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Facts
The assessee, a charitable trust, filed its return declaring income and calculating tax, surcharge, and cess at slab rates. However, the CPC intimation calculated the tax at the maximum marginal rate, leading to an increased demand and reduced refund. The assessee's appeal to the CIT(A) was dismissed.
Held
The Tribunal held that the cancellation of the trust's registration under section 12A should be effective from March 20, 2015, meaning the trust lost its status as a registered trust. Therefore, tax, surcharge, and cess should be calculated at slab rates and prevailing rates, respectively.
Key Issues
Whether the tax, surcharge, and cess should be calculated at the maximum marginal rate or slab rates when the trust's registration under section 12A is cancelled.
Sections Cited
250, 143(1), 234C, 244A, 245, 12A, 11, 13
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI ANIKESH BANERJEE & SHRIGIRISH AGRAWAL
This appeal of the assessee was filed against the order of the Learned Commissioner of Income Tax (Appeal) / Addl /JCIT (A)-1, Coimbatore[for brevity, ‘ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2022-23,date of order11.03.2024. The impugned order was emanated from the orders of the Learned CPC, Bengaluru, order passed under section 143(1) of the Act, date of order 15/06/2023.
“1. On the facts and circumstances of the case and in law, the order passed by the learned Commissioner of Income-tax (Appeals) ['Ld. CIT(A)'] is bad in law, as the opportunity of being heard as requested has not being granted and hence the order of Ld. CIT(A) be quashed.
On the facts and circumstances of the case and in law, the Ld CIT(A) erred in dismissing the appeal of the Appellant challenging Intimation order u/s 143(1) of the Income-tax Act, 1961 (Act') dated 15.06.2023 despite the fact that the said Intimation u/s 143(1) of the Act erroneously calculates: a) Tax at maximum marginal rate of 30% on the total income of the Appellant resulting into a total tax of Rs 2,94,09,267/- instead of Rs 2,92,21,767/- returned by the Appellant at slab rates of taxes applicable to Individuals, as per Finance Act 2022 resulting into additional tax of Rs 1,87,500/- b) Surcharge on the increased tax amounting to total surcharge of Rs 44,11,390/- instead of Rs 43,83,265/-returned by the Appellant resulting into additional demand of Rs 28,125/-; c) Cess on the increased tax and surcharge amounting to total cess of Rs 13,52,826/-instead of Rs 13,44.201/- returned by the Appellant resulting into additional demand of Rs 8,625/; 4) Interest u/s 234C of the Act at higher level consequent to increase in tax, surcharge & c despite of the fact that returned income has been accepted as such, merely due to technical glitches of the income tax department software without appreciating that the Appellant does not lose its character of being a public charitable trust once the registration u/s 12A of the Act is surrendered 3. (1) On the facts and circumstances of the case and in law, the Ld CTT(A) erred in not adjudicating the Trust's ground with respect to erroneous calculation of interest on refund wis 244A of the Act at a lower level. (ii) On the facts and circumstances of the case and in law, consequent to the increase in tax, surcharge, cess and interest u/s 234C of the Act, the Intimation order u/s 143(1) of the Act. calculates reduced refund of Rs 75,69,935/-instead of Rs 78,02,260/-returned by the Appellant and thus interest u/s 244A of the Act is calculated at a lower level of Rs 5.67,743/-.
Tata Education Trust 4. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in erroneously dismissing the ground of appeal with respect to adjustment of refund u/s 245 of the Act despite of the fact that no such ground was raised by the Trust in the appeal before Ld. CIT(A) for AY 2022-23 reflecting that the appeal before the Ld CIT(A) has been disposed of without any application of mind. Each of the above grounds are mutually exclusive, independent and without prejudice to each other. The Appellant craves leave to add, alter, modify or amend any of the ground(s) / sub ground(s) of appeal.”
