benefit of public at large. The assessee trust has surrendered the certificate of registration granted to it u/s 12 A(a) of the Act. The assessee trust has not claimed any benefit u/s 11 of the Act and is assessed to tax as per the rate prescribed normal slab rate, however, it was assessed at Maximum Marginal Rate (MMR). She also submitted that as per the circular No. 320 dated 11-01-1982[F. No. 131(31) /81-TP(Pt.) the tax is to be levied at the normal slab rate. Ld. AR further submitted that the case is squarely covered by the decision of the co-ordinate bench in the case of Vindhya Trust v. DCIT in and Tulsi Trust v. Dy.CIT in ITA No. 1410/Del/2025.
The Ld. Sr. DR has relied the order of the lower authorities and requested for the confirmation of the same. We have heard the both parties and perused the material available on the record. In the present case the appellate trust is a charitable trust and does not claim any benefit of exemption under section 12 A of the Act. As the assessee relied upon the CBDT Circular No. 320 dated 11-01-1982[F. No. 131(31) /81-TP(PL)(Pt.). The said circular is reproduced as under; Circular; No. 320 dated 11-01-1982[F. No. 131(31) /81-TP (PL) (Pt.) SECTION 167 A ASSESSMENT WHERE SHARES OF MEMBERS UNKNOWN) 911. Whether the section is applicable to income received by trustees on behalf of provident funds created exclusively for the benefit of employees 1. “A reference is invited to paragraph 15.1to 15.7 of the Explanatory notes on the provisions relating to direct taxes in the Finance Act, 1981 [circular No. 308 dated 29-06-1981] which explain the scope and ambit of section 167A, as inserted by the Finance Act, 1981.
A question has been raise whether the provisions of section 167A of the Income tax Act which provides for charging of tax at the maximum marginal rate on the total income of an association of persons where the individual shares of members in the income of such association are indeterminate or unknown would also apply to income receivable by trustee on behalf of provident funds, superannuation funds, gratuity funds pension funds etc, created bona fide by the persons carrying on business or profession exclusively for the benefit of the persons employed in such business. The board have been advised that cases where income received by the trustees on behalf of a recognized provident fund, approved superannuation fund and approved gratuity fund is governed by section 10(25) of the Income –Tax Act, the question of their being charged to tax does not arise. So far as cases where income is receivable by the trustees, on behalf of an unrecognized provident fund or an unapproved superannuation fund gratuity fund pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession are concerned, they will continue to be changed to tax in the manner prescribed by section 164(1)(iv) of the Income-Tax Act, as hitherto. Similarly in the cases of registered societies, trade and professional associations social and sports clubs, charitable or religious trusts etc.,where the members or trustees are not entitled to any shares in the income of the association of persons, the provisions of new section 167A will not be attracted and, accordingly tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate.” As stated above the Appellant has carried on charitable activities by granting donations to the extent of Rs.20,00,000/- to eligible trusts/institutions and has not claimed the benefits of section 11 of the Act. Accordingly, The above referred Circular clearly
applies and the tax is to be levied at the normal slab rates. In view of the above, the Appellants prays Your Honour to kindly direct the learned Assessing Officer to apply rate tax correctly as explained above and re-work the tax payable by the Appellant and oblige. ”
Respectfully following the aforesaid decision, the grounds raised by 7. the assessee are allowed for both the years.
In the result, both the appeals of the assessee are allowed. 8.
Order pronounced in the open court on 30/12/2025.