EXECUTOR TO ESTATE OF AMIRALI J. DOSSA,S V ROAD ANDHERI WEST vs. ITO 23(1)(1), MUMBAI

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ITA 619/MUM/2024Status: DisposedITAT Mumbai14 October 2024AY 2022-20234 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the shares of the beneficiaries in the estate are determinate. Therefore, the tax rates applicable to an individual should be applied to the assessee, not the maximum marginal rate applicable to an AOP. The Tribunal reasoned that the application of the maximum marginal rate by the CPC was beyond the scope of prima facie adjustments permissible under Section 143(1). Consequently, the assessee's contention was accepted. The Assessing Officer (AO) is directed to apply the tax rates applicable to an individual. The issue regarding interest under Sections 234B and 234C was not explicitly decided, but the allowance of the appeal on the primary issue implies that these charges may also be re-evaluated based on the correct tax computation.

What were the facts?

The appeal is filed by the Executor to the Estate of Amirali J. Dossa against the order of the Learned Commissioner of Income-tax (Appeals) [CIT(A)] for Assessment Year (A.Y.) 2022-23. The assessee is a trust formed from the estate of the deceased, intended to manage and administer his properties for his three legal heirs. The inheritance for two heirs was complete, but the estate account continued for the sole beneficiary, the minor son. The Central Processing Centre (CPC) applied the maximum marginal rate applicable to an Association of Persons (AOP) under Section 143(1) of the Income Tax Act, 1961. The CIT(A) dismissed the assessee's appeal against this action.

What were the issues?

1. Whether the CIT(A) erred in upholding the AO's action of taxing the appellant at the maximum marginal rate applicable to an AOP, instead of the rates applicable to an individual, resulting in excess tax of Rs. 2,51,070/-. The assessee contends that the shares of beneficiaries are determinate and the estate account continued for a sole beneficiary who is now a major, and that for A.Y. 2021-22, the CIT(A) had allowed a similar appeal. The revenue's contentions are not recorded. 2. Whether the CIT(A) erred in upholding the AO CPC's charging of interest under Section 234B at Rs. 17,661/-, when it should be NIL. The assessee argues for deletion of this interest. 3. Whether the CIT(A) erred in upholding the AO CPC's charging of interest under Section 234C at Rs. 12,741/-, when it should be NIL. The assessee argues for deletion of this interest. 4. The appellant reserves the right to amend or add grounds.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 234B,Section 234C,Section 250

AI-generated summary — verify with the full judgment below

Before: SMT BEENA PILLAI & SMT RENU JAUHRI

For Appellant: Shri Mayur A. Shah (Executor)
For Respondent: Shri Dharamveer D. Yadav — Sr. D.R
Hearing: 10.10.2024Pronounced: 14.10.2024

आदेश / O R D E R PER RENU JAUHRI [A.M.] :-

1.

The present appeal has been filed against the order of the Learned Commissioner of Income-tax (Appeals), ADDL/JCIT (A)-1, Vishakhapatnam [hereinafter referred to as “Addl. CIT(A)”] passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 19.01.2024 for Assessment Years [A.Y.] 2022-23.

(A.Y. 2022-23) Executor to Estate of Amirali J. Dossa

2.

The assessee has raised following grounds of appeal: 1) “The CIT(A) NFAC erred in holding that the AO was justified in taxing the appellant to tax at the maximum marginal rate applicable to an AOP as against his obligation to charge the AOP to tax as an Individual. It is prayed that the AO be directed to tax the appellant at the rates applicable to an individual and delete the tax charged in excess at Rs.2,51,070/- 2) The CIT(A)/NFAC erred in holding that the AO CPC was justified in charging interest u/s.234B at Rs.17,661/- as against interest chargeable at NIL. It is prayed that the interest charged in excess at Rs.17,661/- be directed to be deleted. 3) The CIT(A) NFAC erred in holding that the AO CPC was justified in charging interest u/s.234C at Rs.12,741/- as against interest chargeable at NIL. It is prayed that the interest charged in excess at Rs.12,741/- be directed to be deleted. 4) The appellant craves leave to amend, alter or modify any of the above grounds of appeal or to add fresh grounds of appeal, if found necessary.”

3. The brief facts of the case are that the assessee is a trust formed as per the will of late Mr. Amirali J. Dossa who expired on 14/11/2013, to manage and administer his estate. The trust left behind by the assessee is a specific trust giving direction for the bequest of his properties among his three legal heirs i.e. his two wives and a minor son. The inheritance in favour of the first two legal heirs is complete. Since, the third legal heir was a minor and some funds were left behind, therefore, the estate account continued for the sole beneficiary, being minor son of the late Mr. Amirali J. Dossa. The CPC applied maximum marginal rate on AOP u/s. 143(1) of the Income Tax Act against which the assessee filed the appeal before Ld. CIT(A) vide order dated 19.01.2024, Ld. CIT(A) dismissed the appeal of the assessee.

Page 2 of 4 (A.Y. 2022-23) Executor to Estate of Amirali J. Dossa 4. Before us, the Ld. A.R. has submitted that the shares of the three legal heirs were determinate and the estate account continued only for the sole beneficiary who has also become a major three years prior to the assessment year under consideration. It was further pointed out that for A.Y.2021-22, the Ld. CIT(A) had allowed the assessee’s appeal on similar issue.

5.

We have heard the rival submissions and it is clear that shares of the beneficiaries are determinate and therefore, the rates applicable to an individual are to be applied in this case.

6.

Moreover, the application of maximum marginal rate by the CPC is beyond the scope of prima facie adjustments. Accordingly, we hold that the contention of the assessee deserves to be accepted. Ld. AO is directed to apply the rates applicable to an individual in this case.

7.

In the result, the appeal is allowed. Order pronounced in the open court on 14.10.2024 .

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