MOHAMMEDALLY NOORBHOY BANDUKWALLA TRUST, MUMBAI V. ADD/JOINT/DEPUTY/ACIT/ITO, NFAC, DELHI

ITA 721/MUM/2023

AI Insights

The case involves the Mohammedally Noorbhoy Bandukwalla Trust, a public charitable trust, which appealed against the order of the National Faceless Appeal Centre (CIT (A)), challenging the tax rate applied to its income for the Assessment Year 2014-15. The trust argued that its income should be taxed at the normal rate applicable to individuals, whereas the CPC had taxed it at the maximum marginal rate applicable to AOPs. The CIT (A) upheld the CPC's decision, leading to the trust's appeal to the Tribunal. The Tribunal dismissed the appeal, agreeing with the CIT (A) and CPC that the trust, not being registered under Section 12AA, should be taxed at the maximum marginal rate.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125721 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-05-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 09-03-2023
• Other Referred Cases: Iqbal and Nina Chaney Foundation [ AY 2014-15]
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: OM KADALGAOKAR; CPC. NO SUCH PROVISIONS WERE
• Keywords: Charitable institution; Maximum Marginal Rate; TDS
• Section: 12AA; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T VARKEY, JM AND SHRI PRASHANT MAHARISHI, AM ITA No. 721/MUM/2023 (Assessment Year 2014-15) Mohammedally Noorbhoy Bandukwalla Trust Bhiwandiwala Terrace, J S S Road, Next to Parsi Fire Temple, Metro Cinema, Shop No. 1, Block A, 626 Dhobi Talao Marine Lines(E), Mumbai-400002 Vs. ITO, NFAC Delhi Estate, Delhi, Delhi-110002 (Appellant) (Respondent) PAN No. AAATM0718K Assessee by : Shri K. Gopal & Shri Om Kadalgaokar, ARs Revenue by : Shri P. D. Chougule, DR Date of hearing: 24.05.2023 Date of pronouncement : 31.05.2023 O R D E R PER PRASHANT MAHARISHI, AM: 01. This appeal is filed by assessee, a charitable trust against the appellate order passed by the National Faceless Appeal Centre, Delhi [the learned CIT (A)] for A.Y. 2014-15 dated 15 th February, 2023, where in appeal of assessee preferred against the order under Section 143(1) of the Income-tax Act, 1961 (the Act) dated 12 th March, 2016 passed by the Central Processing Centre was partly allowed. Page | 2 ITA No. 721/MUM/2023; A.Y. 2014-15 Mohammedally Noorbhoy Bandukwalla Trust 02. Assessee is aggrieved and has raised following grounds of appeal:- “1. The CIT(A) has erred in not stating any reason or grounds for rejecting the facts and circumstances of the case, submissions made and the case law cited by the ‘A’ in the submissions made. 2. On the facts and circumstances of the case and in law. The CIT (A) has erred in directing the AO to work out the tax as per the principle stated in his order u’/s 164(1) without naming the any section 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in disregarding the provisions of section 164(2) of the Act, by upholding though indirectly the charge of income tax at maximum Marginal Rate of 30% instead of normal Tax Rate for AOP albeit inadvertently. 4. The Appellant reserves the right to add, to alter, to amend the grounds of appeal at or before the hearing of the appeal. ” 03. The brief facts of the case show that assessee is a public charitable trust registered with charity commissioner. It filed its return of income on 26 th September, 2014, declaring gross total income of ₹8,47,167/-. The above income was offered under the head income from other sources, assessee computed tax at a normal rate of ₹99,434/- and aggregate income tax liability was Page | 3 ITA No. 721/MUM/2023; A.Y. 2014-15 Mohammedally Noorbhoy Bandukwalla Trust computed at ₹1,02,417/- against the Tax Deducted at Source (TDS) of ₹1,03,784/- claiming refund of ₹1,370/-. 04. This return of income was processed under Section 143(1) of the Income Tax Act by passing intimation on 12 March 2016, wherein there is no addition to the total income of the assessee. Thus there was no adjustment u/s 143 (1) (a) of The Act. It was assessed at ₹8,47,170/-. However, the tax liability computed was at ₹2,54,151/- (assessee computed it at ₹99,434/-) and thereafter, tax payment was computed after granting credit for tax deduction at source at ₹2,05,645/-. Thus, there was difference in tax computed on total income by the assessee and CPC. 05. The fact also shows that assessee is a charitable trust registered with the Charity Commissioner since 20 August 1952. Assessee made an application for registration under Section 12AA of the Act on 3 November 2010 and once again on 20 September 2013. As assessee could not produce 'change report' of the trustees because of the reason that the office of the charity commissioner has lost the relevant papers during the transfer of State Board of Wakfs, registration under Section 12AA of the Act was denied. The trust has once again filed a fresh application for registration on 25 May 2016. On 3 April 2016, the relevant details of change report are now available. Fate of this application is not known. 06. Meanwhile, Assessee trust continued to earn income on fixed deposit receipt with banks and offering same as income. As per ROI, income of assessee was taxed at Page | 4 ITA No. 721/MUM/2023; A.Y. 2014-15 Mohammedally Noorbhoy Bandukwalla Trust ordinary rate applicable to the total income as Individual. However, Central Processing Centre while processing the return has considered the status of the assessee as Association of Persons (AOP) trust without any change and computed the tax liability applying maximum marginal rate u/s 143(1) (b) of The Act. Thus, only dispute was that whether the assessee trust can be taxed at the normal rate applicable to an individual or at a maximum marginal rate. 07. On appeal, the learned CIT (A) held that according to him, generally the tax rate on AOP or Body of Individuals (BOI) is charged at normal rate for individual as when income of none of the members exceeds the maximum amount not chargeable to tax, the Income of AOP shall be taxable at a rate applicable to an individual. However, income of AOP is assessed at maximum margin rate only where income of members of AOP or BOI exceeds the maximum amount, which is not chargeable to income tax. He directed the learned Assessing Officer to work out the tax liability in view of this. The appellate order was passed on 15 February 2023. The assessee is aggrieved with that order and is in appeal before us. 08. The grievance of the assessee is that the order of the learned CIT (A) directed the learned Assessing Officer to work out the tax liability without naming any section and indirectly upholding the charge of income tax at maximum marginal rate of 30% instead of normal tax rate for Association of Person. Page | 5 ITA No. 721/MUM/2023; A.Y. 2014-15 Mohammedally Noorbhoy Bandukwalla Trust 09. Contesting the above facts the learned Authorized Representative submitted that i. Action of the CPC is unwarranted, as it has not stated any cogent reasons for levying the tax at maximum marginal rate. ii. there is no error in the rate applied by the assessee, iii. SMC Bench of Pune in ITA No.194/Pun/2019 in Iqbal and Nina Chaney Foundation [ AY 2014-15] decided the similar issue and stated that CPC has no power to enhance the rate without assigning any reason or pointing out any defects in the return filed and therefore, such a kind of action is not permitted. 010. The learned Departmental Representative vehemently submitted that it is necessary to note Assessee trust is not registered under Section 12AA of the Act and therefore, the tax rate applicable is only maximum marginal rate. Assessee has computed the tax rate of an individual, which is not correct. It was further stated that it is a mere processing of the return of income based on the status of the assessee and therefore, it is incorrect to argue that CPC does not have such right. There is no provision to intimate assessee in variation in taxes u/s 143(1)(b) but only u/s 143(1)(a). There is no adjustment u/s 143 (1)(a) but u/s 143(1)(b), so there is no need of any intimation. Page | 6 ITA No. 721/MUM/2023; A.Y. 2014-15 Mohammedally Noorbhoy Bandukwalla Trust 011. On a specific query to ld AR to show respective provision that assessee, when not registered u/s 12AA of the Act is not chargeable to tax at MMR. No such provisions were shown. 012. Further ld AR was asked to show specific requirement of giving notice to assessee by CPC. No such provisions were shown. On our reading, it is only with respect to any adjustment u/s 143(1) (a) and not u/s 143(1) (b) of The Act that CPC should intimate assessee. The ld AR could not show us any reason to substantiate how the assessee has offered tax at the rate applicable to individual. 013. We have carefully considered rival contention and perused order of the ld CIT (A) as well as Intimation issued u/s 143 (1) of The Act. Assessee is a charitable trust not registered under section 12AA of the Act. Therefore, a public charitable trust not registered would be chargeable to tax as Association of persons. The tax incidence of Association of Persons would depend on the Provisions of Section 167B of the Act. According to that, section where shares of the members are indeterminate then tax is to be charged at the maximum marginal rate. The CPC according to Provisions of Section 143(1) (b) of the Act is required to compute the tax on the basis of total income computed under clause (a). There is no adjustment to the total income of the assessee u/s 143 (1)(a) of the Act. Thus, no intimation should be given to assessee as per provision of The Act. Assessee has also failed to substantiate that why it is not chargeable to tax at MMR. Page | 7 ITA No. 721/MUM/2023; A.Y. 2014-15 Mohammedally Noorbhoy Bandukwalla Trust Neither Return of income was produced, nor was any provision of law shown. No evidence of subsequent registration u/s 12AA of the Act of assessee was produced. Facts of case decided by Pune bench was on the fact that trust was registered subsequently. Even otherwise that decision was not on section 143(1)(b) and also did not quote provision of law where CPC is required to issue notice/ intimation to assessee in that subsection. Provision of intimation is only with respect to adjustment u/s 143 (1) (a) of the Act. Trust was registered u/s 12 AA of the Act in that case wef 30-04-2014. In this case it is not at all registered. Thus reliance on that decision is rejected. 014. Further, the ld CIT (A) has merely directed ld AO to charge the tax at correct rate. Naturally, ld AO will provide necessary opportunity and consider whether the trust is registered u/s 12AA of the Act. Ld AO will also look in to the fact whether in the ROI assessee has claimed that it is chargeable to tax at different rate then MMR. 015. In view of this, we do not find any infirmity in the order of the ld CIT (A), who has merely directed the ld AO to apply correct rate of tax. Hence, appeal of assessee is dismissed. Order pronounced in the open court on 31.05.2023. Sd/- Sd/- (ABY T VARKY) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 31.05. 2023 Page | 8 ITA No. 721/MUM/2023; A.Y. 2014-15 Mohammedally Noorbhoy Bandukwalla Trust Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai