Aqua Professionals Welfare Association, Bheemavara V. The Income Tax Officer(Exemptions), , Rajamahendravaram

ITA 118/VIZ/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6414 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 05-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAMA KRISHNA
• Keywords: Maximum Marginal Rate; Benefit of exemption; Revised return; Set aside
• Section: 12A; 12AA; 10B; 143(1); 22; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM (T HROUGH WEB - BASED VIDEO CONFERENCING PLATFORM) BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER I . T . A . NO. 118/VIZ/2020 (ASST. YEAR : 20 1 4 - 1 5 ) M/S. AQUA PROFESSIONALS WELFARE ASSOCIATION , UPSTAIRS, KODANDARAMA COMPLEX, J.P. ROAD, BHIMAVARAM (W.G.DISTRICT) VS. ITO (EXEMPTIONS) , RAJAMAHENDRAVARAM . PAN NO. AADAA 0983 E (APP ELLANT ) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI , ADVOCATE . DEPARTMENT BY : SHRI B.RAMA KRISHNA, SR. DR DATE OF HEARING : 30 / 0 7 /2020 . DATE OF PRONOUNCEMENT : 22 / 0 9 /20 20 . O R D E R PER V. DURGA RAO , JUDICIAL MEMBER THI S APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , RAJAMAHENDRAVARAM , DATED 07 /0 2 /20 20 FOR THE ASSESSMENT YEAR 20 1 4 - 1 5 . 2. FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE IS A REGISTERED SOCIETY , REGISTERED UNDER THE SOCIETIES REGISTRATION ACT TO CARRY OUT ITS ACTIVITIES. THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME 2 ITA NO. 118/VIZ/2020 ( M/S. AQUA PROFESSIONAL S WELFARE ASSOCIATION ) ALONG WITH AUDIT REPORT IN FORM - 10B FOR THE YEAR UNDER CONSIDERATION DATED 30/09/2014 AND 1 ST REVISED RETURN ON 02/12/2014, 2 ND REVISED RETURN ON 02/12/2014, 3 RD REVISED RETURN ON 21/05/2016 AND 4 TH REVISED R E TURN ON 01/02/2016 WHICH DETAILS ARE GIVEN AS UNDER: - SL.NO. NATURE OF RETURN DATE OF FILING RETURN INCOME RETURNED 1. ORIGINAL RETURN 30/09/2014 NIL 2. 1 ST REVISED RETURN 02/12/2014 NIL 3. 2 ND REVISED RETURN 02/12/2014 NIL 4. 3 RD REVISED RETURN 21/05/2016 NIL 5. 4 TH REVISED RETURN 01/02/2016 1,85,247/ - THE CASE OF THE ASSESSEE IS THAT ASSESSEE HAS GOT REGISTRATION U/SEC. 12AA VIDE ORDER DATED 28/04/2016, HENCE, ASSESSEE IS EXEMPTED FROM TAX U/SEC. 11 OF THE ACT . THE CPC (AO) HAS OBSERVED THAT I N THE RETURN OF INCOME IT IS CATEGORICALLY MENTIONED THAT ASSESSEE DO NOT HAVE REGISTRATION U/SEC. 12A OF THE ACT, THEREFORE THE ASSESSEE HAS NOT CLAIMED ANY BENEFIT OF EXEMPTION . THE CPC (AO) HAS COMPLETED THE ASSESSMENT U/SEC. 143(1) AND DECIDED THE TOTAL INCOME AT RS.1,85,247/ - AT MAXIMUM MARGINAL RATE (MMR) . 