NATIONAL ASSOCIATION OF INTERLOCKING SURGEONS,SOLAPUR, MAHARASHTRA V. THE ITO, EXEMPTION WARD 1(2), PUNE, PUNE, MAHARASHTRA

ITA 2560/PUN/2024

AI Insights

The case involves the National Association of Interlocking Surgeons, a charitable trust, which appealed against the orders of the Income Tax Officer and the Commissioner of Income Tax (Appeals) for the assessment years 2010-11, 2014-15, and 2016-17. The primary contention was the incorrect application of the Maximum Marginal Rate of tax instead of the Normal Tax rate. The Tribunal examined the provisions of Section 167B of the Income-tax Act, 1961, and relevant CBDT Circulars, alongside precedents from other cases involving similar issues. The Tribunal found that the assessee, being a charitable trust with indeterminate shares among beneficiaries, should not be subjected to the Maximum Marginal Rate as per the specific exclusions and interpretations of the law and circulars cited.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24810 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Other Referred Cases: Dr. Shalmali Khasbardar Foundation Vs. ITO (Exemption), Air Force Navy Farm Owners Vs. ITO, Mahakavi Edasseri Smaraka Trust Vs. ITO, M/s Anand Educational Society vs. ITO, Sri Lakshmiganapathi Seva Samithi Vs. CIT, CIT vs. Marsons Beneficiary Trust, Bajaj Auto Finance Ltd. vs. CIT Pune, JKs Employees Welfare Fund vs. ITO, Khatau Junkar Ltd. And Another vs K.S. Pathania, M/s Anand Educational Society vs. ITO, Mahakavi Edasseri Smaraka Trust Vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY K. DHIVARE
• Assessee Lawyers: C. H. NANIWADEKAR
• Keywords: Set aside; Rule of consistency; Rectification of order; Earning of tax free income; Charitable institution; Maximum Marginal Rate
• Section: 154; 143(1); 11; 139(1); 139; 12

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC”, PUNE BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER आयकर अपील सं. / ITA Nos.2816, 2817 and 2560/PUN/2024 Assessment Years : 2010-11, 2014-15 and 2016-17 National Association of Interlocking Surgeons, 103, Iyer Orthopaedic Center, Railway Lines, Near SJSB Bank, Solapur – 413 001 Maharashtra PAN : AAATN9300L V/s ITO, Exemption Ward-1(2), Pune Appellant Respondent आदेश / ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The captioned appeals pertaining to Assessment Years 2010-11, 2014-15 and 2016-17 at the instance of assessee are directed against the separate orders dated 09.10.2024 passed by Addl/JCIT(A)-3, Bengaluru u/s.250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) which in turn are arising out of respective Rectification Orders passed u/s.154 of the Act. 2. Since the issues raised by the assessee are common for the three assessment years under appeal, I proceed to dispose of these appeals by way of this consolidated order for the sake of convenience. Assessee by : Shri C.H. Naniwadekar Revenue by : Shri Sanjay K. Dhivare Date of hearing : 05.02.2025 Date of pronouncement : 12.02.2025 2 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons 3. I take up the appeal for the A.Y. 2010-11 as the lead case. Assessee has raised the following grounds of appeal : “1. The learned CIT (A) erred on facts and in law in upholding the order u/s 154 of the Act wherein the learned AO has erred in not rectifying the mistake apparent from records by charging tax at Maximum Marginal Rate by invoking the provisions of section 167B of Act instead of the tax rates applicable to an AOP. He failed to appreciate the fact that, the assessee is an AOP-Trust registered I as a charitable trust, is a public body and, accordingly, there is no question of its beneficiaries being individual members, whose shares have therefore to be defined. He failed to appreciate the facts, the law involved as well as the CBDT's Circular No.320 dated 11/01/1982 that is binding on the department. 2. The learned CIT (A) erred on facts and in law in upholding the order u/s 154 of the Act by citing the belated filing of the application for rectification of mistake u/s 154 of the Act filed after the time limit as prescribed under the Act. He failed to appreciate the fact that, the return was processed on 26.03.2012 and the assessee trust had already filed its first rectification application well within the prescribed time limit. 3. Without prejudice to the other grounds of appeal, the learned CIT(A) has erred on facts and in law in denying relief to the assessee by not rectifying the mistake apparent from records which is otherwise available to the assessee merely based on an alleged delay in filing of the rectification application u/s 154 of the Act before the learned AO. 4. The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal.” 4. The only grievance of the assessee is that the assessee ought to have been charged with the Normal Rate of tax and not the Maximum Marginal Rate of tax. For this proposition, ld. Counsel for the assessee at the outset made reference to the CBDT Circular 320, dated 11.01.1982 which is placed at page 47 of the paper book and the same has been referred by Coordinate Benches of the Tribunal in the case of Dr. Shalmali Khasbardar Foundation Vs. ITO (Exemption) in ITA No.3811/Mum/2024, dated 30.09.2024, Air Force Navy Farm Owners Vs. ITO in ITA 3 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons No.1992/Del/2019, dated 11.01.2024, Mahakavi Edasseri Smaraka Trust Vs. ITO reported in (2024) 162 taxmann.com 44 (Cochin-Trib.) wherein the decisions have been rendered in favour of the assessee and it has been held that the contents of CBDT circular referred (supra) which were applicable to section 167A of the Act, is also applicable for the amended provisions of section 167B of the Act. 5. Facts of the case in brief are that the assessee is an AOP taxable under the Normal rate of Income-tax. It filed the return of income for the A.Y. 2010-11 which was processed by CPC on 26.03.2012 by calculating the tax payable at Maximum Marginal Rate. The assessee filed the rectification application u/s.154 requesting the AO to calculate the tax payable under Normal Tax rate, which came to be rejected. Now the assessee is in appeal before the Tribunal. 6. The ld. Departmental Representative on the other hand supported the orders of the lower authorities and also submitted that the assesee’s applications u/s.154 was delayed and there was no mistake apparent in the rectification application and that section 167B of the act is applicable in the instant case and assessee is not falling in the exceptions mentioned therein. Therefore, the ld.CIT(A) was justified in charging the income of the assessee at Maximum Marginal Rate. 7. I have heard the rival contentions and perused the record placed before me. The only issue that arises for my consideration is whether the income of the assessee is chargeable to Normal Tax rates or the Maximum Marginal 4 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons Tax rates. The assessee is a Trust registered on 16.05.2007 formed with the following objects : “1. To bring orthopaedic Surgeons of similar interest in interlocking nailing together. 2. To discuss and diffuse knowledge of interlocking nailing techniques. 3. To conduct seminar & conferences. 4. To give fellowships to upcoming Doctors in interlocking nailing techniques. 5. To carry out newsletter/brochures of interlocking related subjects. 6. To carry out Research & Development programs/activities in the field of interlocking nailing techniques.” 8. I have perused the Trust Deed dated 16.05.2007. I observe that there are Five trustees and the individual share of the Members of the Trust is not specified in the said deed. CPC processed the return of income for the year under appeal charging the income of the assessee at Maximum Marginal Rate. Assessee filed the Rectification application u/s.154 of the Act which has been rejected. Before us, ld. DR has stated that the application u/s.154 filed by the assessee u/s.154 was delayed. I have gone through the record and notice that the assessee had filed the application u/s.154 for rectifying the mistake apparent from record to the CPC for having wrongly charged the Maximum Marginal Rate as against the Normal Tax Rate. However, the applications filed by the assessee u/s.154 were combined together and a consolidated order was passed on 12.01.2023. Therefore, the application u/s.154 of the Act for the impugned assessment year was filed within the prescribed time limit. 5 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons 9. In so far as the chargeability of the income of the assessee at the Normal Tax Rate or the Maximum Marginal Rate, my attention was drawn to CBDT Circular No.320 dated 11.01.1982 which is placed at page 47 of the paper book, the contents of which read as under : “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 income of an association of persons where the individual shares of members in the income of such association are indeterminate of unknown would also apply to income receivable by trustees on behalf of provident funds, superannuation funds, gratuity funds, pension funds, etc created bono 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. 10. In the above circular, the last four lines indicate that in 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 tax will not be payable at the Maximum Marginal rate. 6 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons However, section 167A of the Act was replaced by section 167B from 01.04.1989 and the same reads as under : “Charge of tax where shares of members in association 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 (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association 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 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 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.” 11. Now in the above provision, section 167B(1), only the Company or Cooperative Societies registered under the Societies Registration Act are excluded and the remaining association of persons or body of individuals where 7 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons individual share of the members are not known are indeterminate, tax is leviable at the Maximum Marginal Rate. Before me, Ld. Counsel for the assessee has stated that assessee is a registered Charitable Trust and it is carrying out the charitable activity as per the Trust deed and even if share of the trustees are not defined, still the assessee being a Charitable Registered Trust engaged in the charitable activity is liable to taxed at the Normal Tax rate. To buttress his arguments, reliance was placed in the case of Dr. Shalmali Khasbardar Foundation Vs. ITO (supra) was placed where also similar issue was for consideration and the finding of the Tribunal reads as under : “We have perused the submissions advanced by both the sides in the light of the records placed before us. 5. The assessee has raised a preliminary issue challenging the validity of intimation under Section 143(1) of the Act passed without granting opportunity to the assessee, wherein an adjustment was made that was debatable in nature. The Ld. AR placed reliance on the decision of Hon’ble Bombay High Court in the case of Bajaj Auto Finance Ltd. vs. CIT Pune reported in (2018) 404 ITR 564 (Bom) and the decision of Hon’ble Rajasthan High Court in the case of JKs Employees Welfare Fund vs. ITO reported in (1993) 199 ITR 765 (Raj). 5.1 It is noted that, Hon’ble Rajasthan High Court in case of JKs Employees Welfare Fund (supra) considered what amounts to a prima facie adjustment by observing as under: “A bare perusal of section 143(1)(a) contemplate that the ITO has to accept the return as it is and in the proviso, three exceptions have been given, which confer the jurisdiction on him for making adjustment. The action under this section cannot be taken beyond the power permitted by these three exceptions. The third exception provides that where any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed. The question is whether the application of rate of tax can be covered by the term 'relief claimed in the return because application of a different rate of tar will not fall under the category of loss carried forward, deduction, allowance. There is another provision in clause (i) regarding arithmetical errors in the return. There may be a case where the rate of tax is not disputed but while 8 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons calculating the tax there is an error which could be corrected under this clause, i.e., while calculating the tax on the normal rate or maximum marginal rate there is a mistake which could be corrected and will fall in the category of arithmetical mistake, but whether maximum marginal rate is to be applied or the normal rate is applicable is not covered by any of the too clauses of the proviso to section 143(1)(a). The matter has also to be considered from another angle that the word prima facie which has been used therein means on the face of and refers to the items, on which there cannot be two opinions. If the matter is arguable one or debatable then the same cannot be disallowed under the proviso.” 5.2 It is noted that Hon’ble Bombay High Court while considering the issue of what amounts to a prima facie adjustment that could be made under Section 143(1)(a), relied on Instruction No.1814 dated 04.041989. Hon’ble Bombay High Court also referred to the decision of its Co-ordinate Bench in Khatau Junkar Ltd. And Another vs K.S. Pathania reported in (1992) 196 ITR 157 (Bom) and held that the word “prima facie inadmissible” in clause (iii) of Section 143(1)(a)’ means, ‘on the face of it the claim is not admissible’. Hon’ble High Court observed that, it means the claim does not require any further inquiry before deemed disallowed. 5.2 Hon’ble Court further observed that where a claim was made which require further inquiry, it cannot be disallowed without hearing the parties and / or giving the opportunity to submit proof in support of its claim. Hon’ble Bombay High Court thus observed that, debatable issues cannot be adjusted by way of intimation under Section 143(1)(a), which would lead to an arbitrary and unreasonable intimation being issued leading to chaos. In our view the above proposition by Hon’ble Bombay High Court as well as Hon’ble Rajasthan High Court squarely is applicable to the present facts of the case. Accordingly ground no.1 of the assessee stands allowed. (B) Ground No.2 raised by the assessee, is on the applicability of the maximum marginal rate, for which reliance was placed on the decision of Hon’ble Bombay High Court in the case of CIT vs. Marsons Beneficiary Trust (supra). It is noted that present assessee before us is admittedly a public charitable trust, where the shares of the beneficiaries are in determinate are not known, unlike an AOP, where the beneficiaries have a defined share in the income. It is noted that Section 164 is a special provision that prevails over the general provision of Section 167B. The decision of Hon’ble Bombay High Court in case of CIT vs. Marsons Beneficiary Trust (supra) has considered the fact in a case of a Trust, where the beneficiaries in the share was determinate and therefore, Hon’ble Court held that the earnings on behalf of such Trust would be taxed as an AOP. As a corollary in the present facts, the share of the beneficiaries are not known though the assessee in the return of income mentioned itself to be an AOP and therefore provisions of Section 167B are not applicable. If we 9 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons analyze the alternative plea raised that the assessee had not claimed any exemption under Sections 11 and 12 for the year under consideration therefore, there not being a situation of denial of exemption under Sections 13(1)(c) or 13(1)(d) the assessee come within the ambit to subject that portion of income to the maximum marginal rate. Accordingly, in our view assessee cannot be subjected to maximum marginal rate for the year under consideration merely because it filed its return of income in form ITR – 7 as against ITR – 5. Accordingly, Ground No.2 raised by the assessee stands allowed.” 12. I find the Delhi Bench of Tribunal in the case of Air Force Navy Farm Owners Vs. ITO (supra) dealing with the similar issue has held as under : “8. Heard rival submissions, perused the orders of the authorities below and the materials placed before me. 9. On reading of the directions of the Tribunal, it is very much clear that the Tribunal for limited purpose of examining the applicability of provisions of Section 167B the matter was set aside to Assessing Officer to decide the issue in accordance with law. Ld. CIT(A) held that the provisions of Section 167B are applicable to the Assessee. 10. The issue of whether the provisions of Section 167B of the Act are applicable to the assessee society which is registered under the Societies Registration Act, 1860 is concerned, I find that the issue has been decided by the Visakapatnam Tribunal in the case of M/s Anand Educational Society vs. ITO (supra), wherein the Tribunal following its earlier order in the case of Vidyodaya Educational Society vs. DCIT held that once the society is registered under the Societies Registration Act the applicability of maximum marginal rates u/s 167B of the Act would not arise. While holding so, the Tribunal observed as under: “5. We have heard both the parties and perused the material placed on record. Though the Ld.CIT(A) held that the maximum marginal rate is applicable in the case of the assessee, who is having exempt income as well as taxable income, but there is no such distinction provided under section 167B of the Act. This Tribunal in the case cited supra held that normal rates are applicable in the case of the Society registered under Societies Act. For the sake of clarity and convenience, we extract relevant part of the order of this Tribunal in para No.10-11 which reads as under: 10 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons 10. The next submission of the assessee is taxing the income at maximum marginal rate. 4s per section 167B of the Act, in case of an assessee registered under Societies Act, the same is excluded for taxing the income at for maximum marginal rate. For ready reference we extract relevant part of Section 167B(1) of the Act which reads as under: 167B. (1) Where the individual shares of the members of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of1860) or under any law corresponding to that Act in force in any part of India) in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of the association or body at the maximum marginal rate : Plain reading of section 167B of the Act indicates that the income of company or cooperative society or a society registered under Societies Act of 1860 are excluded from charging the tax at maximum marginal rate (MMR) and would be chargeable at normal rates. In the similar facts and circumstances, the coordinate bench of ITAT in ITA Nos.212 to 215/vizag/2014 in the case of Sri Lakshmiganapathi Seva Samithi Vs. C1T dated 26.8.2016 held that in case of society, the application of maximum marginal rate does not arise. For ready reference, we reproduce the extract of relevant part of the order of the Tribunal in para No.13 which reads as under: \"13. As regards the applicability of maximum marginal rate of tax is concerned, the C1T was of the opinion that the A.O. ought to have applied maximum marginal rate of tax to the income of the society. But, the fact is that once the society is registered under the Societies Registration Act, the applicability of maximum marginal rate does not arise, it is because the societies are registered under the Societies Registration Act are prohibited from distribution of any surplus to its members. Once the distribution of profit to its members is prohibited, the question of determination of share of each individual member does not arise. Hence, the CIT was not correct in coming to the conclusion that the rate of tax applicable to the assessee is maximum marginal rate of tax without understanding the provisions.\" 11. The assessee is a society registered under Societies Act, 1860 as evidenced from the registration certificate. The facts are similar in this 11 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons case, therefore, following the decision of coordinate bench and section 167B of the Act, we hold that the income of the assessee is to be taxed at normal rates but not at maximum marginal rate, accordingly, we set aside the order of the Ld. CIT(A) and allow the appeal of the assessee on this ground. 6. During the appeal hearing, the Ld. DR did not bring any other decision of the higher court to controvert the case laws relied upon by the Ld.AR. Since, the facts are identical, respectfully following the rule of consistency and the view taken by this Tribunal in the case cited supra, we hold that the income of the assessee is to be taxed at normal rates, but not at maximum marginal rates. Accordingly, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee.” Similar view has been taken by the Hyderabad Bench of ITAT in the case of KMR Educational Society vs. ACIT [68 SOT 163]. 11. Facts being identical following the above decisions. I hold that the provisions of section 167B have no application to the Assessee and the income of the assessee cannot be taxed at maximum marginal rates. Ground nos. 1.a, 1.c to 1.e are allowed.” 13. I also find the Cochin Bench of Tribunal in the case of Mahakavi Edasseri Smaraka Trust Vs. ITO (supra) had dealt with identical issue and has observed as under : “4. We have heard the party before us, and perused the material on record. 4.1 The issue arising in the instant case, and toward which we have perused the impugned order and also the grounds raised before the first appellate authority, is the manner in which the income of such an Institution is to be computed in the absence of any application of income, i.e., if the allowance for 15% of the income from property held under trust is to be allowed u/s. 11(1)(a) of the Act or not. The relevant part of the impugned order read as under: '7.2 Thus it is seen that the appellant has claimed a deduction of Rs. 15429/- from its total gross receipt of Rs. 1,02,862/- and offered an adjusted total income of Rs. 87,433/- in its return of income. However, the deduction claimed by the appellant for Rs. 15,429/- being 15% of the gross receipts accumulated or set apart for application to charitable or religious purposes is not allowable to the appellant because the appellant has not reflected any application of funds for its purposes in respect of the 12 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons remaining 85% of the gross receipts. Therefore, the adjustment made by the CPC is upheld and the grounds nos. 2 & 3 are dismissed.' (emphasis, ours) 4.2 Section 11(1)(a) of the Act, also read out during hearing, reads as under: Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income— (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; (b) to (d) ......... 4.3 The issue arising, in fine, is the applicability of section 11(1)(a) of the Act in the absence of any application of its income for it's objects by the assessee, a charitable trust, during the relevant year. We see no reason for it being not so, and neither has any been stated by the Revenue at any stage. The language of the provision is unambiguously clear, so that an assessee is not entitled to, save where an option is specifically exercised in its respect, and before expiry of the time allowed for furnishing the return of income u/s. 139(1) of the Act, accumulate or set aside for application in excess of 15% of it's income from the property held under trust. That is to say, it is necessarily to, save where an option is specifically exercised in its respect - which is not so in the instant case, apply 85% of it's income for charitable purposed during the relevant year. The assessee, as afore-said, having not done so, it's income is accordingly to be limited thereto, i.e., 85% of it's total income. A reading of Explanation 1 to section 11(1), reproduced hereunder, makes it abundantly clear that in the absence of option being exercised, the deeming qua application of income, which extends to the shortfall w.r.t. eighty-five percent of income derived from property held under trust, shall not apply: Explanation 1.