M/s Basil Mendes Memorial Educational and Charitable Trust , Mangalore V. Income Tax Officer Ward-1(1)Exemptions, Mangalore

ITA 2887/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1096 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 27-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: PRATIKSHA PAI
• Keywords: Charitable institution; Principle of natural justice; Maximum Marginal Rate
• Section: 12A; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 2887 /BANG/201 7 ASSESSMENT YEAR : 20 11 - 12 M/S. BASIL MENDES MEMORIAL EDUCATIONAL AND CHARITABLE TRUST, 2-11-821/2 &, ASHLENE, OPP. CIRCUIT HOUSE, KADRI HILLS, MANGALORE 575 004. PAN: AABTB4742K VS. THE INCOME TAX OFFICER, WARD 1 (1) (EXEMPTIONS), MANGALORE. APPELLANT RESPONDENT APPELLANT BY : SMT. PRATIKSHA PAI, CA RESPONDENT BY : DR. P.V. PRADEEP KUMAR, ADDL. CIT (DR) DATE OF HEARING : 17 .07.2018 DATE OF PRONOUNCEMENT : 14 .09.2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT (A), MANGALORE DATED 14.11.2017 FOR ASSESSM ENT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LEARNED AO HAS DELIVERED WITHOU T ADEQUATE CONSIDERATION OF THE CORRECT POSITION OF LAW. 2. THE ORDER OF THE LEARNED CIT(A) UPHOLDING THE OR DER OF THE AO IS ERRONEOUS SINCE THE FACTS OF THE CASE HAS NOT BEEN PROPERLY CONSIDERED. 3. THE APPELLANT HAS BEEN DENIED NATURAL JUSTICE ON ACCOUNT OF WRONG INTERPRETATION OF THE POSITION OF LAW AND RATE OF T AX APPLICABLE TO THE INCOME. 4. THE ORDER OF THE LEARNED AO IN SO FAR AS IT IS A GAINST THE APPELLANT IS OPPOSED TO LAW, EQUITY, AND WEIGHT OF EVIDENCE, PROBABILITIES, FACTS ITA NO.2887/BANG/2017 PAGE 2 OF 9 AND CIRCUMSTANCES. 5. THE LEARNED AO IS NOT JUSTIFIED IN TAXING INCOME OF THE TRUST AT MAXIMUM MARGINAL RATE. THE ORDER OF THE LEARNED CIT (A) IN UPHOLDING THIS TAX RATE MAY ALSO BE QUASHED. 6. THE LEARNED AO HAS WRONGLY MADE A PRESUMPTION TH AT THE ACTIVITIES OF THE TRUST ARE COMMERCIAL IN NATURE WI THOUT MAKING ANY STUDY INTO THE DAY-TO-DAY FUNCTIONING OF THE TRUST. THE LEARNED AO HAS NOT APPLIED HIS MIND IN GOING THROUGH THE INCOM E OF THE TRUST WHICH INDICATES THAT THERE IS NO INCOME OF ANY COMM ERCIAL NATURE. THE INCOMES ARE ONLY IN THE FORM OF EDUCATIONAL COURSE FEE COLLECTED FROM STUDENTS. 7. SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME O F HEARING. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE COPY OF DEED OF TRUST DATED 02.12.2008 IS AVAILABLE ON PAGES 39 TO 55 OF PAPER BOOK ALONG WITH THE SUPPLEMENTARY TRUST DEED DATED 10.05.2016. IN PART ICULAR, HE DRAWN OUR ATTENTION TO CLAUSE NO. 3(H) OF THE SAID DEED OF TR UST AS AVAILABLE ON PAGE NO. 43 OF PAPER BOOK AND POINTED OUT THAT AS PER THIS CLAU SE OF THIS DEED OF TRUST, THE FUNDS AND INCOME OF THE TRUST SHALL BE SOLELY UTILI ZED FOR THE ACHIEVEMENT OF ITS OBJECTS AND NO PORTION OF IT SHALL BE UTILIZED FOR PAYMENT TO THE TRUSTEE/ MEMBER BY WAY OF PROFITS, INTEREST, DIVIDEND, SALARY ETC. HE SUBMITTED THAT UNDER THESE FACTS, THE PROVISIONS OF SECTION 164(1) ARE NOT APP LICABLE. HE FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 167B ARE ALSO NOT AP PLICABLE IN THE PRESENT CASE. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED TH E ORDERS OF AUTHORITIES BELOW. HE ALSO SUBMITTED THAT THE PRESENT APPEAL IS IN RES PECT OF THE PROCEEDINGS WHICH STARTED BY THE ORDER PASSED BY THE AO U/S. 15 4 OF IT ACT DATED 31.10.2012 ON AN APPLICATION FILED BY THE ASSESSEE FOR RECTIFICATION U/S. 154 DATED 30.07.2012. HE SUBMITTED THAT THE ISSUE HAS TO BE DECIDED AGAINST THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 167B OF IT ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IN PARAS 5.1 TO 5.4 OF THE ORDER OF CIT (A), ENTIRE FACTS ALONG WITH THE C ONTENTS OF THE ASSESSEES APPLICATION FOR RECTIFICATION U/S. 154, THE ASSESSE ES WRITTEN SUBMISSION DATED 13.11.2017 AND THE FINDING OF CIT (A) ARE AVAILABLE AND HENCE, FOR THE SAKE OF ITA NO.2887/BANG/2017 PAGE 3 OF 9 READY REFERENCE, THESE PARAS FROM THE ORDER OF CIT (A) ARE REPRODUCED HEREINBELOW. 5. DECISION ON THE GROUNDS OF APPEAL 5.1 THE APPELLANT IS A TRUST BUT NOT REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961. THE TRUST FILED ITS RETURN OF INCOME FOR AY 2011-12 ON 30-03-2012 DECLARING TOTAL INCOME OF RS.1,95,930/-. THE RETURN WAS PROCESSED U/S 143(1) ON 22-062012 ASSESSING INCOME AT RS.1,95,930/-. THE ASSESSEE FILED RETURN OF INCOME IN ITR-5 CLAIMI NG THE STATUS OF AOP. WHILE PROCESSING THE RETURN OF INCOME, INCOME OF THE ASSESSEE IS CHARGED TO TAX AT MAXIMUM MARGINAL RATE. THE ASS ESSEE FILED APPLICATION FOR RECTIFICATION U/S 154 DATED 30-07-2 012 FOR THE AY 2011-12 STATING THAT THE ASSESSEE IS A 'PUBLIC CHAR ITABLE TRUST' AND NOT A 'PRIVATE TRUST' AND THE RATE APPLICABLE IS NO RMAL TAX RATES WITH BASIC EXEMPTION. THE AO REJECTED THE RECTIFICATION APPLICATION. 5.2 THE RELEVANT PORTION OF THE ORDER U/S 154 IS RE PRODUCED BELOW: IN ORDER TO RECTI THE ASSESSEE'S CLAIM, ASSESSEE WA S REQUESTED TO FURNISH THE FOLLOWING DETAILS ON OR BEFORE 10-09-20 12. 1. COPY OF 12A CERTIFICATE 2. DETAILS OF TRUSTEES WITH THEIR PAN & INCOME TAX DETAILS THE ABOVE DETAILS HAVE NOT BEEN SUBMITTED BY THE AS SESSEE SO FAR. VERIFICATION OF 12A REGISTRATION IN OFFICE OF THE C OMMISSIONER OF INCOME TAX, MANGALORE ALSO CONFIRMS THAT THE ASSESS EE IS NOT REGISTERED U/S 12A AS ON DATE. FURTHER, VERIFICATIO N OF THE TRUSTEE'S ASSESSMENT DETAILS, IT IS SEEN THAT THE TRUSTEES AR E HAVING PAN AND FILING THEIR INCOME TAX RETURNS AND ARE ALSO HAVING TAXABLE INCOME. FURTHER VERIFICATION OF THE RETURN OF INCOME OF THE ASSESSEE SHOWS THAT THE ASSESSEE HAS DECLARED THE INCOME UNDER THE HEAD 'PROFITS & GAINS FROM BUSINESS & PROFESSION' AND FILED RETURN OF INCOME IN ITR 5 WHICH IS MEANT FOR ASSESSEE DECLARING INCOME UNDE R THE HEAD INCOME FROM 'BUSINESS & PROFESSION'. ASSESSEE ALSO CLAIMED STATUS OF AOP AND NOT STATUS OF 'TRUST' IN THE RETURN OF INCO ME FILED FOR AY 2011-12. IT IS ALSO SEEN THAT THE GROSS RECEIPTS AR E RS. 1,42,30,600/- AND OUT OF THIS MAJOR EXPENDITURE INCURRED IS TOWAR DS ADVERTISEMENT AMOUNTING TO RS. 48,65,536/- & TOWARDS BUSINESS PRO MOTION AMOUNTING TO RS. 5,22,461/-. THIS ALSO CONFIRMS THA T THE ASSESSEE ACTIVITY IS MORE COMMERCIAL IN NATURE. AS THE STATUS OF THE ASSESSEE IS TREATED AS 'AOP' F OR TAX PURPOSE, THE TAX RATES APPLICABLE IS AS PER THE PROVISIONS OF SE C 164(1). HENCE, MAXIMUM RATE OF TAX IS APPLICABLE IN THIS CASE. 5.3 APPELLANT'S WRITTEN SUBMISSION DATED 13-11-2017 : THE LEARNED AO HAS TAKEN A WRONG NOTION THAT INCOME OF CHARITABLE TRUST OR INSTITUTIONS (IF NOT EXEMPT) ARE SUBJECT T O 30% TAX PLUS APPLICABLE SURCHARGE AND CESS (AS ON THE BASIS OF C OMPANIES OR FIRM). ITA NO.2887/BANG/2017 PAGE 4 OF 9 ALL TRUST OR INSTITUTIONS OR ANY OTHER LEGAL OBLIGA TION ARE LIABLE TO ASSESSED AS 'ASSOCIATION OF PERSON' AND PART I OF F IRST SCHEDULE TO THE ANNUAL FINANCE ACT PRESCRIBES RATE OF TAXES AT WHIC H DIFFERENT PERSONS WILL BE LIABLE TO PAY TAXES AND CLAUSE (I) OF THAT PART PRESCRIBES AOP TO BE TAXED AS SAME AS ON THE BASIS OF INDIVIDUAL. AS PER INCOME TAX ACT, SEC-167B IS APPLICABLE IN CA SE OF AOP / BOI TAXATION. SO IF TRUST OR INSTITUTION ARE LIABLE TO BE ASSESSED AS AOP THEN OBLIVIOUSLY SECTION 167B DOES ALSO HAVE APPLIC ABILITY IN CASE OF CHARITABLE TRUST OR INSTITUTIONS. BUT SECTION 167B WILL NOT BE APPLICABLE IN CASE OF CHARITABLE TRUST OR INSTITUTIONS BECAUSE OF FOLLOWING TWO REASONS; A. SEC-167B OF INCOME TAX ACT, 1961 SPECIFICALLY EX CLUDES COMPANIES AND SOCIETIES REGISTERED UNDER SOCIETIES REGISTRATION ACT, 1980 OR ANY OTHER SIMILAR LEGISLATION. B. THE DIFFERENT RATES AS PRESCRIBED IN SECTION I67 B ARE BASED UPON KNOWLEDGE AND DETERMINED OF SHARE OF INDIVIDUAL MEM BERS. AS FAR AS CHARITABLE OR RELIGIOUS ORGANIZATIONS ARE CONCERNED THERE IS NO SCOPE OF SHARE OF INCOME OR SURPLUS AMONG MEMBER S CONCERNED. HENCE IT CAN BE SAID NOW THAT CHARITABLE OR RELIGIO US TRUST OR INSTITUTIONS ARE SUBJECT TO TAX AT THE RATE APPLICA BLE TO INDIVIDUAL ASSESSEE. AOP-TRUST IS SUBJECT TO MAXIMUM MARGINAL RATE ONLY IN THE FOLLOWING CASES: I. INCOME FOR PRIVATE RELIGIOUS PURPOSE{SEC-13(1)(A )} II. INCOME FOR THE BENEFIT OF PARTICULAR RELIGIOUS COMMUNITY(SEC- 13(1)(B)} III. INCOME FOR THE BENEFIT OF PERSONS SPECIFIED IN SECTION 13(3) {SEC-13(1)(C)} IV. FUNDS NOT INVESTED IN ACCORDANCE WITH PROVISION S OF SEC-11(5) {SEC-13(1)(D)} V. ANONYMOUS DONATION {SEC-115} THEREFORE, THE APPELLANT SUBMITS THAT EXCEPT IN THE CONDITIONS MENTIONED ABOVE CHARITABLE TRUST OR INSTITUTIONS AR E SUBJECT TO INCOME TAX AT THE RATE APPLICABLE TO INDIVIDUAL ASS ESSEE PROVIDED EXEMPTION UNDER SECTION 11 OR 12 OF 10(23C) IS NOT AVAILABLE. 5.4 THE SUBMISSIONS OF THE APPELLANT AND RECTIFICAT ION ORDER WERE CAREFULLY CONSIDERED. THERE IS NO MERIT IN THE ARGU MENTS OF THE APPELLANT. THE ASSESSEE ITSELF DECLARED THE INCOME UNDER THE HEAD 'PROFITS & GAINS FROM BUSINESS & PROFESSION' AND FI LED RETURN OF INCOME IN ITR 5 WHICH IS MEANT FOR ASSESSEE DECLARI NG INCOME UNDER THE HEAD INCOME FROM 'BUSINESS & PROFESSION'. ASSES SEE ALSO CLAIMED STATUS OF AOP AND NOT STATUS OF 'TRUST' IN THE RETU RN OF INCOME FILED FOR AY 2011-12. IT IS SEEN THAT THE GROSS RECEIPTS ARE RS.1,42,30,600/- AND OUT OF THIS MAJOR EXPENDITURE INCURRED IS TOWAR DS ADVERTISEMENT AMOUNTING TO RS.48,65,536/- & TOWARDS BUSINESS PROM OTION ITA NO.2887/BANG/2017 PAGE 5 OF 9 AMOUNTING TO RS.5,22,461/-. THIS CONFIRMS THAT THE ACTIVITY OF ASSESSEE IS COMMERCIAL IN NATURE. AS THE STATUS OF THE ASSES SEE IS TREATED AS 'AOP' FOR TAX PURPOSE, THE TAX RATE APPLICABLE IS A S PER THE PROVISIONS OF SEC 164(1). HENCE, MAXIMUM MARGINAL RATE OF TAX IS APPLICABLE IN THIS CASE. THE AO ALSO DISCUSSED THE ISSUE CLEARLY AND I AGREE WITH REASONING GIVEN BY THE AO. THERE IS NO REASON TO IN TERFERE WITH THE ORDER OF THE AO. THE GROUNDS ARE REJECTED. 5. FROM THE ABOVE PARAS REPRODUCED FROM THE ORDER O F CIT (A), IT IS SEEN THAT AS PER CIT (A), THE TAX RATE APPLICABLE IN THE PRESENT CASE IS AS PER THE PROVISIONS OF SECTION 164(1) OF IT ACT. HENCE, FOR THE SAKE O F READY REFERENCE, WE REPRODUCE THE PROVISIONS OF SUB SECTION 1 OF SECTIO N 164 OF IT ACT. THE SAME IS AS UNDER. CHARGE 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 MENTIONE D IN CLAUSES (III) AND (IV) OF SUB-SECTION (1) OF SECTION 160 ARE LIAB LE AS REPRESENTATIVE ASSESSEES OR ANY PART THEREOF IS NOT SPECIFICALLY R ECEIVABLE ON BEHALF OR FOR THE BENEFIT OF ANY ONE PERSON OR WHERE THE I NDIVIDUAL SHARES OF THE PERSONS ON WHOSE BEHALF OR FOR WHOSE BENEFIT SU CH INCOME OR SUCH PART THEREOF IS RECEIVABLE ARE INDETERMINATE OR UNK NOWN (SUCH INCOME, SUCH PART OF THE INCOME AND SUCH PERSONS BEING HERE AFTER IN THIS SECTION REFERRED TO AS 'RELEVANT INCOME', 'PART OF RELEVANT INCOME' AND 'BENEFICIARIES', RESPECTIVELY), TAX SHALL BE CH ARGED ON THE RELEVANT INCOME OR PART OF RELEVANT INCOME AT THE MAXIMUM MA RGINAL RATE: PROVIDED THAT IN A CASE WHERE (I) NONE OF THE BENEFICIARIES HAS ANY OTHER INCOM E CHARGEABLE UNDER THIS ACT EXCEEDING THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX IN THE CASE OF AN ASSOCIATION OF PERSONS OR IS A BENEFICIARY UN DER ANY OTHER TRUST; OR (II) THE RELEVANT INCOME OR PART OF RELEVANT INCOM E 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 INCO ME IS RECEIVABLE UNDER A TRUST CREATED BEFORE THE 1ST DAY OF MARCH, 1970, BY A NON- TESTAMENTARY INSTRUMENT AND THE ASSESSING OFFICER I S SATISFIED, HAVING REGARD TO ALL THE CIRCUMSTANCES EXISTING AT THE REL EVANT TIME, THAT THE TRUST WAS CREATED BONA FIDE EXCLUSIVELY FOR THE BEN EFIT OF THE RELATIVES OF THE SETTLOR, OR WHERE THE SETTLOR IS A HINDU UND IVIDED 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 MAIN TENANCE; OR (IV) THE RELEVANT INCOME IS RECEIVABLE BY THE TRUS TEES ON BEHALF OF A PROVIDENT FUND, SUPERANNUATION FUND, GRATUITY FUND, PENSION FUND OR ANY OTHER FUND CREATED BONA FIDE BY A PERSON CARRYI NG ON A BUSINESS ITA NO.2887/BANG/2017 PAGE 6 OF 9 OR PROFESSION EXCLUSIVELY FOR THE BENEFIT OF PERSON S 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 I NCLUDES, PROFITS AND GAINS OF BUSINESS, THE PRECEDING PROVISO SHALL APPL Y ONLY IF SUCH PROFITS AND GAINS ARE RECEIVABLE UNDER A TRUST DECL ARED 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. 6. FROM THE CONTENTS OF THE ASSESSEES WRITTEN SUBM ISSIONS DATED 13.11.2017 REPRODUCED BY CIT(A) IN PARA 5.3 OF HIS ORDER, IT H AS BEEN STATED THAT SECTION 167B IS APPLICABLE IN CASE OF AOP/BOI BUT AS PER TH E ASSESSEE, SECTION 167B IS NOT APPLICABLE IN THE CASE OF CHARITABLE TRUST O R INSTITUTIONS. HENCE WE REPRODUCE THE PROVISIONS OF SECTION 167B OF IT ACT ALSO FOR READY REFERENCE. THE SAME IS AS UNDER. CHARGE OF TAX WHERE SHARES OF MEMBERS IN ASSOCIATIO N OF PERSONS OR BODY OF INDIVIDUALS UNKNOWN, ETC. 167B. (1) WHERE THE INDIVIDUAL SHARES OF THE MEMBERS OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS (OTHE R THAN A COMPANY OR A CO-OPERATIVE SOCIETY OR A SOCIETY REGISTERED U NDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860) OR UNDER ANY LA W CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA) IN THE W HOLE OR ANY PART OF THE INCOME OF SUCH ASSOCIATION OR BODY ARE INDETERMINAT E OR UNKNOWN, TAX SHALL BE CHARGED ON THE TOTAL INCOME OF THE ASSOCIA TION OR BODY AT THE MAXIMUM MARGINAL RATE : PROVIDED THAT, WHERE THE TOTAL INCOME OF ANY MEMBER OF SUCH ASSOCIATION OR BODY IS CHARGEABLE TO TAX AT A RATE WHICH IS HIGHER THAN THE MAXIMUM MARGINAL RATE, TAX SHALL BE CHARGED ON THE TOTAL INCOME OF THE ASSOCIATION OR BODY AT SUCH HIGHER RATE. (2) WHERE, IN THE CASE OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS AS AFORESAID [NOT BEING A CASE FALLING UNDER SUB-SECTION (1)], (I) THE TOTAL INCOME OF ANY MEMBER THEREOF FOR TH E PREVIOUS YEAR (EXCLUDING