3. The brief facts of the case are that the assessee-trust was established in 1990 as a ‘Public Charitable Trust’ registered under the Bombay Public Trust Act, 1950 (now known as Maharashtra People’s Trust Act, 1950). The assessee trust had obtained registration under section 12A on 10/12/1990. The assessee trust surrendered the aforesaid registration by letter dated 19/02/2015 and filed the return ITR-5 for this impugned assessment year. The assessee declared total income at Rs.9,80,30,894/- during the impugned assessment year. The assessee calculated the income, tax, surcharge and cess as per Finance Act,2022 in which tax on total income was calculated at slab rates at Rs.2,92,21,767/-; surcharge was calculated at the rate of 15% amounting to Rs.43,83,265/-; an cess was calculated at 4% amounting to Rs.13,44,201/-. Credit for TDS was claimed, interest under section 234C was levied of Rs.6,28,875/- and a refund of Rs.78,02,260/- was determined and claimed. Whereas in the intimation under section 143(1), the CPC Bengaluru determined the tax at the maximum marginal rate of 30% (instead of slab rates) amounting to R.2,94,09,267/-; surcharge at the rate of 15% increased to Rs.44,11,390/-; and cess @4% increased to Rs.13,52,826/-. Interest under section 234C also increased to Rs.6,36,952/- eventhough the returned income remained unchanged. The refund has been Tata Education Trust determined in impugned intimation U/s 143(1) of the Act amount to Rs. 75,69,935/- i.e. short refund is determined amount to Rs. 2,32,325/-. The aggrieved assessee filed an appeal before the ld. CIT(A). The ld.CIT(A) passed an order and rejected the assessee’s appeal. Being aggrieved, the assessee filed an appeal before us.
4. We heard the rival submissions and considered the documents available in the record. The ld.AR argued and mentioned that the issue is squarely covered by the order of theCo-ordinate bench of ITAT, Mumbai, “E”-Bench in for A.Y. 2021-22, date of pronouncement 08/08/2024, in assessee’s own case. The ld.AR respectfully relied on the order of coordinate bench. The relevant paragraphs are reproduced as below: - “7. Aggrieved by the impugned order of the Ld. CIT (A), this appeal has been preferred before us. During the appellate proceedings before us, the appellant, in addition to its detailed submissions made in the form of Paper Book, placed reliance on the order of the Hon'ble 1TAT Mumbai 'F' Bench in appellant's own case in 1TANo.7241/Mum/2019 dated March 24, 2021 for the assessment year2019-20 wherein the Hon'ble Bench has considered the decision takenby the coordinate bench in the case of Navajbai Ratan Tata Trust vs PCIT in and held that the observations made in Navajbai Ratan Tata Trust vs PCIT will apply mutatis mutandis in the case of the appellant as well. The conclusions drawn by the coordinate bench in Navajbai Ratan Tata Trust are given as under:
"68. In view of the above discussions, as also bearing in mind theentirety of the case, we are of the considered view that the" impugned order of cancellation of registration granted to theassessee under section 12A must Tata Education Trust be held to be effective from the date on which the hearing on first show- cause notice was concluded and the show cause notice issued by the Commissioner was formally acquiesced by the assessee in the said hearing, i.e., 20th March 2015, since, without disposing of the said matter, the Commissioner, or his successors, could not have started otherparallel proceedings for cancellation of registration obtained under section 12A. The registration having been "obtained" under section 12A was in the nature of a benefit to the assessee, and it was, therefore, entirely at the option of the assessee. In our considered view, an assessee unwilling to avail the "benefit" of registration "obtained" under section 12A cannot be, directly or indirectly and by actions or by inactions, compelled bv the revenue authorities, to continue with the said registration "obtained by the assessee, particularly when it pertained to the registration obtained in a period prior to the insertion of section 12AA. The present cancellation of registration under section 12A must, therefore, be held to be effective from 20th March 2015. To this limited extent, we uphold the plea of the assessee.
