Golla's Educational and Research Trust, Vijayawada V. ACIT(CPC), Bengaluru

ITA 541/VIZ/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3958 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 24-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V APPALA RAJU
• Keywords: Charitable institution; Maximum Marginal Rate; Set aside
• Section: 143(1); 12; 11

Judgement Text

ITA NO.541 /VIZAG/2017 M/S. GOLLAS EDUCATIONAL & RESEARCH TRUST, VIJAYAWA DA 1 , , 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.541/VIZAG/2017 ( / ASSESSMENT YEAR: 2014-15) M/S. GOLLAS EDUCATIONAL & RESEARCH TRUST VIJAYAWADA THE ACIT, (CPC) BANGALORE [PAN NO. AABTG8836H ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI V. APPALA RAJU, DR / DATE OF HEARING : 25.04.2018 / DATE OF PRONOUNCEMENT : 2 6.04.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX, VIJAYAWADA VIDE ITA NO.408/CIT(A)/VJA/2015-16 DATED 31.8.2017 FOR THE A SSESSMENT YEAR 2014-15. ITA NO.541 /VIZAG/2017 M/S. GOLLAS EDUCATIONAL & RESEARCH TRUST, VIJAYAWA DA 2 2. THE ASSESSEE IS AN EDUCATIONAL RESEARCH TRUST RE GISTERED UNDER TRUST ACT. THE ASSESSEE FILED RETURN OF INCOME ON 6.1.2015 ADMITTING TOTAL INCOME OF ` 65,526/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T') AND THE INCOME OF THE ASSESSEE WAS TAXED UNDER MAXIMUM MARGINAL RATE. 3. AGGRIEVED BY THE INTIMATION U/S 143(1) OF THE AC T, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) UPHELD THE CHARGING OF INCOME UNDER MAXIMUM MARGINAL RATE. 4. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, T HE LD. A.R. ARGUED THAT THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND AS PER SECTION 164(2) OF THE ACT THE INCOME OF A CHARITABLE TRUST REQUIRED TO BE TAXED AT NORMAL RATES. THE ONLY GROUND PRESSED BY THE LD . A.R. IN THIS APPEAL IS GROUND NO.(D) WITH REGARD TO CHARGING OF TAX AT NORMAL RATES. 5. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE IN TIMATION U/S 143(1) OF THE ACT. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES 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 ITA NO.541 /VIZAG/2017 M/S. GOLLAS EDUCATIONAL & RESEARCH TRUST, VIJAYAWA DA 3 BE TAXED AT NORMAL RATES. FOR READY REFERENCE, WE EXTRACT RELEVANT PART OF SECTION 164(2) OF THE ACT OF THE PROVISO WHICH R EADS AS UNDER: [ CHARGE 31 OF TAX WHERE SHARE OF BENEFICIARIES UNKNOWN. 32 164. (1) 33 [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 31 ANY ONE PERSON 31 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 31 'BENEFICIARIES', RESPECTIVELY), 34 [TAX SHALL BE CHARGED ON THE RELEVANT INCOME OR PAR T OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE 35 :] .. 44 [(2) IN THE CASE OF RELEVANT INCOME WHICH IS DERIVE D FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, 45 [OR WHICH IS OF THE NATURE REFERRED TO IN SUB-CLAUS E ( IIA ) OF CLAUSE ( 24 ) OF SECTION 2 ,] 46 [OR WHICH IS OF THE NATURE REFERRED TO IN SUB-SECTI ON (4A) OF SECTION 11 ,] TAX SHALL BE CHARGED ON SO MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT UNDER SECTION 11 45 [OR SECTION 12 ], AS IF THE RELEVANT INCOME NOT SO EXEMPT WERE THE INCOME OF AN ASSOCIATION OF PERSONS : 47 [ 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 PA RT OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE.]] 7. PLAIN READING OF SECTION 164(2) OF THE ACT, SHOW S THAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST WHOL LY FOR CHARITABLE PURPOSES REQUIRED TO BE TAXEX AT NORMAL RATES. ON THE SIMILAR FACTS,IN THE CASE OF ITO VS. SHRI HANUMAN MANDIR TRUST (2003 ) 84 ITD 0083 THE PUNE TRIBUNAL HAS HELD AS FOLLOWS: I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE FACTS ON RECORD. I HAVE PERUSED THE TERMS AND CONTENTS OF THE TRUST DEED WHICH HAVE BEE N REPRODUCED (SUPRA) AND AFTER DOING SO, I HOLD THAT THE ASSESSEE TRUST HAS TO BE CONSIDERED AS A P UBLIC RELIGIOUS TRUST IN VIEW OF THE JUDGEMENT OF T HE HONBLE SUPREME COURT IN THE CASE OF DEVKI NANDAN V S. MURLIDHAR (SUPRA). THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT IT IS THE DEITY WHO IS THE ASSESSEE AND THAT, THEREFORE, THE STATUS SHOULD BE THAT OF INDIVIDUAL IS NOT CORRECT, IN VIE W OF THE OBSERVATIONS OF THE HONBLE SUPREME COURT REPRODUCED (SUPRA). ACCORDINGLY, I DIRECT THAT THE STATUS OF THE ASSESSEE HAS TO BE TAKEN AS THAT OF AOP. BUT SINCE THE ASSESSEES INCOME IS ONE DERIVE D FROM PROPERTY HELD UNDER THE TRUST WHOLLY FOR ITA NO.541 /VIZAG/2017 M/S. GOLLAS EDUCATIONAL & RESEARCH TRUST, VIJAYAWA DA 4 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 AO P WERE THE SAME AS THOSE OF INDIVIDUAL AND, THEREFORE, THE ASSESSEE EVEN THOUGH ASSESSABLE UNDE R 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 APPLIED IN TH E PRESENT CASE TO TAX THE ASSESSEE AT THE MAXIMUM MAR GINAL RATE, BECAUSE MAXIMUM MARGINAL RATE COULD BE APPLIED ONLY IF THERE WAS FAILURE ON THE P ART OF THE TRUST UNDER S. 13 (1)(C) OR 13(1)(D) OF THE ACT, WHICH IS NOT THE REASON FOR DENYING BENEFITS O F S. 11 IN THE PRESENT CASE. IN VIEW OF THE ABOVE LEGAL POSITION, I HOLD THAT S. 164(2) APPLIES AND T HE TAX IS TO BE CALCULATED ON THE AOP ON THE MINIMUM MARGINAL RATE. 8. TAX PAYERS INFORMATION SERIES -37, ASSESSMENT O F CHARITABLE TRUSTS AND INSTITUTIONS PUBLISHED BY THE INCOME TA X DEPARTMENT CLARIFIES THE POSITION IN PARA NO.5.7 AS FOLLOWS: INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSE (INCLUDING VOLUNTAR Y CONTRIBUTIONS RECEIVED FROM DONORS), TO THE EXTENT IT IS NOT EXEM PT UNDER SECTIONS 11 AND 12, IS LIABLE TO TAX AT THE NORMAL RATES APPLIC ABLE TO AN ASSOCIATION OF PERSONS (AOP), EXCEPT FOR ANONYMOUS DONATIONS DI SCUSSED IN PARA 5.4 ABOVE. . THEREFORE, WE HOLD THAT THE INCOME OF THE ASSESSE E REQUIRED TO BE TAXED AT NORMAL RATES OF AOP BUT NOT AT MAXIMUM MAR GINAL RATE. ACCORDINGLY, WE DIRECT THE A.O. TO TAX THE INCOME O F THE ASSESSEE AT NORMAL RATES. 9. EVEN OTHERWISE, WHETHER TO CHARGE THE INCOME AT NORMAL RATES OR AT MAXIMUM MARGINAL RATE IS AN ISSUE OF DEBATE AND REQUIRE VERIFICATION OF FACTS WHICH CANNOT BE DECIDED U/S 143(1) OF THE ACT. THE A.O. U/S 143(1) OF THE ACT TAXED THE ASSESSEES INCOME AT MA XIMUM MARGINAL RATE THOUGH THE ASSESSEE CLAIMED THE SAME AT NORMAL RATES. THE ISSUE IS A DEBATABLE WHICH HAS TO BE DECIDED AFTER TAKING INTO CONSIDERATION ITA NO.541 /VIZAG/2017 M/S. GOLLAS EDUCATIONAL & RESEARCH TRUST, VIJAYAWA DA 5 FACTS AND MERITS OF THE CASE AND THE RELEVANT FACTS AND CASE LAWS. THEREFORE, SUCH ADJUSTMENTS ASSESSMENTS ARE NOT PER MISSIBLE U/S 143(1) OF THE ACT, HENCE, WE SET ASIDE THE ORDERS OF THE L OWER AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE. 10. THE REMAINING GROUND NO.1 (A,B,C & E) ARE NOT P RESSED BY THE LD. A.R. DURING THE APPEAL HEARING. HENCE, GROUND NOS. 1(A), (B), (C) AND (E) ARE DISMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26 TH APR18. SD/- SD/- ( . ) ( . .. . . . . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 26.04.2018 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. GOLLAS EDUCATIONAL AND RES EARCH TRUST, 26-25-9, DURGI VARI STREET, GANDHINAGAR, VIJAYAWADA 2. / THE RESPONDENT THE ACIT (CPC), BENGALURU. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM