SHRI DIGAMBAR JAIN MANDIR TRUST CHARANWAS, CHARANWAS V. AO, MAKRANA

ITA 123/JODH/2021

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7858 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-01-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 20-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Maximum Marginal Rate
• Section: 56; 10; 2; 11; 12A; 12AA; 143(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER ITA Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 & 2015-16 to 2017-18 Shri Digambar Jain Mandir Trust Charanwas Village Charanwas [PAN: AAKTS 7535 G] (Appellant) Vs. AO, Makrana (Respondent) ITA Nos. 237/Jodh/2023 Assessment Year: 2014-15 Shri Digambar Jain Mandir Trust Charanwas Village Charanwas [PAN: AAKTS 7535 G] (Appellant) Vs. ITO, Ward-1, Makrana (Respondent) Appellant by Sh. Mukesh Khandelwal, CA Respondent by Sh. A. S. Nehra, Sr. DR & Ms Nidhi Nair, Sr. DR Date of Hearing 01.02.2024 &18.03.2024 Date of Pronouncement 15.04.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 2 These five appeals filed by assessee are arising out of the order of the National Faceless Appeal Centre, Delhi dated 22/10/2021 & 30.05.2023 [here in after ‘NFAC’) ] for assessment years 2013-14, 2014- 15, 2015-16, 2016-17 & 2017-18 which in turn arise from the order dated 15.11.2014, 19.02.2016, 19.10.2017, 31.05.2018 & 09.03.2019 passed under section 143(1) of the Income Tax Act, by AO, CPC, Bangalore. 2. Amongst all five appeals four appeals were heard on 01.02.2024 and one appeal for A. Y. 2014-15 in ITA no. 237/Jodh/2023 was heard on 18.03.2024. These appeals are filed by assessee aggrieved from the orders of the CPC, Bangaluru which were passed u/s 143(1) of the Income Tax Act, 1961 wherein the grievance of the assessee is that the CPC, while processing the respective year return charged the tax on the income of the assessee at Maximum Marginal Rate [ herein after “MMR” ]. Even the ld. CIT(A) did not considered the pleas of the assessee trust. Thus, the issue in all these years is similar so as to decide that that whether on the facts of the case, the assessee trust should be charged to tax MMR or as per the normal provision applicable for Individual and AOP. Considering that aspect of the matter we deem it fit to decide all these appeal with a common order. I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 3 3. At the outset, the ld. AR has submitted that the matter in ITA No. 121/Jodh/2021 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount of tax disputed in other cases. Therefore, for the purpose of the present discussions, the case of ITA No. 121/Jodh/2021 is taken as a lead case and are disposed by taking lead case facts, grounds, and arguments from the folder in ITA No. 121/Jodh/2021. 4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 121/Jodh/2021 on the following grounds; “1. That under the facts and circumstances of the case the ld. CIT(A) has erred seriously in sustaining the action of the ld. AO in disallowing a sum of Rs. 44,130/- being the amount claimed to had been used for the purposes of the trust. 2. Ground that under the facts and circumstances of the case the ld. CIT(A) has erred seriously in sustaining the action of the ld. AO in charging tax at Maximum marginal rate on the whole income assessed.” 5. Succinctly, the fact as culled out from the records is that the assessee filed its return of income in form ITR-7 on 17.07.2014 by declaring total income of Rs. 2,45,050/- comprising of interest income of I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 4 Rs. 2,03,533 and income from voluntary contributions for Rs.85,650/-. The assessee maintains a Jain temple at Charanwas District Nagaur. The assessee derives income from charity received from devotees coming to the temple and interest on bank deposits. Out of such earnings some expenses relating to maintenance of temple have been charged and net income has been offered in ITR. The assessee trust is admittedly not registered u/s 12A of the Income Tax Act, 1961 during the concerned years. The CPC while processing the returns charged tax on net income offered by the assessee at Maximum Marginal Rate whereas the assessee had offered the income by calculating tax as applicable on individuals which resulted into creation of demand. 6. Aggrieved from the order of Assessing Officer, the assessee preferred an appeal before the ld. NFAC. Apropos to the grounds so raised the relevant finding of the ld. NFAC is reiterated here in below: “7. DECISION: 7(i) I have carefully considered the facts of the case as well as the submission filed by the appellant. Alongwith the written submissions, the appellant has enclosed a copy of the registration certificate issued by Deputy Registrar, Nawa, District Nagaur (Rajasthan) and on the strength of the said registration certificate certificate, it has been claimed that the appellant institution is a trust registered under 'the provisions of Stamps Act. On going through the said certificate, it is observed that Deputy Registrar, Nawa, District Nagaur (Rajasthan) has acknowledged receipt of the trust deed filed by the assessee before him and has issued a computerized registration number on 20.07.2011, towards registration of the trust deed filed by the assessee. In that sense, the trust deed was registered on 20.07.2011. Subsequently, the amended trust deed was filed before Deputy Registrar, Nawa, District Nagaur I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 5 (Rajasthan) and the said amended trust deed was registered on 11.02.2021, a copy of the amended trust deed has also been uploaded by the assessee. 7(ii) It is observed that the appellant is a Religious Trust but it has not obtained Registration u/s 12AA under the Income Tax Act, 1961. The appellant filed its return of income in form ITR 7 on 17/07/2014 by declaring income under the head "income from other sources of Rs. 2,89,183/-, Out of it, the appellant in the ITR claimed deduction u/s 11 and 12 a sum of Rs. 44,135/-as AMOUNT APPLIED TO CHARITABLE PURPOSES IN INDIA DURING THE PREVIOUS YEAR". In this manner, a balance sum of Rs. 2,45,048/- was declared as taxable total income. In the written submissions, the assessee has submitted that income under the head "income from other sources" of Rs. 2,89,183/- comprised of interest income of Rs. 2,03,533/- and income from voluntary contribution for Rs. 85,650/-, and that out of voluntary contribution for Rs. 85,650/-, a sum of Rs.44,135/- was claimed as application of income in terms of section 11, thereby taxable total income of Rs. 2,45,048/-. The said return was processed by CPC u/s 143(1) and passed an order on 15.11.2019, where CPC added back the application of income of Rs. 44,135/- claimed as deduction u/s 11 by the appellant, in the total income of the appellant. In this manner, CPC determined the taxable total income at Rs. 2,89,183/-. Further, the CPC computed tax on the taxable total income at the rate of Maximum marginal rate. The appellant submits that the income of the trust is eligible for tax chargeable at the rate as per section 164(2) of the Act as that of AOP and not MMR. 7(iii) This is an undisputed fact that the trust is not registered u/s 12A of the Income Tax Act. Hence provisions of sections 11 & 12 are not applicable not in this case. The trust deed has been registered. On its own volition the appellant has submitted its status as AOP/BOI(other trust/institution as per the income tax return). Since the appellant is a Trust, and it has to be assessed as a Trust and not in any other status, therfore and provisions of Section 160 to 167 are applicable in its case. Before arriving at any decision, it is necessary to analyze the provisions of law that are applicable in the case of trusts as below: 7(Iv) The first relevant provision of the Act is section 2(24)(iia) which is as under: "Definitions. 2. In this Act, unless the context otherwise requires,- ............. (24) "income" includes- (i) I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 6 (ii).....: (iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) or by any university or other educational institution referred to in sub-clause (iliad) or sub- clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub- clause (via) of clause (23C) of section 10 or by an electoral trust. Explanation. For the purposes of this sub-clause, "trust" includes any other legal obligation; Accordingly, in view of inclusive definition of income provided in s * 0.2(24) of the Act, in case of a trust created wholly or partly for the religious purposes voluntary contributions/Interest on bank savings and FDs is its income for the relevant FY. Hence Rs. 2,89,183/- received by the trust is to be included in the income charged under section 56 as Income from other sources. 7(v) A trust is charged to tax in the hands of representative asseessee and not in the hands of beneficiaries as defined in Section 160. Definition of representative assessee is as under: "Representative assessee. 160. (1) For the purposes of this Act, "representative assessee" means (1) .. (iv) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including any wakf deed which is valid under the MussalmanWakf Validating Act, 1913 (6 of 1913),) receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees; (v) in respect of income which a trustee appointed under an oral trust receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees. Explanation 1.-A trust which is not declared by a duly executed instrument in writing [including any wakf deed which is valid under the MussalmanWakf Validating Act, 1913 (6 of (1913), I shall be deemed, for the purposes of clause (N) to be a trust I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 7 declared by a duly executed instrument in writing if a statement in writing, signed by the trustee or trustees, setting out the purpose or purposes of the trust, particulars as to the trustee or trustees, the beneficiary or beneficiaries and the trust property, is forwarded to the Assessing Officer,- (i) where the trust has been declared before the 1st day of June, 1981, within a period of three months from that day; and (ii) in any other case, within three months from the date of declaration of the trust. Explanation 2.-For the purposes of clause (v), "oral trust" means a trust which is not declared by a duly executed instrument in writing [including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913)], and which is not deemed under Explanation 1 to be a trust declared by a duly executed instrument in writing. (2) Every representative assessee shall be deemed to be an assessee for the purposes of this Act." ME TAX DEPART In this case the beneficiaries are public at large. It has to be assessed in the hands of the trustee only. 7(vi) Liabilities of a trustee are defined in Section 161 of the Act as under: "Liability of representative assessee. 161. (1) Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. (1A) Notwithstanding anything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable aa representative assessee consists of, or Includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so llable at the maximum marginal rate: I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 8 Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. (2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a representative assessee, he shall not, in respect of that income, be assessed under any other provision of this Act." 7(vii) The charging sections in case of Trusts (including private) that is assessed in the hands of Trustee as per section 160 r/w 161 of the Act and where share of beneficiaries is unknown is governed by the provisions of Section 164 of the Act which is reproduced as under: "[Charge 60 of tax where share of beneficiaries unknown. 