Background: Till AY 2023-24, due to application of the provisions of Section 167B of Income Tax Act, 1961, Association of Persons with (1) share of member indeterminate or unknown or (2) 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 was being charged on the total income of such association or body at the maximum marginal rate.
What the Govt. tax calculation utility and other private software vendors were doing till AY 2023-24? : They were calculating tax @30% plus 4% cess thereon in such cases instead of applying maximum marginal rate.
What the CPC, Bengaluru was doing till AY 2023-24? : While processing the return under section 143(1), it was raising the demand by applying maximum marginal rate.
But, w.e.f AY 2024-25, sub-section (1A) is inserted in Section 115BAC which reads as follows.
“Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6), for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024, shall be computed at the rate of tax given in the following Table, namely:—. “ And the said table provides the slab rates.
So, now w.e.f. AY 2024-25, Section 115BAC(1A) overrides Section 167B also and therefore, all AOPs are now subject to the slab rate taxation. But still for AY 2024-25, the Govt. tax calculation utility and other private software vendors are calculating tax @30% plus 4% cess thereon in such cases. And the CPC, Bengaluru is also raising demands by applying maximum marginal rate.
So, the tragedy is Govt. tax calculation utility (and private sectors software vendors who are blindly following Govt. tax calculation utility) and the CPC were not going into the same direction till AY 2023-24 and even in AY 2024-25, they are going into the same opposite directions without applying the legal provisions correctly.
What can be the solution? It seems that only the writ petition in High Court is the proper solution to this problem. Otherwise, such erroneous demands will continue forever. But writ petition in High Court is not cost effective in most of the cases, so state level or national level business and professional associations must do this in the interest of business.
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Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. The interpretation of tax laws may vary based on specific facts and circumstances. Readers are advised to consult a qualified tax professional or refer to official government notifications before making any tax-related decisions. The author and publisher disclaim any liability for actions taken based on the contents of this article.
Author: CA. Tejas Andharia, B.COM, F.C.A., D.I.S.A.(ICAI), D.I.R.M.(ICAI), Bhavnagar (Gujarat) | Email: tejasinvites@gmail.com
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