--For the purposes of clauses (a) and (b),-- (1) in computing the fifteen per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income; (2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, 13 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons or, as the case may be, held under trust in part, by any amount— (i) for the reason that the whole or any part of the income has not been received during that year, or (ii) for any other reason, Mahakavi Edasseri Smaraka Trust v. Income Tax Officer then-- (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income, in such form and manner as may be prescribed) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub- clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived. The application in the instant case being nil, the shortfall extends to the entire 85%. 4.4 We are conscious that the assessee did not file an appeal against the Intimation u/s. 143(1)(a) of the Act raising the impugned demand, preferring instead rectification thereof, scope of which is severely limited. This, to our mind, would not constrain us inasmuch as the Revenue itself has made the impugned adjustment under summary proceedings u/s. 143(1)(a), the scope of which is, again, limited to apparently incorrect claims, which is not the case. The assessee shall accordingly be assessed at the returned income of Rs.87,430. 4.5 Continuing further, even as observed by the Bench during hearing, the principal issue arising in the instant case, inasmuch as it is this that leads to the impugned demand, is the tax rate applied, which has been by the Revenue at the maximum marginal rate, duly raised by the assessee per its grounds of appeal before us. The assessee surely did not raise this issue before the ld. CIT(A), whose adjudication accordingly does not include the same. We, nevertheless, consider the Mahakavi Edasseri Smaraka Trust v. Income Tax Officer same, being a legal issue, with the relevant facts available on record, 14 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons adjudicating the same in disposal of the appeal, upon hearing Smt. Devi, the ld. Sr. DR. 4.6 We again find no reason for application of section 167B of the Act, prescribing the maximum marginal rate in the instant case, which is one of a charitable trust. Section 167B, as a reading of the provision would show, is only where the shares of the beneficiaries of the trust are not known. The assessee, registered as a charitable trust, is a public body and, accordingly, there is no question of it's beneficiaries being individual members, whose shares have therefore to be defined. The application thereof in the instant case is wholly misconceived. The matter in fact stands clarified by the Board per it's Circular No. 320, dated 11/01/1982, also binding on the Revenue. The tax rate accordingly is to be computed as per the normal rates as applicable to Association of Persons. The same, in our view, is again an apparent mistake and, where contested, outside the ambit of s. 143(1)((a) in the first instance, so that it could not have been effected there-under.” 14. The decisions of Coordinate Benches referred (supra) having dealt the very same issue as has been raised in the instant bunch of appeals, I find that the ratio laid down by the Coordinate Benches in the decisions referred (supra) are squarely applicable on the facts of the instant case and therefore, respectfully following the judicial precedents I am inclined to hold that the income of the assessee is not chargeable to tax at Maximum Marginal Rate but is chargeable to tax at Normal Rate. The Revenue authorities are directed to calculate the tax liability of the assessee as per the Normal Tax rates. Accordingly, I set aside the impugned order of ld.CIT(A) and allow the grounds of appeal raised by the assessee. 15. Since the facts and circumstances for the A.Yrs. 2014- 15 and 2016-17 which are under appeal are also same, the finding given by me for the A.Y. 2010-11 will equally hold good mutatis mutandis for these assessment years as well. I hold and direct accordingly. 15 ITA Nos.2816, 2817 and 2560/PUN/2024 National Association of Interlocking Surgeons 16. In the result, all the three appeals of the assessee are allowed. Order pronounced on this 12th day of February, 2025. - Sd/- (MANISH BORAD) ACCOUNTANT MEMBER पुणे/Pune; \u0001दनांक / Dated : 12th February, 2025 Satish आदेश क\u0002 \u0003ितिलिप अ\tेिषत / Copy of the Order forwarded to : 1. अपीलाथ\f / The Appellant. 2. \r\u000eयथ\f / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय \rितिनिध, आयकर अपीलीय अिधकरण, “(SMC)” ब\u0014च, पुणे/ DR, ITAT, “(SMC)” Bench, Pune. 5. गाड\u0018 फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune "