Deloitte Employees Welfare Trust Vs ITO (ITAT Mumbai)
ITAT Mumbai: Employee Welfare Trust Taxable at Normal AOP Rates—MMR & 37% Surcharge Deleted
The Mumbai ITAT (SMC Bench) allowed the appeal of Deloitte Employees Welfare Trust for AY 2022-23 and set aside the levy of tax at Maximum Marginal Rate (MMR) with 37% surcharge made through CPC intimation under section 143(1).
The Tribunal held that:
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The trust is created bona fide for the exclusive benefit of employees, and trustees receive income as representative assessees for employees’ welfare.
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Such trusts fall within clause (iv) of the first proviso to section 164(1) and are outside the ambit of section 167B.
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Consequently, income is taxable at normal rates applicable to an AOP, not at MMR.
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CBDT Circular No. 577 (04.09.1990) squarely clarifies that cases covered by the first proviso to section 164(1) do not attract section 167B.
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Even assuming MMR applies, surcharge cannot be levied unless income crosses the statutory threshold; following the Special Bench decision in Araadhya Jain Trust and Mumbai ITAT rulings, no surcharge is leviable where income is below ₹50 lakh.
Accordingly, the ITAT directed recomputation of tax at normal AOP rates and deletion of surcharge, and the appeal was allowed
FULL TEXT OF THE ORDER OF ITAT MUMBAI
