Sorathiya Bramha Kshtriya Samaj Vs ITO (ITAT Nagpur)
No Private Shares, No Maximum Marginal Rate—Public Charitable Body Must Be Taxed at Normal AOP Rates u/s 167B
Summary: The Nagpur Bench of the ITAT has held that a non-profit charitable organisation serving the public at large, where no member is entitled to any share in its income, cannot be taxed at the maximum marginal rate under s.167B merely because it has filed its return in the status of an Association of Persons. Its income must be assessed at the normal rates applicable to an AOP.
The assessee, Sorathiya Bramha Kshtriya Samaj, was a charitable and non-profit organisation. It provided a Bhawan to the public at a reasonable and nominal cost and also used the premises to meet the educational requirements of needy students. None of its members was a beneficiary entitled to receive any share of the organisation’s income.
While processing the return, the CPC applied the maximum marginal rate under s.167B. The assessee filed an application for rectification u/s 154, contending that application of MMR was a mistake apparent from the record. The AO rejected the request through a rectification order dated 21.06.2022, and the CIT(A) confirmed that action.
Before the ITAT, the assessee argued that s.167B deals with an AOP or body of individuals in which members have beneficial interests in the income but their individual shares are indeterminate or unknown. In the case of a public charitable organisation, however, the members have no beneficial share whatsoever. The beneficiaries are the public at large, and no part of the surplus can be distributed among the members.