3 . AGGRIEVED BY THE O RDER OF THE CPC (AO) , THE ASSESSEE HAS FILED AN APPEAL BEFORE THE LD. CIT(A) . THE LD. CIT(A) HAS OBSERVED THAT ASSESSEE HAS FILED ITS RETURN OF INCOME NOT CLAIMING ANY 3 ITA NO. 118/VIZ/2020 ( M/S. AQUA PROFESSIONAL S WELFARE ASSOCIATION ) EXEMPTION U/SEC. 11 OF THE ACT . IN THE RETURN OF INCOME THE ASSESSEE HAS CATEGORICALLY MENTIONED THAT IT DOES NOT HAVE 12A REGISTRATION . BASED ON THESE FACTS , THE CPC (AO) PASSED AN ORDER U/SEC. 143(1) BY DETERMINING TOTAL INCOME AT RS. 1,85,247/ - . THUS, U/SEC. 143(1), NO ADJUSTMENT HAS BEEN MADE . THEREFORE, THERE IS NO CAUSE OF GRIEVANCE FOR THE ASSESSEE A ND ACCORDINGLY APPEAL FILED BY THE ASSESSEE WAS DISMISSED. 4 . BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE CPC (AO) HAS PASSED THE ORDER U/SEC. 143(1) BY TAXING THE ASSESSEE AT MMR WHICH IS NOT CORRECT. IN THE CASE OF REGISTERED SOCIETY THE INCOME OF THE ASSESSEE HAS TO BE TAXED AT NORMAL RATE AND THIS ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF VIDYODAYA EDUCATIONAL SOCIETY VS. DCIT IN ITA NO. 369/VIZ/2016 , DATED 26/0 4/2018 . 5. ON THE OTHER HAND, LD.DR HAS STRONGLY SUPPORTED THE ORDER S PASSED BY THE AUTHORITIES BELOW . 6 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES BELOW. 7 . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE ASSESSEE HAS TO BE TAXED AT MMR OR NORMAL RATE. IT IS A FACT THAT ASSESSEE IS A REGISTERED SOCIETY AND ALSO GOT REGISTRATION U/SEC. 4 ITA NO. 118/VIZ/2020 ( M/S. AQUA PROFESSIONAL S WELFARE ASSOCIATION ) 12A DATED 28/04/2016 . AS PER THE DECISION OF THE COORDINATE BENCH OF THE VISAKHAPATNAM TRIBUNAL IN THE CASE OF VIDYODAYA EDUCATIONAL SOCIETY (SUPRA) ONCE THE ASSESSEE IS A REGISTERED SOCIETY IT HAS TO BE TAXED AT NORMAL RATE , NOT MMR . THEREFORE, THE CPC (AO) IS NOT CORRECT IN TAXING THE ASSESSEE AT MMR. FOR THE SAKE OF CONVENI ENCE , THE ORDER PASSED BY THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF VIDYODAYA EDUCATIONAL SOCIETY (SUPRA) IS REPRODUCED AS UNDER: - 10. THE NEXT SUBMISSION OF THE ASSESSEE IS TAXING THE INCOME AT MAXIMUM MARGINAL RATE. AS PER SECTION 167B OF THE ACT, IN CASE OF AN ASSESSEE REGISTERED UNDER SOCIETIES ACT, THE SAME IS EXCLUDED FOR TAXING THE INCOME AT FOR MAXIMUM MARGINAL RATE. FOR READY RE FERENCE WE EXTRACT RELEVANT PART OF SECTION 167B(1) OF THE ACT WHICH READS AS UNDER: 167B. (1) WHERE THE INDIVIDUAL SHARES OF THE MEMBERS OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS (OTHER THAN A COMPANY OR A CO - OPERATIVE SOCIETY OR A SOCIETY REG ISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA) IN THE WHOLE OR ANY PART OF THE INCOME OF SUCH ASSOCIATION OR BODY ARE INDETERMINATE OR UNKNOWN, TAX SHALL BE CHARGED ON THE TOTAL INCOME OF THE ASSOCIATION OR BODY AT THE MAXIMUM MARGINAL RATE : PLAIN READING OF SECTION 167B OF THE ACT INDICATES THAT THE INCOME OF COMPANY OR COOPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER SOCIETIES ACT OF 1860 ARE EXCLUDED FROM CHARGI NG THE TAX AT MAXIMUM MARGINAL RATE (MMR) AND WOULD BE CHARGEABLE AT NORMAL RATES. IN THE SIMILAR FACTS AND CIRCUMSTANCES, THE COORDINATE BENCH OF ITAT IN ITA NOS.212 TO 215/VIZAG/2014 IN THE CASE OF SRI LAKSHMIGANAPATHI SEVA SAMITHI VS. CIT DATED 26.8.201 6 HELD THAT IN CASE OF SOCIETY, THE APPLICATION OF MAXIMUM MARGINAL RATE DOES NOT ARISE. FOR READY REFERENCE, WE REPRODUCE THE EXTRACT OF RELEVANT PART OF THE ORDER OF THE TRIBUNAL IN PARA NO.13 WHICH READS AS UNDER: 5 ITA NO. 118/VIZ/2020 ( M/S. AQUA PROFESSIONAL S WELFARE ASSOCIATION ) 13. ..AS REGARDS THE APPLICABILITY OF MAXIMUM MARGINAL RATE OF TAX IS CONCERNED, THE CIT WAS OF THE OPINION THAT THE A.O. OUGHT TO HAVE APPLIED MAXIMUM MARGINAL RATE OF TAX TO THE INCOME OF THE SOCIETY. BUT, THE FACT IS THAT ONCE THE SOCIETY IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, THE APPLICABILITY OF MAXIMUM MARGINAL RATE DOES NOT ARISE, IT IS BECAUSE THE SOCIETIES ARE REGISTERED UNDER THE SOCIETIES REGISTRATION ACT ARE PROHIBITED FROM DISTRIBUTION OF ANY SURPLUS TO ITS MEMBERS. ONCE THE DISTRIBUTION OF PROFIT TO ITS MEMBERS IS PROHIBITED, THE QUESTION OF DETERMINATION OF SHARE OF EACH INDIVIDUAL MEMBER DOES NOT ARISE. HENCE, THE CIT WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE RATE OF TAX APPLICABLE TO THE ASSESSEE IS MAXIMUM MARGINAL RATE OF TAX WITHOUT UNDERSTANDIN G THE PROVISIONS. 11. THE ASSESSEE IS A SOCIETY REGISTERED UNDER SOCIETIES ACT, 1860 AS EVIDENCED FROM THE REGISTRATION CERTIFICATE. THE FACTS ARE SIMILAR IN THIS CASE, THEREFORE, FOLLOWING THE DECISION OF COORDINATE BENCH AND SECTION 167B OF THE ACT, WE HOLD THAT THE INCOME OF THE ASSESSEE IS TO BE TAXED AT NORMAL RATES BUT NOT AT MAXIMUM MARGINAL RATE, ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE ON THIS GROUND. 8 . RESPECTFULLY FOLLOWING THE ABOVE REFERRED TO CASE , THE ORDER PASSED BY THE LD. CIT(A) IN UPHOLDING THE ORDER PASSED BY THE CPC (AO) U/SEC. 143(1) IS HEREBY CANCELLED AND ALLOW THE APPEAL OF THE ASSESSEE. 9 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON TH IS 2 2 N D DAY OF SEP. , 2020 . S D / - S D / - (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 2 N D SEPTEMBER , 20 20 . 6 ITA NO. 118/VIZ/2020 ( M/S. AQUA PROFESSIONAL S WELFARE ASSOCIATION ) VR/ - COPY TO: 1. THE ASSESSEE - M/S. AQUA PROFESSIONALS WELFARE ASSOCIATION, UPSTAIRS, KODANDARAMA COMPLEX, J.P. ROAD, BHIMAVARAM (W.G.DISTRICT). 2. THE REVENUE ITO (EXEMPTIONS), RAJAMAHENDRAVARAM. 3. THE CIT (EXEMPTIONS) , HYDERABAD . 4. THE CIT(A) , RAJAMAHENDRAVARAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.