We have noted that many other peripheral issues, with"regard to the conduct of the assessee trust and compliance with thestatutory provisions under section 11 to 13 are raised in the course of the impugned proceedings. In our humble understanding, there is no need to deal with these aspects so far as our adjudication, on the core issue requiring our adjudication in this appeal, is concerned. All these issues so raised by the revenue authorities areleft open for adjudication at the appropriate stage such as in theassessment, or any other related proceedings, if and so necessary. Our observations hereinabove have no hearing, or should be construed as having any bearing, on these issues.
Tata Education Trust 70. The admission of additional ground of appeal is also an academic issue in the light of the above conclusions arrived at by us, and there is no need to deal with that aspect of the matter either. As we have decided this appeal on the short issue about the date from which the impugned order must be held to be effective, we refrain from dealing with all other issues, including the additional ground of appeal, at this stage. There are many other facets of arguments advanced before us and the grievances raised before us. However, we see no need to deal with all these aspects of the matter at this stage. "
8. So what is coming out of the above order is that cancellation ofA registration granted to the assessee under section 12A must be held tobe effective from the date on which the hearing on first show-cause notice was concluded and the show cause notice issued by the Commissioner was formally acquiesced by the assessee in the said hearing, i.e., 20th March 2015. Meaning thereby that once the registration of the Trust is cancelled w.e.f 20th March 2015, the Trust has lost its status of a registered trust and, therefore, tax on total 1 income has to be calculated at slab rates and not at MMR. Similarly, surcharge and cess have to be calculated at prevailing rate. We hold it accordingly.
9. In Ground No. 2, the appellant has raised the objection that the adjustment of refund for A.Y. 2021-22 was made against demand of A.Y. 2015-16 without giving any intimation in writing as required u/s 245 of the Act. We have considered this issue and direct the AO to calculate the tax on total income at slab rates and charge cess and surcharge at the prevailing rate as per schedule. The adjudication of the issue of giving intimation in writing before adjustment of refund against outstanding demands, if any, is, therefore, premature. 10.In the result, the appeal is allowed.”
The ld.DR argued and fully relied on the order of the revenue authorities. The relevant part of the appeal order is reproduced as below:-
Tata Education Trust “5.7 Order u/s 143(1) is appealable and the decision on this is given above. The adjustment done u/s 245 is not an appealable order and the appellant can file a grievance against this or can go to Court under writ jurisdiction. The judgement of the jurisdictional Bombay High Court in case of Greatship (India) Ltd Vs ACIT (2022)143 taxmann.com 171 (Bom) is in WP. No. 1476 of 2022 dt. 18-7-2022 and the decision in writ petition. The Supreme Court's writ jurisdiction is governed by Article 32 of the Constitution, and the High Courts writ jurisdiction is governed by Article 226. Writ jurisdiction of the Supreme Court can only be invoked if there is an infringement of a fundamental right. In contrast, the High Courts' writ jurisdiction is more expansive. According to Article 226, High Courts can issue writs for "any other purpose”, in addition to protecting fundamental rights. Therefore, it is not necessary that the breach is of a fundamental or constitutional right to invoke a writ petition under Article 226. For issuance of a writ, any harm caused by the State or a State institution in violation of ordinary law would be sufficient. In a writ petition the Court gives a factual finding/decision on the relevant case and is not a universal interpretation of law. Hence no decision is given on Ground 4 and the appellant is at liberty to approach the appropriate authorities for settlement of the grievance. “ Considering the above submission of both the parties, we find that the assessee was wrongly assessed, and the tax was determined at the maximum marginal rate which is unjustified. The ld. DR relied on the part of the appeal which has no relevancy with the impugned appeal and was unable to submit any contrary judgment against the submission of the assessee. The impugned appeal order is set aside. We respectfully relied on the assessee’s own case (supra) and direct the ld. AO to calculate the tax on the total income at a slab rates and charge cess and surcharge as per the prevailing rates as per schedule and accordingly issue the refund after calculating the same.