HIS SHARE FROM SUCH ASSOCIATION OR BODY) EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO TAX IN TH E CASE OF THAT MEMBER UNDER THE FINANCE ACT OF THE RELEVANT YEAR, TAX SHALL BE CHARGED ON THE TOTAL INCOME OF THE ASSOCIATION OR B ODY AT THE MAXIMUM MARGINAL RATE; (II) ANY MEMBER OR MEMBERS THEREOF IS OR ARE CHARG EABLE TO TAX AT A RATE OR RATES WHICH IS OR ARE HIGHER THAN THE MAXIMUM MA RGINAL RATE, TAX ITA NO.2887/BANG/2017 PAGE 7 OF 9 SHALL BE CHARGED ON THAT PORTION OR PORTIONS OF THE TOTAL INCOME OF THE ASSOCIATION OR BODY WHICH IS OR ARE RELATABLE TO TH E 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 ASSO CIATION 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 ASSOCIA TION OR BODY SHALL BE DEEMED TO BE INDETERMINATE OR UNKNOWN IF SUCH SH ARES (IN RELATION TO THE WHOLE OR ANY PART OF SUCH INCOME) ARE INDETE RMINATE OR UNKNOWN ON THE DATE OF FORMATION OF SUCH ASSOCIATIO N OR BODY OR AT ANY TIME THEREAFTER. 7. WHEN WE GO THROUGH THE ASSESSEES APPLICATION FO R RECTIFICATION U/S. 154, WE FIND THAT THIS IS THE CLAIM OF THE ASSESSEE THAT TH E ASSESSEE IS A PUBLIC CHARITABLE TRUST AND NOT A PRIVATE TRUST AND THEREF ORE, MAXIMUM MARGINAL RATE IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. AS PER THE ORDER PASSED BY THE AO U/S. 154, IT IS SEEN THAT THE AO HAS STATED IN THIS ORDER THAT TO RECTIFY AS PER THE ASSESSEES CLAIM, THE ASSESSEE WAS REQUESTED TO FUR NISH THE COPY OF 12A CERTIFICATE AND DETAILS OF TRUSTEES WITH THEIR PAN AND INCOME DETAILS AND THEREAFTER, THE AO HAS STATED IN THE SAID ORDER THA T THESE DETAILS HAVE NOT BEEN SUBMITTED BY THE ASSESSEE TILL THE ORDER WAS PASSED BY HIM ON 31.10.2012 ALTHOUGH THE QUERY WAS RAISED BY HIM ON 10.09.2012. HE ALSO NOTED THAT ON VERIFICATION OF 12A REGISTRATION IN OFFICE OF THE C OMMISSIONER OF INCOME TAX, MANGALORE, IT IS CONFIRMED THAT THE ASSESSEE IS NOT REGISTERED U/S. 12A AS ON 31.10.2012. HE FURTHER NOTED THAT FROM THE VERIFIC ATION OF THE TRUSTEES ASSESSMENT DETAILS, IT IS SEEN THAT THE TRUSTEES AR E HAVING PAN AND FILING THEIR INCOME TAX RETURNS AND ARE ALSO HAVING TAXABLE INCO ME. THE AO HAS ALSO STATED IN HIS ORDER PASSED BY HIM U/S. 154 THAT FUR THER VERIFICATION OF THE RETURN OF INCOME OF THE ASSESSEE SHOWS THAT THE ASSESSEE H AS DECLARED THE INCOME UNDER THE HEAD PROFITS & GAINS FROM BUSINESS & PRO FESSION AND THE RETURN OF INCOME WAS FILED IN ITR 5 WHICH IS MEANT FOR ASSESS EE DECLARING INCOME UNDER THE HEAD INCOME FROM BUSINESS & PROFESSION. THE AO HAS ALSO NOTED THAT THE ASSESSEE HAS CLAIMED STATUS OF AOP AND NOT OF T RUST IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE PRESENT YEAR. THE AO HAS CONCLUDED ON THIS BASIS THAT AS THE STATUS OF ASSESSEE IS TREATED AS AOP FOR TAX PURPOSE, THE SECTION APPLICABLE IS SECTION 164(1) AND THEREFORE, MAXIMUM MARGINAL RATE OF TAX IS ITA NO.2887/BANG/2017 PAGE 8 OF 9 PROPER IN THE PRESENT CASE. THIS IS ADMITTED POSIT ION THAT SECTION 167B IS APPLICABLE IN CASE OF AOP AND BOI BECAUSE THIS IS T HE STAND TAKEN BY THE ASSESSEE IN WRITTEN SUBMISSIONS FILED BEFORE CIT(A) ON 13.11.2017 AS REPRODUCED BY CIT(A) IN PARA 5.3 OF HIS ORDER. 