Sri Nookalamma Ammavari Devasthanam, Peddapuram V. The ITO, Tuni

ITA 196/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5148 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C DAS
• Keywords: Charitable institution; Maximum Marginal Rate
• Section: 12A; 12; 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 1 96 /VIZ/ 201 7 ( / ASSESSMENT YEAR: 20 1 0 - 1 1 ) SR I NOOKALAMMA AMMAVARI DEVASTHANAM KANDRAKOTA [PAN :A ABTS5247G ] VS. INCOME TAX OFFICER WARD - 1 TUNI ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI D.L.NARASIMHA RAO , A R / RESPONDENT BY : SHRI K.C.DAS, D R / DATE OF HEARING : 1 9 . 0 7 . 2018 / DATE OF PRONOUNCEMENT : 25 .0 7 .2018 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) [CIT(A)] - 1 , GUNTUR VIDE I . T . A . NO. 146 / 20 1 3 - 1 4/CIT( A - 1) /GNT DATED 2 5 . 10 .201 6 F OR THE ASSESSMENT YEAR 20 1 0 - 1 1 . 2 I TA NO .196 /VIZ/201 7 SRI NOOKALAMMA AMMAVARI DEVASTHANAM, KANDRAKOTA 2. THE ASSESSEE IS A RELIGIOUS INSTITUTION RUNNING THE TEMPLE OF GODDESS SRI NOOKALAMMA AMMAVARU AT KANDRAKOTA VILLAGE, PEDDAPURAM MANDAL. FOR THE ASSESSMENT YEAR 2009 - 10, THE ASSESSEE FILED RETURN OF INCOME IN THE STATUS OF AOP ON 27.08.2010 ADMITTING NIL INCOME. THE RETURN WAS PROCESSED U/S 143(1) AND SUBSEQUENTLY TAKEN UP THE CASE FOR ASS ESSMENT. THE ASSESSEE CLAIMED EXEMPTION U/S 11 OF INCOME TAX ACT (HEREINAFTER CALLED AS ACT) IN RESPECT OF EXCESS OF INCOME OVER EXPENDITURE. DURING THE ASSESSMENT PROCEEDINGS, T HE ASSESSEE WAS ASKED TO PRODUCE THE COPY OF THE PROCEEDINGS ISSUED BY THE CIT GRAN TING REGISTRATION U/S 12A/12AA OF THE ACT, FOR GRANTING EXEMPTION OF INCOME U/S 11 OF THE ACT, BUT THE ASSESSEE FAILED TO PRODUCE THE EVIDENCE. HOWEVER, THE ASSESSEE PRODUCED THE REGISTRATION PROCEEDINGS OF THE CIT DATED 31.1.2013 GRANTING REGISTRATION W .E.F. 1.4.2013 RELATING TO THE ASSESSMENT YEAR 2013 - 14. SINCE THERE WA S NO REGISTRATION U/S 12A FOR THE IMPUGNED ASSESSMENT YEAR , THE ASSESSING OF FICER (AO) ADOPTED THE STATUS OF THE ASSESSEE AS AOP AND TAXED THE SURPLUS INCOME AT MAXIMUM MARGINAL RATE . 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND RAISED THE GROUNDS FOR EXTENSION OF BENEFIT AND FOR EXEMPTION U/S 11 AND ALSO AGAINST CHARGING THE TAX AT MAXIMUM MARGINAL 3 I TA NO .196 /VIZ/201 7 SRI NOOKALAMMA AMMAVARI DEVASTHANAM, KANDRAKOTA RATE. THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON BOTH THE GROUNDS. 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, THE LD. AR PRESSED ONLY THE GROUND RELATING TO CHARGING OF TAX AT MAXIMUM MARGINAL RATE. THEREFORE, GROUND NOS.1, 2, 3, 4 AND 6 ARE DISMISSED AS NOT PRESSED. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL PLACED ON RE CORD ON THE ISSUE OF CHARGING THE TAX AT MAXIMUM MARGINAL RATE ON SURPLUS I NCOME. DURING THE APPEAL HEARING, THE LD.AR ARGUED THAT THE ASSESSEE IS CHARITABLE RELIGIOUS ASSOCIATION REGISTERED IN TERMS OF SECTION 43 OF ANDHRA PRADESH CHARITABLE AND HINDU RELIGIOUS INSTITUTIONS ENDOWMENT ACT. THE ASSESSEE DEVASTHANAM IS RUN BY EN DOWMENT DEPARTMENT, MANAGED BY STAFF OF ENDOWMENTS AND HEADED BY EXECUTIVE OFFICER. THE ASSESSEE DEVASTHANAM DERIVES INCOME BY WAY OF JATARA COLLECTIONS, SALE OF PRASADA, HUNDI COLLECTIONS, INTEREST ON BANK FDS AND AGRICULTURAL INCOME. THE FACT THAT THE ASSESSEE IS RELIGIOUS CHARITABLE INSTITUTION IS NOT DISPUTED BY THE AO. THE LD.AR ARGUED THAT EVEN IF THE INCOME OF THE T RUST IS NOT EXEMPT THE IN C OME OF THE T RUST IS REQUIRED TO BE 4 I TA NO .196 /VIZ/201 7 SRI NOOKALAMMA AMMAVARI DEVASTHANAM, KANDRAKOTA TAXED AT NORMAL RATES BUT NOT AT THE MAXIMUM MARGINAL RATE. THE SIMILAR I SSUE HAS COME UP BEFORE THIS TRIBUNAL IN THE CASE OF M/S GOLLA S EDUCATIONAL AND RESEARCH TRUST, VIJAYAWADA IN ITA NO.541/VIZ/2017 DATED 26.04.2018 AND THE C OORDINATE BENCH HELD THAT THE INCOME OF THE ASSESSEE IS REQUIRED TO BE TAXED AT NORMAL RATES OF AOP BUT NOT AT MAXIMUM MARGINAL RATE. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT RELEVANT PART OF ORDER OF THE COORDINATE BENCH WHICH READS AS UNDER : 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE OR DERS OF THE AUTHORITIES BELOW. IN THIS CASE, EVEN IF THE INCOME OF THE ASSESSEE NOT EXEMPT U/S 11 & 12 OF THE ACT AS PER SECTION 164(2) OF THE ACT, THE INCOME OF THE TRUST REQUIRED TO BE TAXED AT NORMAL RATES. FOR READY REFERENCE, WE EXTRACT RELEVANT PART OF SECTION 164(2) OF THE ACT OF THE PROVISO WHICH READS AS UNDER: [CHARGE L L OF TAX WHERE SHARE OF BENEFICIARIES UNKNOWN. 12 - 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 SPECIFICAL LY RECEIVABLE ON BEHALF OR FOR THE BENEFIT OFANY 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 RATE7 - 5 [(2) I N 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 SU B - SECTION (4A) OF SECTION 11,1 TAX SHALL BE CHARGED ON SO MUCH OF 5 I TA NO .196 /VIZ/201 7 SRI NOOKALAMMA AMMAVARI DEVASTHANAM, KANDRAKOTA THE RELEVANT INCOME AS IS NOT EXEMPT UNDER SECTION 1 145[OR SECTION 121, 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 IN COME AT THE MAXIMUM MARGINAL RATE.]] 7. PLAIN READING OF SECTION 164(2) OF THE ACT, SHOWS THAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST WHOLLY FOR CHARITABLE PURPOSES REQUIRED TO BE TAXED AT NORMAL RATES. ON THE SIMILAR FACTS, IN THE CASE OF ITO VS. SHRI HANUMAN MANDIR TRUST (2003) 84 LTD 0083 THE PUNE TRIBUNAL HAS HELD AS FOLLOWS: I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE FACTS ON RECORD. I HAVE PERUSED THE TERMS AND CONTENTS OF THE TRUST DEED WHICH HAVE BEEN REPRODUCED (SUPRA) AND AFTER DOING SO, I HOLD THAT THE ASSESSEE TRUST HAS TO BE CONSIDERED AS A PUBLIC RELIGIOUS TRUST IN V IEW OF THE JUDGEMENT OF THE HON 'BLE SUPREME COURT IN THE CASE OF DEVKINANDAN VS. MURFIDHAR (SUPRA). THE SUBMISSION OF THE ASSESSEE BEFORE THE CI T(A) THAT IT IS THE DEITY WHO IS THE ASSESSEE AND THAT, THEREFORE, THE STATUS SHOULD BE THAT OF INDIVIDUAL IS NOT CORRECT, IN VIEW OF THE OBSERVATIONS OF THE HON 'BLE SUPREME COURT REPRODUCED (SUPRA). ACCORDINGLY, I DIRECT THAT THE STATUS OF THE ASSESSEE H AS TO BE TAKEN AS THAT OF A OP. BUT SINCE THE ASSESSEE INCOME IS ONE DERIVED FROM PROPERTY HELD UNDER THE TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, PROVISIONS OF S. 164(2) WILL COME INTO OPERATION, BUT SINCE UNDER SCHEDULE TO FINANCE ACT, RATES OF INCOME - TAX FOR AOP WERE THE SAME AS THOSE OF INDIVIDUAL AND, THEREFORE, THE ASSESSEE EVEN THOUGH ASSESSABLE UNDER THE STATUS OF AOP IS STILL TO BE TAXED AS PER THE RATES APPLICABLE TO AN INDIVIDUAL. I FURTHER HOLD THAT PROVISO TO S. 164(2) WAS WRONGLY APP LIED IN THE PRESENT CASE TO TAX THE ASSESSEE AT THE MAXIMUM MARGINAL RATE, BECAUSE MAXIMUM MARGINAL RATE COULD BE APPLIED ONLY IF THERE WAS FAILURE ON THE PART OF THE TRUST UNDER S. 13 (1)(C) OR 13(1)(D) OF THE ACT, WHICH IS NOT THE REASON FOR DENYING BENE FITS OF S. 11 IN THE PRESENT CASE. IN VIEW OF THE ABOVE LEGAL POSITION, I HOLD THAT S. 164(2) APPLIES AND THE TAX IS TO BE CALCULATED ON THE AOP ON THE MINIMUM MARGINAL RATE.' 8. TAX PAYERS INFORMATION SERIES - 37, ASSESSMENT OF CHARITABLE 6 I TA NO .196 /VIZ/201 7 SRI NOOKALAMMA AMMAVARI DEVASTHANAM, KANDRAKOTA TRUSTS AND I NSTITUTIONS PUBLISHED BY THE INCOME TAX DEPARTMENT CLARIFIES THE POSITION IN PARA NO.5.7 AS FOLLOWS: INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE (INCLUDING VOLUNTARY CONTRIBUTIONS RECEIVED FROM DONORS), TO THE EXTENT IT IS NOT EXEMPT UNDER SECTIONS 11 AND 12, IS LIABLE TO TAX AT THE NORMAL RATES APPLICABLE TO AN ASSOCIATION OF PERSONS (A OP), EXCEPT FOR ANONYMOUS DONATIONS DISCUSSED IN PARA 5.4 ABOVE. THEREFORE, WE HOLD THAT THE INCOME OF THE ASSESSEE REQUIRED T O BE TAXED AT NORMAL RATES OF AOP BUT NOT AT MAXIMUM MARGINAL RATE. ACCORDINGLY, WE DIRECT THE A.O. TO TAX THE INCOME OF THE ASSESSEE AT NORMAL RATES. 5.1. SINCE THE FACTS OF THE CASE ARE IDENTICAL, RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH, WE HOLD THAT THE SURPLUS INCOME OF THE ASSESSEE SHOULD BE TAXED AT NORMAL RATES BUT NOT AT MAXIMUM MARGINAL RATE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT(A) ON THIS ISSUE AND PARTLY ALLOW THE APPEAL OF THE ASSESSEE. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25 TH JU LY , 201 8 . S D/ - S D/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 25 .0 7 .2018 L.RAMA, SPS 7 I TA NO .196 /VIZ/201 7 SRI NOOKALAMMA AMMAVARI DEVASTHANAM, KANDRAKOTA / COPY OF THE ORDER FORWARDED TO: - 1 . / THE ASSESSEE - SR I NOOKALAMMA AMMAVARI DEVASTHANAM , KANDRAKOTA 2 . / THE REVENUE INCOME TAX OFFICER, WARD - 1, TUNI 3 . THE PR. COMMISSIONER OF INCOME TAX - 2 , VI SAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX(APPEALS) - 1 , GUNTUR 5 . , , / DR, ITAT, VISAKHAPATNAM 6. / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM