YOUNG PRESIDENTS ORGANISATION (CHENNAI CHAPTER),CHENNAI vs. DDIT, CHENNAI

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ITA 1900/CHNY/2015Status: DisposedITAT Chennai09 September 2016AY 2009-105 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that surcharge is an integral part of income-tax. Once the assessee is treated as an Association of Person for the levy of income-tax, the same status must continue for the levy of surcharge. Therefore, the assessee's claim to be treated as a company for surcharge purposes was rejected.

What were the facts?

The assessee, a company registered under Section 25 of the Companies Act and Section 12AA of the Income-tax Act, filed a revised return admitting it was not eligible for exemption under Section 11. The Assessing Officer treated it as an Association of Person under Section 164(2) and levied tax and surcharge. The assessee argued that as a company, it was not liable for surcharge as its income did not exceed Rs. 1 Crore.

What were the issues?

Whether an assessee, treated as an Association of Person for income-tax levy due to ineligibility for Section 11 exemption, can claim to be treated as a company for the purpose of surcharge levy.

Which sections of the Income-tax Act were involved?

Section 11,Section 164(2),Section 25

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY

For Respondent: Shri A.V. Sreekanth, JCIT
Hearing: 16.06.2016Pronounced: 09.09.2016

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 17, Chennai, dated 27.03.2015 and pertains to assessment year 2009-10.

2.

The only issue arises for consideration is with regard to levy of surcharge by the Assessing Officer.

3.

Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee filed the revised return. However, the exemption under Section 11 of the Income-tax Act, 1961 (in short "the Act") was not claimed. In the original return, the assessee wrongly claimed exemption under Section 11 of the Act. Therefore, by way of revised return, the assessee computed taxable income.

The Assessing Officer treated the assessee as Association of Person under Section 164(2) of the Act and levied tax. The Assessing Officer has also levied surcharge. According to the Ld. counsel, the assessee is a company under Section 25 of the Companies Act and also registered under Section 12AA of the Act as charitable institution. However, the assessee is not claiming exemption under Section 11 of the Act. Therefore, the assessee has to be necessarily treated as Association of Person under Section 164(2) of the Act and tax has to be levied accordingly.

However, according to the Ld. counsel, the charitable institution is not liable to pay surcharge. Referring to the Finance Act, 2008, the Ld. counsel submitted that in the case of Association of Person, as

per Paragraph A of Part I, the assessee has to pay income-tax.

While coming to surcharge in the case of companies, surcharge can be levied only if it exceeds `1 Crore. In this case the income has not exceeded `1 Crore since it is a company, according to the Ld. counsel, as per the Finance Act, 2008, the assessee is not liable for surcharge.

4.

On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that he is placing his reliance on the observation made by the CIT(Appeals).

5.

We have considered the rival submissions on either side and perused the relevant material available on record. Article 271 of Constitution of India enables the Parliament to levy surcharge on certain duties and taxes. The Apex Court in Sarojini Tea Co.(P) Ltd. v. Collector of Dibrugarh AIR 1992 SC 1264 and in CIT v.

Srinivasan (1972) 83 ITR 346, while interpreting Articles 265 and 271 of Constitution of India held that surcharge levied under the Income-tax Act, is part of the tax. Accordingly, the levy of surcharge is upheld by the Apex Court. The assessee before this Tribunal admits that it is not entitled for exemption under Section 11 of the Act, therefore, it has to be necessarily assessed as Association of Person under Section 164(2) of the Act.

6.

Now in view of Finance Act, 2008, the assessee claims before this Tribunal that in the case of companies, surcharge can be levied only if the income exceeds `1 Crore. In the case before us, even though the assessee is registered under Section 25 of the Companies Act, it is registered as charitable institution under Section 12AA of the Income-tax Act, 1961. Since the assessee is not eligible for exemption under Section 11 of the Act, it is treated as Association of Person under Section 164(2) of the Act. In other words, the assessee-company is treated as Association of Person for assessment under Income-tax Act. In view of the judgment of Apex Court in K. Srinivasan (supra), surcharge being a part of income-tax, the assessee cannot be treated separately as company. In other words, once the assessee was treated as Association of Person under Section 164(2) of the Act, for levy of income-tax, the same status shall continue for levy of surcharge also. Therefore, the claim of the assessee that it has to be treated as company for the purpose of surcharge is misconstrued. This Tribunal do not find any merit in the contention of the assessee.

Accordingly, the orders of the authorities below are confirmed.

7.

In the result, the appeal of the assessee is dismissed.

Order pronounced on 9th September, 2016 at Chennai.

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