164. (1) Subject to the provisions of sub-sections (2) and (3), where any income in respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable as representative assessees or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown (such income, such part of the income and such persons being hereafter in this section referred to as "relevant income", "part of relevant income" and "beneficiaries", respectively), tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate: TAX DEPAR Provided that in a case where- (1) none of the beneficiaries has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an association of persons or is a beneficiary under any other trust; or (ii) the relevant income or part of relevant income is receivable under a trust declared by any person by will and such trust is the only trust so declared by him; or (iii) the relevant income or part of relevant income is receivable under a trust created before the 1st day of March, 1970, by a non-testamentary instrument and the Assessing Officer is satisfied, having regard to all the circumstances existing at the relevant time, that the trust was created bona fide exclusively for the benefit of the relatives of the settlor, or where the settlor is a Hindu undivided family, exclusively for I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 9 the benefit of the members of such family, in circumstances where such relatives or members were mainly dependent on the settlor for their support and maintenance; or (iv) the relevant income is receivable by the trustees on behalf of a provident fund. superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession, tax shall be charged on the relevant income or part of relevant income as if it were the total income of an association of persons: Provided further that where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, the preceding proviso shall apply only if such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. (2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub- clause (iia) of clause (24) of section 2, or which is of the nature referred to in sub- section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons: Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13 tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. (3) In a case where the relevant income is derived from property held under trust in part only for charitable or religious purposes or is of the nature referred to in sub- clause (iia) of clause (24) of section 2 or is of the nature referred to in sub-section (4A) of section 11, and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically receivable on behalf or for the benefit of any one person or the individual shares of the beneficiaries in the income so applicable are Indeterminate or unknown, the tax chargeable on the relevant income shall be the aggregate of- (a) the tax which would be chargeable on that part of the relevant income which is applicable to charitable or religious purposes (as reduced by the income, if any, I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 10 which is exempt under section 11) as if such part (or such part as so reduced) were the total income of an association of persons; and (b) the tax on that part of the relevant income which is applicable to purposes other than charitable or religious purposes, and which is either not specifically receivable on behalf or for the benefit of any one person or in respect of which the shares of the beneficiaries are indeterminate or unknown, at the maximum marginal rate: Provided that in a case where- (1) none of the beneficiaries in respect of the part of the relevant income which is not applicable to charitable or religious purposes has any other income chargeable under this Act exceeding the maximum amount not chargeable to tax in the case of an association of persons or is a beneficiary under any other trust; or (ii) the relevant income is receivable under a trust declared by any person by will and such trust is the only trust so declared by him; or (iii) the relevant income is receivable under a trust created before the 1st day of March, 1970, by a non-testamentary instrument and the Assessing Officer is satisfied, having regard to all the circumstances existing at the relevant time, that the trust, to the extent it is not for charitable or religious purposes, was created bona fide exclusively for the benefit of the relatives of the settlor, or where the settlor is a Hindu undivided family, exclusively for the benefit of the members of such family, in circumstances where such relatives or members were mainly dependent on the settlor for their support and maintenance, tax shall be charged on the relevant income as if the relevant income (as reduced by the income, if any, which is exempt under section 11) were the total income of an association of persons: Provided further that where the relevant income consists of, or includes, profits and gains of business, the preceding proviso shall apply only if the income is receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him: Provided also that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. Explanation 1. For the purposes of this section,- I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 11 (i) any income in respect of which the persons mentioned in clause (iii) and clause (iv) of sub-section (1) of section 160 are liable as representative assessee or any part thereof shall be deemed as being not specifically receivable on behalf or for the benefit of any one person unless the person on whose behalf or for whose benefit such income or such part thereof is receivable during the previous year is expressly stated in the order of the court or the instrument of trust or wakf deed, as the case may be, and is identifiable as such on the date of such order, instrument or deed; (ii) the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is received shall be deemed to be indeterminate or unknown unless the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable, are expressly stated in the order of the court or the instrument of trust or wakf deed, as the case may be, and are ascertainable as such on the date of such order, instrument or deed." ANALYSIS The Section begins with the heading "Charge of tax where share of beneficiaries unknown. "The appellant claims to be created for the object of benefit of the Public. Clearly the beneficiaries share is indeterminate and unknown. Section 164(1) begins with the phrase "Subject to the provisions of sub-sections (2) and (3)". Thus it is the omnibus clause except for the cases referred to in section 164(2) & 164(3). It will necessary to understand to what these two sub sections refer to as once that is known, it will be easier to discern what the remaining cases are chargeable to tax as per Section 164(1). This analyzed as under: 1. Applicability of Section 164(2): The appellant has claimed that it is governed by the provisions of 164(2) as it is wholly public charitable trust. This is not disputed that the Trust is not Registered. No claim of Corpus donation has been made and only interest income has been earned. This is clearly covered as income of the Trust u/s 2(24)(iia) of the Act. But the question arises whether this subsection purportedly applicable to Trusts that is wholly for public charitable purpose is actually also applicable in the case of Trusts that are not registered u/s 12A. To ascertain this I refer to the principle of Noscitur a Sociis, a rule of construction. It is one of the rules of language used by court to interpret legislation. This means that, the meaning of an unclear word or phrase should be determined by the words immediately surrounding it. In other words, the meaning of a word is to be judged by the company it keeps. The questionable meaning of a doubtful word/phrase can be derived from its association with other words. It can be used wherever a statutory provision contains a word or phrase that is capable of bearing more than one meaning. It is seen that the subsection uses the phrase tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12'. This means that tax is I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 12 charged on so much of income which is not exempt u/s 11/12. Benefit of 11/12 is applicable only if the Trust is Registered u/s 12A. Further, the proviso to the subsection refers to violation of Section 13(1)(c) and 13(1)(d). These are also applicable in case of trusts Registered u/s 12A. By applying this Rule of Interpretation, it can be conclude that Subsection 2 is not applicable in the case Trusts that are not registered u/s 12A, the case of appellant. It is applicable in cases where 12A registration was available and some income is treated as not exempt or where available 12A registration is forfeited or cancelled. 1. Applicability of Section 164(3): On similar analysis the major difference in subsection 3 is that is applicable relevant income is derived from property held under trust in part only for charitable or religious purposes and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically receivable on behalf or for the benefit of any one person or the individual shares of the beneficiaries in the income so applicable are indeterminate or unknown. Applying the Rule of Noscitur a Sociis here as well it can be concluded that it is also not applicable in the case of Trusts that are not/never Registered under 12A. 1. Applicability of Section 164(1) This subsection starts with the exception clause that 'Subject to the provisions..' of 164(2) & 164(3). Now based on analysis in a) & b) it has been concluded that both these subsections are not applicable in the case of the appellant. The remaining cases where beneficiaries are unknown and shares indeterminate shall be covered by the omnibus section 164(1) of the Act and hence the case of appellant is covered u/s 164(1) Tax in cases covered u/s 164(1) of the Act shall be charged on the relevant income at the maximum marginal rate. Exception clauses as per the provisos wrt section 164(1) are not applicable in the case of appellant. 7(vill) It will also be pertinent to refer to Circular No. 320 [F. No. 131(31) / 81 - TP(Pt.)], dated 11-1-1982 which is enumerated as under "911. Whether the section is applicable to to Incom Income received by trustees on behalf of provident funds created exclusively for the benefit of employees 1. A reference is invited to paragraph 15.1 to 15.7 of the Explanatory Notes on the provisions relating to direct taxes in the Finance Act, 1981 [Circular No. 308, dated 29-6-1981] which explain the scope and ambit of section 167A, as inserted by the Finance Act, 1981. 2. A question has been raise whether the provisions of section 167A of the Income- tax Act which provide for charging of tax at the maximum marginal rate on the total I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 13 income of an association of persons where the individual shares of members in the income of such association are indeterminate or unknown would also apply to income receivable by trustees on behalf of provident funds, superannuation funds, gratuity funds, pension funds, etc., created bona fide by persons carrying on business or profession exclusively for the benefit of the persons employed in such business. The Board have been advised that cases where income received by the trustees on behalf of a recognised provident fund, approved superannuation fund and approved gratuity fund is governed by section 10(25) of the Income-tax Act, the question of their being charged to tax does not arise. So far as cases where Income is receivable by the trustees, on behalf of an unrecognized provident fund or an unapproved superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession are concerned, they will continue to be charged to tax in the manner prescribed by section 164(1)(iv) of the Income-tax Act, as hitherto. Similarly, in the cases of registered societies, trade and professional associations, social and sports clubs, charitable or religious trusts, etc., where the members or trustees are not entitled to any share in the income of the association of persons, the provisions of new section 167A will not be attracted and, accordingly, tax will be payable in such cases at the rate ordinarily applicable to the total income of an association of persons and not at the maximum marginal rate." (emphasis mine) Section 167A is the precursor of section 167B and the Circular clarifies the situation that for charitable or religious trusts, where beneficiaries are known or are registered u/s 12A, tax will be payable at ordinary rates. In next para, the provisions of s. 167A and s.167B are discussed. 7(ix) As per s.167A, in the case of an AOP where shares of the members are determinate and known, each member's share in the profit is required to be apportioned to the member (Section 167A). Thus, in case of an AOP where shares are known and determinate, the income of the AOP is charged at normal Income Tax, rates, i.e. basic exemption limit and tax slabs for different income levels. The shares received by individual members is required to be added to their income separately and each member has to pay tax after including such share in his income. On the other hand, in a case where shares of members of an AOP are not known, section 167B comes into play. In such a case tax is to be charged at higher rate. Section 167B(1) deals with cases where income of any member is chargeable at higher rate of tax. As per section 167B(1) the income is chargeable at maximum marginal rate. However, if total income of any member is chargeable to tax at a I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 14 higher rate than maximum marginal rate, then the total income of the AOP is to be charged at such higher rate(rate which is higher than maximum marginal rate.) Section 167B(2) deals with cases not falling under section 167B(1). In cases where income of any member of the AOP exceeds the maximum amount which is not chargeable to tax i.e. above basic exemption limit, the income of the AOP will be charged to tax at maximum marginal rate, if total income of any member exceeds the bank exemption limit. Further, if any member is chargeable to tax at a rate higher than maximum marginal rate, then such portion of the income of AOP which is relatable to the higher rate of tax will be charged to tax at higher rate and the balance portion is to be charged at maximum marginal rate. 7(x) In the instant case, the appellant has claimed that it is required to be taxed as AOP, as per the tax slab provided in the finance act, after providing benefit of basic exemplion limit. However CPC computed tax at maximum marginal rate. So, the question involved is the appellant, who got its trust deed registered before Deputy Registrar, whether its income will get benefit of basic exemption lime and tax slab or it will be taxed at maximum marginal rate. An identical issue has been decided by ITAT, Delhi on 16.07.2020, in this case of 'Air Force Navy Farm Owners Welfare Association vs ITO'. The Honourable ITAT has held as under: *5.3 In our opinion, the finding of the Learned CIT(A) on the issue in dispute is well reasoned. A society registered under the Societies Registration Act, 1860, has been excluded from the provision of section 167B(1). Thus, in case of any society, which though has been held as Association of Person and income of such Association is indeterminate; such society will be excluded from invoking of maximum marginal rate. But, the provision of section 1678(2) are applicable in case of Association of persons not being a case falling under sub-section 1. The relevant provision is reproduced as under: "Charge of tax where shares of members in association of persons or body of individuals unknown, etc. (2) Where, in the case of an association of persons or body of individuals as aforesaid [not being a a case falling under sub-section (1)].- (1) the total income of any member thereof for the previous year (excluding his share from such association or body) exceeds the maximum amount which is not chargeable to tax in the case of that member under the Finance Act of the relevant I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 15 year, tax shall be charged on the total income of the association or body at the maximum marginal rate; (ii) any member or members thereof is or are chargeable to tax at a rate or rates which is or are higher than the maximum marginal rate, tax shall be charged on that portion or portions of the total income of the association or body which is or are relatable to the share or shares of such member or members at such higher rate or rates, as the case may be, and the balance of the total income of the association or body shall be taxed at the maximum marginal rate. Explanation. For the purposes of this section, the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such association or body or at any time thereafter." 5.4 In view of the clear and unambiguous provisions of 167B(2) if income of any member (other than the share of such Association) is higher than the basic exemption limit of the relevant year, the income of the Association is chargeable at the maximum marginal rate. 5.5. Before us, the assessee has not disputed the finding of the Learned CIT(A) that income of its member during the year under consideration exceeds the basic exemption limit. 5.6 In view of the above discussion, we do not find any error in the order of the Learned CIT(A) and accordingly, we uphold the same. The grounds raised by the assessee are accordingly dismissed. 6. In the result, the appeal of the assessee is dismissed." 