8. THIS IS THE SECOND ARGUMENT OF LD. AR OF ASSESSE E THAT SECTION 167B IS NOT APPLICABLE IN RESPECT OF CHARITABLE TRUST/INSTITUTI ONS. BUT WE FIND NO MERIT IN THIS CONTENTION OF ASSESSEE BECAUSE WE DO NOT FIND ANY M ENTION IN THE PROVISIONS OF SECTION 167B AS PER WHICH CHARITABLE TRUST, INSTITU TIONS ARE EXCLUDED FROM ITS APPLICABILITY. AS PER THE EXPLANATION TO SECTION 1 67B, IT IS PROVIDED THAT FOR THE PURPOSE OF THIS SECTION, IF THE INDIVIDUAL SHARES O F THE MEMBERS OF AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IN TH E WHOLE OR ANY PART OF THE INCOME OF SUCH ASSOCIATION OR BODY SHALL BE DEEMED TO BE INDETERMINATE OR UNKNOWN AND IF SUCH SHARES (IN RELATION TO THE WHOL E OR ANY PART OF SUCH INCOME) ARE INDETERMINATE OR UNKNOWN ON THE DATE OF FORMATION OF SUCH ASSOCIATION OR BOI OR AT ANY TIME THEREAFTER, MMR I S APPLICABLE IN THE PRESENT CASE, IT IS STATED BEFORE US THAT AS PER CLAUSE 3(H ) OF THE TRUST DEED, THE FUNDS AND INCOME OF THE TRUST SHALL BE SOLELY UTILIZED FO R THE ACHIEVEMENT OF THE OBJECTS OF THE TRUST BUT WE FIND THAT AS PER PARA N O. 12 OF THE SAME TRUST DEED, THE TRUST SHALL BE IRREVOCABLE BUT THE TRUSTEES AT ANY TIME IN THEIR DISCRETION AND FOR THE BETTER FULFILLMENT OF THE OBJECTS OF THE TR UST MAY DISSOLVE THE TRUST AND DISTRIBUTE THE FUNDS AND PROPERTIES OF THE TRUST TO SUCH INSTITUTION OR PERSONS, AS THEY MAY DECIDE AND APPROVED BY THE OBJECTS OF THE TRUST. WHEN WE READ BOTH THESE CLAUSES SIMULTANEOUSLY, IT COMES OUT THAT DUR ING THE LIFE TIME OF TRUST, THE INCOME / FUNDS OF THE TRUST CANNOT BE UTILIZED BY T HE TRUSTEES BUT IF AT ANY POINT OF TIME, THE TRUSTEES DECIDES TO DISSOLVE THE TRUST , THE FUNDS AND PROPERTIES OF THE TRUST CAN BE DISTRIBUTED TO ANY PERSON AS THE T RUSTEES MAY DECIDE AND THEREFORE, IT CANNOT BE SAID THAT THE TRUST FUND CA NNOT BE USED BY THE TRUSTEES AT ALL. UNDER THESE FACTS, IN OUR CONSIDERED OPINION, THE SHARE OF THE TRUSTEES IN THE TRUST FUND IS NOT KNOWN AND IT IS INDETERMINATE AND THEREFORE, THERE IS NO INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES AS PER WHICH, THEY APPLIED PROVISIONS OF SECTION 164(1) OF IT ACT. HENCE WE D ECLINE TO INTERFERE IN THE ORDER OF CIT (A) ON THIS ISSUE. ITA NO.2887/BANG/2017 PAGE 9 OF 9 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 14 TH SEPTEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.