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Facts
The assessee, a trust for educational assistance to employees, incorrectly offered its income as an AOP under Section 167B. The AO computed tax at MMR with a higher surcharge. The assessee appealed the intimation order.
Held
The First Appellate Authority dismissed the appeal on grounds of delay without considering the merits. The Tribunal found that the CIT(A) did not decide the issue on merits.
Key Issues
Whether the assessee-trust was correctly treated as an AOP under Section 167B, and if the surcharge applied by the AO was justified. Whether the delay in filing the appeal before the CIT(A) should be condoned.
Sections Cited
167B, 143(1), 164(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘H(SMC
(Assessment Year :2022-23) M/s. HMIL Shareholding Vs. ITO Ward 6(1)(1) (Educational Assistance- Aayakar Bhavan 1994) Trust-2, Mumbai New Marine Lines Ion House, 4th Floor Mumbai Dr. E Moses Road Near Famous Studio Mahalaxmi Maharashtra-400 011 PAN/GIR No.AABTH9806L (Appellant) .. (Respondent) Assessee by Shri Motichand Gupta Revenue by Shri Aditya Manohar Rai Date of Hearing 08/08/2024 Date of Pronouncement 14/08/2024 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 14/05/2024 passed by ld. Addl. / JCIT(A)-2, Ahmedabad in relation to intimation u/s.143(1) for A.Y.2022-23.
The short issue involved that ld. AO had erred on facts and in law in computing tax liability of the assessee by applying Section 167B without appreciating that assessee is not an AOP but merely acting as representative.
M/s. HMIL Shareholding (Educational Assistance-1994) Trust-2 3. The brief facts are that the assessee is a trust settled on 19th August 1994 by Ion Exchange (India) Limited (hereinafter referred to as "the Company") with the objective of providing benefit to the employees of the Company. The trust seeks to advance appropriate assistance to employees of the Company for advancing their educational career including reimbursement of expenses for attending part-time courses, training programmes, etc. The employees of the Company are the beneficiaries of the said assessee-trust. The trust was settled by its authors by settling certain shares of the Company in the assessee trust, with the direction that the income from the shares should be used for the purposes stated therein. The trustees hold the equity shares of the company on behalf of the assessee and earn dividend income therefrom, which is the major source of income for the assessee-trust.
For the assessment year 2022-23 relevant to the financial year 2021-22, the assessee trust offered total income of Rs. 13,110/-. Since the inception of the assessee-trust, , the assessee-trust had been offering its income as a trust falling under clause (iv) of the first proviso to section 164(1) of the Act, and hence, at slab rates. However, in the tax return for the assessment year 2022-23, the assessee had erroneously offered its income to tax in the manner provided under section 167B of the Act i.e., as an Association of Persons (hereinafter referred to as "AOP") and at maximum marginal rate (hereinafter referred to as "MMR").
M/s. HMIL Shareholding (Educational Assistance-1994) Trust-2 5. The said return was processed under section 143(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") and an intimation order was passed by Dy. Director of Income-tax, CPC, Bengaluru (hereinafter referred to as "CPC") on 13th October, 2022. In the intimation order, the Appellant-trust was assessed as an AOP. Since the shares of employees, being the beneficiaries of the assessee-trust, was unknown, the tax liability was computed at MMR as per section 167B of the Act only Vide the intimation order, the CPC determined the tax liability at Rs.5,604/- on the assessee-trust by adding a surcharge @ 37% on dividend income as against the surcharge @ 15% added by the assessee-trust.
Aggrieved by the intimation the assessee trust preferred appeal before the ld. CIT(A)-NFAC on 08/01/2024, the appeal was delayed by 421 days as the assessee had bonafide belief that it had committed an error in computing tax liability and later on, when assessee received professional advice on the correct legal position of law, the appeal was filed. The ld. First Appellate Authority without giving any opportunity of hearing has held that delay was without any sufficient cause.
Before us ld. Counsel submitted that since it is a very small issue, the only issue with regard to applicability of maximum marginal rate as per Section 167B by also adding surcharge at 37% of dividend income as against surcharge @15% added by the assessee, which was correct as per law.
M/s. HMIL Shareholding (Educational Assistance-1994) Trust-2 8. Since ld. CIT (A) has not decided the issue on merits and dismissed the appeal on the ground of delay therefore, in the interest of substantial justice, we remand this matter back to the file of the First Appellate Authority with a direction to condone the delay and decide the appeal on merits. Accordingly, appeal of the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on 14th August, 2024.
Sd/- Sd/- (OMKARESHWAR CHIDARA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 14/08/2024 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER,
(Asstt. Registrar)