7(xi) In view of above, section 167B(2) will come into pay and tax is to be charged at maximum marginal rate. Further, since the trust is not Registered u/s 12A/12AA, deduction for application of income utilized for charitable purposes u/s 11 are not available to Act. it. It will only be allowed deduction of expenses as per section 57 of the INCOME TAX DEPARTMEN Nes 7(xii) Section 143(1) allows the AO to make prima-facie adjustments in case of in correct claims as defined therein. In the present case, appellant claims tax to be charged at normal rate but has not claimed to be registered u / s 12A which is inconsistent with the provision of law as analyzed above. I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 16 7(xiii) In view of the above, I direct the AO to treat the Income of the appellant trust as Income from other Sources and allow the expenses made solely to earn that Income u / s 57. Amount spent, if any, for application (Relief for poor) related to the objectives of the trust are not allowable, as the Trust is unregistered u/s 12A and hence provisions of section 11 & 12 are not applicable in its case. The net income of the trust shall be chargeable to tax at maximum marginal rate u/s 164(1) / 143 * (1) of the Act as discussed above. Thus the action of the AO, CPC is upheld. The ground of appeal is dismissed.” 7. As the assessee did not find any favor from the order of the ld. CIT(A), the assessee preferred the present appeal on the ground as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, he has filed the written submissions and the same is reproduced herein below: “ The assessee is a charitable trust for the benefit of public at large. It manages Shri Digambar Jain Mandir at Charavas. It was not registered under the provisions of section 12A of the Income Tax Act, 1961 during the period involved in all these appeals. It had filed its ITRs as per provisions of section 139. In the ITRs it had declared income on which it had offered tax as applicable on individuals. The positions of net income offered in the ITRs is as under :- Asstt. Year Gross Receipts Expenses Claimed Net Income offered 2013-14 289183 44135 245048 2014-15 328879 54121 274758 2015-16 222295 0 222295 2016-17 222181 0 222181 2017-18 239819 0 239819 The ITRs were processed u/s 143(1) in the following way :- Asstt. Year Income Offered Tax worked out Processed by CPC 2013-14 245048 4640 89357 2014-15 328879 7700 122610 2015-16 222295 0 66690 2016-17 222181 0 66654 2017-18 239819 0 71946 I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 17 Copies of all the intimations as provided by CPC have been enclosed in the paper book. It is apparent that the CPC has charged tax at MMR probably by considering the status of the appellant as AOP. Action of ld. AO :- As the CPC had processed the ITRs u/s 143(1)(a) without mentioning anything about the treatment and hence there is no speaking order of the Ld. AO. First Appeal : Against all the intimations the appellant filed appeals before Ld. CIT (A) and same were disposed off by ld. CIT (A), NFAC concurring with the view of the CPC in charging t ax at MMR on the appellant. This action has been mainly challenged in these appeals. The ld. CIT (A) had sustained the action of the CPC by stating as under :- Provision of section 164(1) and 167B are the relevant provisions applicable in the instant case and hence MMR is clearly applicable. Regarding claim of certain expanse in AY 2013-14 and 2015-16 he states that since the assessee institution is not registered u/s 12A and hence expenses can not be allowed u/s 11 and hence the same can be allowed after examining compliance to section 57. Submissions of the appellant : Main ground of appeal is against charging of tax at MMR on the income of the appellant trust which has been charged on the premise that the appellant trust was not registered under the provisions of section 12A of the Income Tax Act, 1961. The CPC had applied MMR without specifying any reason but the ld. CIT (A) has stated that provisions of section 164(1) and 167B are only applicable in the instant case and hence MMR is justifiable. Such action of the ld. AO as well as ld. CIT (A) is not in accordance with provisions of Income Tax Act, 1961 on account of the reasons that as per provisions of section 164(1) tax at MMR is applied on such income which is received by a representative assessee for the benefit of many persons without any determinate shares and section 167B of the Act states for charging MMR on income of AOP where shares of members are indeterminate. In the instant case which relates to a trust maintaining a Jain temple which has been constituted as Public Charitable Trust vide deed dated 21.06.2011 I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 18 (and further amended vide amendment deed dated 14.08.2020) and whose main object is to take care of the ancient Shree Mahaveer Digambar Jain temple at Charanvas (Nagaur) besides certain other charitable objects and where there is no provision about distribution of income of the trust. The income of the trust is to be utilized only for the purposes of the trust and in case of any dissolution of the trust the assets of the trust are to be handed over to other institution having similar objects. Further the beneficiaries of the trust is general public without any identification w.r.t. number of persons and their caste/creed/sex etc. as Temple is open to all and hence under such circumstances provisions of section 164(1) is not applicable. Under such circumstances section 167B does not have any application. It is only applicable when shares of the members are indeterminate. Since no such concept is applicable in the instant case and hence charging of income to tax at MMR is against the provisions of the Income Tax Law. Hence in the instant case both the sections are inapplicable as in cases particularly those constituted for charitable objects neither any allocation is provided for sharing benefits of the trust for any particular section of the society nor and there is any definite or indefinite share in favour of any beneficiary and hence both the said sections are not applicable in the instant case The ld. CIT (A) in his order has relied upon a case of Honourable ITAT, Delhi in the case of Air Force Navy Farm Owners Welfare Association v/s ITO wherein the Hon`ble ITAT held that society registered the provisions of Societies Registration Act, 1860 are excluded from the provisions of section 167B. Based on this decision he has stated that since the assessee is not registered under provisions of Societies Registration Act, 1860 and hence 167B shall come into play. He forgot to take into consideration that section 167B excludes any AOP registered under any law corresponding to Societies registration Act, 1860 in force in any part of India and the assessee institution is duly registered with Deputy Registrar under Indian Stamp Act and since the assessee has been formed for charitable objects and hence same is also covered with said exclusion. AS we know that there are both ways of forming a charitable institution i.e. through mode of trust or through registration under Societies Registration Act and there can not be any discrimination in the institutions whether formed as a trust or as a sanstha. Further your reference is also drawn on Circular no. 320 of the CBDT dated 11.01.1982 (APB 36) which contains the following (in last seven lines) as under :- “Similarly, in the cases of registered societies, trade and professional associations, social and sports clubs, charitable or religious trusts, etc., where the members or trustees are not entitled to any share in the income of the association of persons, the provisions of new section 167A will not be attracted and, accordingly, tax will be payable in such cases at the rate I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 19 ordinarily applicable to the total income of an association of persons and not at the MMR. Although section 167A as was existing in the Income Tax Act, 1961 had been deleted from the stature book w.e.f. 1-4-1989 and section 167B was inserted in the statute book w.e.f. 1-4-1989 but the spirit of the CBDT is very clear on this aspect that in case of charitable or religious trusts where there is no provision of sharing of profits of the trust amongst the members or trustees of the trust tax is chargeable normally and not at MMR. This circular is directly applicable in the instant case and hence the action of the ld. CPC and confirmed by Ld. CIT (A) is clearly beyond the provisions of Income Tax Law and hence is required to be quashed and instructions be passed for applying normal rates of tax (just like an individual) in all the cases. It is also further submitted that the assessee institution is now registered u/s 12A copy of which is annexed at APB 33-35. There are other grounds of appeal in following cases :- Appeal No. ITA No. 121/JODH/2021 (Assessment year 2013-14) : In this case the assessee had claimed an expenditure of Rs. 44,130 out of gross income received by the assessee trust but the same was disallowed by CPC u/s 143(1) without assigning any reason for the same. Such action has been confirmed by the Ld. CIT (A) on the ground (Page 25 para 7(xi)) that since the assessee is not registered u/s 12A/12AA no deduction can be allowed except u/s 57. This action of the CPC and the ld. CIT (A) is wrong as all the expenditure have been claimed for maintenance of the temple which is main object of the trust and hence allowable. Otherwise also the assessee has spent the expenditure for the purpose of attracting more and more people for coming forward for contributing to the temple and hence as per section 57 same deserves to be allowed.. Appeal No. ITA No. 122/JODH/2021 (Assessment Year 2015-16) In this case the appellant had initially filed ITR by declaring income from interest at Rs. 2,22,295 and income from voluntary contributions for Rs. 60,400 and out of this total income of Rs. 2,82,695 it had claimed an expenditure of Rs. 64,808 spent on charitable activities and a net income of Rs. 2,17,887 was declared. The said ITR was treated as defective by CPC and hence the appellant had submitted another ITR declaring the income from interest only amounting to Rs. 2,22,295 which was processed by CPC at declared income. The ld. CIT in his order has mentioned at para 7(xiv) that since in the first ITR the assessee had declared a sum of Rs. 60,400 as voluntary contribution and had not declared any such income in second ITR I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 20 and has enhanced the income and instructed the AO to take appropriate action to tax such income at MMR. This action of the ld. CIT (A) is wrong as before enhancing the income he has not issued any notice to the appellant and further in a way he has disallowed the claim of the assessee for expenditure for Rs. 64,808 which had been spent only for the maintenance of temple which is prime object of the assessee and in view of spending the same for the basic object of the trust same deserves allowance. Your honour is sincerely requested to consider the above submissions favourably and allow the appeal in toto and oblige. 8. In this appeal the ld. AR of the assessee submitted a detailed paper book and the same is extracted here in below : SN Description Page No. 1 ITRV, Computation of Income and Intimation order u/s 143(1) for the AY 2013-14 1-6 2 ITRV, Computation of Income and Intimation order u/s 143(1) for the AY 2015-16 7-14 3 ITRV, Computation of Income and Intimation order u/s 143(1) for the A.Y 2016-17 15-23 4 ITRV, Computation of Income and Intimation order u/s 143(1) for the A.Y 2017-18 24-32 5 Registration Certificate u/s 12A 33-35 6 CBDT Circular No. 320 dated 11.01.1982 36 7 Bombay HC Judgment in the case of DIT(E) v/s Shardaben Baghubhai Mafatlal Public Charitable Trust No. 8 (247 ITR 1) 37-47 9. The ld. AR of the assessee argued that considering the fact that herein this case the beneficiary are the general public so there is no share of beneficiaries whether known or unknown as the assessee is trust so charging the assessee as per the provisions of section 164(1) as held by the ld. CIT(A) is incorrect and the relevant facts has not been I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 21 appreciated and since there is specific provision in section 164(2) the tax should be charted based on that specific section applicable to the trust assessee. The ld. AR of the assessee also submitted that considering the facts of the case even the provision of section 167B will not applicable and the ld CIT(A) has not appreciated the facts of the case of the assessee. When there is specific provision for charging the tax the general provision cannot be made applicable. Alternatively, the ld. AR of the assessee submitted that the source of income is on account of temple and for running and maintaining the temple activity the expenditure incurred cannot be disallowed. 10. The ld DR is heard who has relied on the findings of the lower authorities and submitted that the assessee is not registered trust and therefore, the benefit of section 11 & 12 cannot be given. The 12A applied in 2022 cannot be applied retrospectively. Based on these arguments the ld. DR supported the orders of lower authority. 11. We have heard the rival contentions and perused the material placed on record. From the facts argued by the ld. AR of the assessee the bench noted that the beneficiary in this case of the trust are the general public. So there is no share of beneficiaries whether known or I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 22 unknown as the assessee is trust so charging the assessee as per the provisions of section 164(1) as held by the ld. CIT(A) is incorrect and the relevant facts has not been appreciated and since there is specific provision in section 164(2) the tax should be charged based on that specific section applicable to the trust assessee. The ld. AR of the assessee also submitted that considering the facts of the case even the provision of section 167B will not applicable and the ld CIT(A) has not appreciated the facts of the case of the assessee. When there is specific provision for charging the tax the general provision cannot be made applicable. Thus, we hold that when the provision of section 164(2) specially deals to charge the tax of those trust where the whole or any part of the relevant income is not exempt under section 11 and 12, the relevant provision of the Act is reiterated herein below : Provision of section 164(2) of the Act (2) In the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, or which is of the nature referred to in sub-clause (iia) of clause (24) of section 2, or which is of the nature referred to in sub-section (4A) of section 11, tax shall be charged on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons : Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 23 So the Maximum Marginal Rate (MMR) is applicable if the clause (c) or clause (d) of sub-section (1) of section 13. Thus, 13(1)(c) deals where the money spent for the related party and 13(1)(d) deals religious trust or institution. The ld. AR of the assessee submitted that the assessee subsequently already registered u/s. 12A with effect from 22.03.2022 and thus it does not come under the provision of section 13(1)(c) and (d) of the Act and therefore, based on that set of facts the assessee trust shall be charged to tax u/s. 164(2) at the rate as applicable to Individual and AOP. The term individual / person include as per section 2(31) and the same is reads as; (31) "person" includes— (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains; We further note that the tax rates applicable is specified in Sec. 2(37A) which states that “rate or rates in force” or “rates in force”, in relation to an assessment year or financial year, mean the rate or rates of income- I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 24 tax specified in this behalf in the Finance Act of the relevant year, or as specified under specific sections, which includes Sec.164 and 167B also. The first schedule to the Finance Act reads; “(I) In the case of every individual other than the individual referred to in items (II) and (III) of this Paragraph or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which any other Paragraph of this Part applies. Even the revenue department website also advise that the tax rate of the trust is as applicable to the Individual and the screen shot of the same is reproduced herein below as to strengthen the discussion so record: I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 25 Considering that aspect of the matter we are of the considered view that the decision of the ld. CIT(A) to charge the assessee u/s. 164(1) is not correct it should be charged based on the specific provision of the Act u/s. 164(2) of the Act and the tax rate as applicable to that 164(2) will apply to the rate of the AOP/Individual and the initial exemption is also available to such assessee. Based on these observations the ground no. 2 raised by the assessee is allowed. 12. As regards the ground no. 1 raised by the assessee the bench noted that the ld. CIT(A) has not granted the benefit of deduction of expenditure only on the reason that the assessee is not registered u/s. 12 A of the Act. The ld. AR of the assessee placed on record the registration certificate issued to the trust on 22.03.2022 and therefore, considering that aspect of the matter we direct the ld. AO to grant the benefit of the deduction of the expenditure claimed by the as per object of the trust. Based on these observation ground no. 1 raised by the assessee is allowed. In terms of these observations, the appeal of the assessee in ITA no. 121/Jodh/2021 is allowed. I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 26 13. The fact of the case in ITA No. 122 to 124-Jodh-2023 and 237/Jodh/2023 is similar to the case in ITA No. 121-Jodh-2021 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 121/Jodh/2021 is similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. 121/Jodh/2021 for the Assessment Year 2013-14 shall apply mutatis mutandis in the case of Shri Digambar Jain Mandir Trust in ITA Nos. 122 to 124-Jodh-2021 and 237/Jodh/2023 for the Assessment Year 2015-16 to 2017-18. In the result, five appeals of the assessee are allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judicial Member Accountant Member Ganesh Kumar, PS Copy of the order forwarded to: I.T.A. Nos. 121 to 124/Jodh/2021 Assessment Year: 2013-14 27 (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order Date Initial 1. Draft dictated on Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order