Case Law Details
Vihar Trust Vs DCIT (ITAT Delhi)
The ITAT Delhi partly allowed the assessee’s appeal against the order of the CIT(A) dated 19.09.2025 relating to the processing of the return under Section 143(1) of the Income-tax Act, 1961. The assessee challenged the ex parte disposal of the appeal, levy of tax at the Maximum Marginal Rate (MMR), surcharge at 37%, and consequential interest under Sections 234B and 234C.
Before the Tribunal, the assessee submitted that the dispute regarding the applicable rate of tax had already been decided in its own favour by the Delhi Tribunal in ITA Nos. 4372 to 4374/Del/2024 for Assessment Years 2021-22 to 2023-24 by order dated 29.01.2026. It was argued that, since no effective opportunity of hearing had been granted by the CIT(A), this binding decision could not be brought to the appellate authority’s notice, resulting in the matter being unnecessarily restored to the Assessing Officer. The assessee requested that tax be charged at the normal rates applicable to an Individual and HUF instead of the Maximum Marginal Rate. The Department relied on the orders of the lower authorities but left it to the Tribunal to consider the earlier decision in the assessee’s own case.
The Tribunal observed that the issue was identical to that decided in the assessee’s own earlier appeals. Referring to the earlier order, which had relied upon the decision in Vindhya Trust and other Tribunal decisions, it held that the assessee’s income was liable to be taxed at the normal rate and not at the Maximum Marginal Rate. Accordingly, Grounds 2.1 and 2.2 relating to the rate of tax were allowed.
Regarding the challenge to surcharge, the Tribunal noted that the CIT(A) had already directed the Assessing Officer to verify the trust deed and the status of the beneficiaries for determining eligibility for slab rates and to recompute surcharge in accordance with the Finance Act by applying the cap applicable to dividend income. The CIT(A) had also directed that interest under Sections 234B and 234C be recomputed consequentially. In view of these directions, the Tribunal held that Grounds 3.1 and 3.2 had become infructuous.
The appeal was, therefore, partly allowed.
Cases Discussed
- Vindhya Trust (ITAT Delhi), ITA No. 131/Del/2025, order dated 23.07.2025
- Dr. Shalmali Khasbardar Foundation v. ITO (Exemption) (ITAT Mumbai), ITA No. 3811/Mum/2024
- National Association of Interlocking Surgeons vs. ITO (ITAT Pune), (2025) 172 com 9 (Pune)
- Mahakavi Edasseri Smarka Trust vs. ITO (E) (ITAT Cochin), (2024) com 44 (Cochin)
- Jain Sangh Parabdi Khayu Trustee vs. DCIT, Bangalore (ITAT Ahmedabad SMC), ITA No. 353-354/AHD/2021
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal of the assessee is directed against the order of ld. CIT(A), Ranchi dated 19.09.2025 u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) wherein appeal of the assessee was decided by directing the AO to verify the trust deed and the status of the beneficiaries to determine the eligibility of slab rates alongwith some more directions as contained in para 5 of the impugned order.
2. Aggrieved by the impugned order, the assessee is in appeal before us and has raised the following grounds:
“I. EX-PARTE DISPOSAL OF APPEAL
1.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [CIT(Appeals)] erred in disposing off the appeal “Ex-Parte” without affording reasonable and sufficient opportunity of being heard to the Appellant, thereby violating the principles of natural justice.
1.2 The learned CIT(Appeals) erred in passing the Appellate Order under Section 250 of the Act dated 19.02.2026, whereas the appeal before Commissioner of Income Tax was filed on 17.02.2026. The Appellate Order has been passed within short span of time without granting any effective opportunity of hearing to the Appellant. As a result, the Appellate Order under Section 250 of the Act has been passed without due consideration of facts and in gross violation of the principles of natural justice. Accordingly, the said ex-parte Appellate Order may kindly be set aside and the matter may kindly be restored to the file of the learned CIT(Appeals) for fresh adjudication after granting adequate opportunity of being heard to the Appellant.
II. RATE OF TAX:
2.1 On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) erred in confirming the Tax levied by the learned Assessing Officer (CPC) at flat rate of 30% (Maximum Marginal Rate), instead of normal slab rates applicable in the case of the Appellant while processing the Return of Income under Section 143(1) of the Act.
2.2 The learned CIT(Appeals) failed to appreciate that the Appellant is an Association of Persons (AOP), a charitable trust not availing benefits of Section 11 of the Act and is liable to pay tax at the slab rates applicable in the case of an Individual, etc.
The Appellant prays that the learned Assessing Officer may kindly be directed to re-compute the tax by applying the normal slab rates and reduce the tax levied accordingly.
III. ERRONEOUS LEVY OF SURCHARGE:
3.1 The learned CIT(A) erred in confirming the surcharge levied by the learned Assessing Officer at the rate of 37% on the Income other than Dividend Income of the Appellant instead of the applicable rate of 15 % in the case of the Appellant while processing the Return of Income for the above year under Section 143(1) of the Act.
3.2 The learned CIT(A) failed to appreciate that the Total Income of the Appellant for the above year is Rs. 3,41,70,890/- (including the income by way of Dividend Rs. 3,25,16,940/-) exceeds Rs. 2 crores but is less than Rs. 5 crores. Accordingly, as per the as per clause(e) of the Paragraph (A) of Part-I of First Schedule to the Finance Act, if the case is not covered by either clause(c) or clause(d) the surcharge is payable @ 15%. Hence, in the case of the Appellant, the Total Income excluding Dividend Income of Rs. 3,25,16,940/- is only Rs. 16,53,945/-. Therefore, the rate of surcharge applicable on the entire income including income by way of dividend is 15%.
The Appellant prays that the Surcharge levied erroneously may kindly be deleted as the said levy is illegal and bad in law and hence invalid.
The appellant prays that the learned Assessing Officer be directed to re-compute the surcharge in the case of the Appellant as explained above and reduce the same accordingly.
IV. INTEREST UNDER SECTION 234B AND 234C OF THE ACT:
It is submitted that the erroneous levy of Tax and Surcharge at Maximum Marginal Rates has led to erroneous imposition of Interest under Sections 234B and 234C of the Act. Since the interest is consequential, the same also need to be revised once the tax and surcharge levied are re-computed.
The appellant prays that the erroneous interest charged under Sections 234B and 234C may kindly be revised as the same is contrary to the law and unwarranted.
The appellant hereby reserves the right to add to, alter or amplify the above grounds of appeal.”
3. We have heard the ld. AR and the ld. DR. The ld. AR at the very outset submitted that the issue involved is covered in assessee’s own case by the order of Delhi Tribunal in ITA Nos. 4372 to 4374/Del/2024 for A.Ys. 2021-2022 to 2023-24 vide order dated 29.01.2026. It is argued that the Delhi Tribunal in the above case has settled the issue of charging income tax at normal rate of tax as against Maximum Marginal Rate (MMR). It is therefore submitted that since the ld. CIT(A) has not afforded opportunity of hearing, the said fact could not be brought into the notice of the ld. CIT(A) wherein the matter has been restored to the AO which has resulted into miscarriage of justice. And it is therefore prayed that since the matter is covered in assessee’s own case hence the grounds raised be allowed and AO be directed to charge tax as per normal rate of tax as applicable to individual and HUF and not as per Maximum Marginal Rate (MMR).
4. We have also heard the ld. DR who, while relying the order of the lower authorities has left it to the discretion of the court to consider the order of the Delhi Tribunal in assessee’s own case referred (supra).
5. We have considered the submissions. Since the same issue is involved and settled in assessee’s own case in ITA Nos. 4372 to 4374/Del/2025 referred (supra), the relevant portion of the said order is extracted below as under:
“6. Heard the contentions of both parties and perused the material available on record. The sole dispute in this case is with respect to charging of tax whether it is on Maximum Marginal Rate (“MMR”) or as per normal rates of tax as applicable on Individual and HUF. The Co-ordinate bench of the Tribunal in the case of Vindhya Trust in ITA No.131/Del/2025 order dated 23.07.2025 has dealt with the issue and decided the same in favour of the assessee by making following observations:-
“2. At the time of hearing, ld. AR of the assessee submitted that the assessee is an AOP, filed its return of income for the AY 2021-22 on 11.10.2021 declaring total income of Rs.1,18,24,410/-. The return was processed under section 143(1) of the Income-tax Act, 1961 (for short ‘the Act’) wherein CPC has accepted the return of income, however the AO levied tax at a flat rate of 30% as against the assessee’s applicable tax slab rates in the case of an individual and also levied surcharge @ 37% instead of 15% applicable to the assessee.
3. Aggrieved, assessee preferred an appeal before the ld. CIT (A). Ld. CIT(A) considered the submissions of the assessee and by reference to the return of income filed by the assessee, he observed that the shares of the members of the assessee AOP are not undetermined, therefore, tax shall be charged at the total income of the assessee at the maximum marginal rate as per section 167B of the Act. Similarly, after considering the submissions of the assessee, ld. CIT (A) sustained the surcharge levied by the AO and held that there is no mistake in calculating the tax liability of the assessee.
4. Aggrieved with the above order, assessee is in appeal before us.
5. At the time of hearing, ld. AR of the assessee brought to our notice that in subsequent assessment year i.e. AY 2022-23, ld. JCIT (A)-3 considered the detailed submissions of the assessee and allowed the appeal of the assessee on both counts i.e. income chargeable and tax at MMR as well as levy of surcharge. He filed a copy of the same and further he submitted that in the following cases, the respective ITAT Benches allowed the similar issue contested before it :-
i. ITAT, Mumbai Bench in the case of Dr. ShalmaliKhasbardar Foundation v. ITO (Exemption) – ITA No.3811/Mum/2024;
ii. ITAT, Pune Bench in the case of National Association of Interlocking Surgeons vs. ITO – (2025) 172 com 9 (Pune);
iii. ITAT, Cochin Bench in the case of MahakaviEdasseriSmarka Trust vs. ITO (E) – (2024) com 44 (Cochin);
iv. ITAT, SMC, Ahmedabad Bench in the case of Jain SanghParabdiKhayu Trustee vs. DCIT, Bangalore – ITA No.353- 354/AHD/2021.
6. On the other hand, ld. DR of the Revenue relied on the orders of the authorities below.
7. Considered the rival submissions and material placed on record. We observe that in the current assessment year, lower authorities have applied the rate of MMR and also applied surcharge applicable to AOP as applicable to section 167B (1) of the Act. However, it is brought to our notice that the constitution and functions of the assessee are exactly similar and consistently followed by the assessee. In subsequent assessment year i.e. 2022-23, ld. CIT (A) has considered the similar facts on record and allowed the same by relying on the CBDT circular. For the sake of brevity, the same is reproduced below :-
“7.2.5. Section 167(1) of the Act, makes it very clear that this section would not apply to the company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1960), or under any law corresponding to that Act in force in any part of India. The appellant is a charitable trust registered under Charitable and Religious Trust Act, 1920 and therefore, appellant can’t be subjected to tax @ MMR at any cost.
7.2.6 The appellant being a public charitable trust, there profit ratio/ shares can’t be allocated among the members and once right is not allocated, the question whether the shares are determinate or indeterminate doesn’t arise. Further, this organization was not formed for a benefit of few individuals, like in private trusts and therefore sharing of income and determination of income of each individual does not arise. As per sub-section (2) of section 1678 of the Act which deals with association of persons or body of individuals, not being a case falling under subsection (1), where individual shares of members are not indeterminate or unknown, in other words, the shares of members is known and fixed is also not applicable to facts of the appellant for the reason mentioned supra. Hence, the rate of MMR under both sub sections (1) and (2) of 1678 is not applicable to appellant’ case.
7.2.7. It is pertinent to refer to the Circular of the C8DT in No. 320, dated 11.01.1982. The said circular is reproduced as under:
“Circular: No. 320 [F. No. 131(31)/81-TP (Pt.)], dated 11-11982- SECTION 167A ASSESSMENT WHERE SHARES OF MEMBERS UNKNOWN)
911. Whether the section is applicable to income received by trustees on behalf of provident funds created exclusively for the benefit of employees 5 ITA No.131/DEL/2025
1. A reference is invited to paragraph 15. 1 to 15.7 of the Explanatory Notes on the provisions relating to direct taxes in the Finance Act, 1981 [Circular No. 308, dated 29-6-1981] which explain the scope and ambit of section 167 A, as inserted by the Finance Act, 1981.
2. A question has been raise whether the provisions of section 167 A 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 or unknown would also apply to income receivable by trustees on behalf of provident funds, superannuation funds, gratuity funds, pension funds, etc., created bona 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 recognized 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 167 A 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”.
7.2.8. In view of the above, the appeal of the appellant is allowed and AO is directed to tax the appellant’s income at the normal tax rates applicable to AOP or Body of Individuals for the AY 2022- 23.”
8. Similarly, we observe that ITAT, Cochin Bench in the case of MahakaviEdasseriSmarka Trust (supra) considered the similar issue and held as under:-
“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.
4.7 We decide accordingly.”
9. Respectfully following the above decision and also the decision of the ld. CIT (A) in subsequent assessment year i.e. 2022-23, we allow the grounds raised by the assessee.”
7. Thus, by respectfully following the aforesaid judgements and other related judgements relied upon by Ld.AR for the assessee, we hold that the tax has to be charged at a normal rate of tax as against MMR. Accordingly, grounds raised in above captioned three appeals are allowed.
6. Hence, respectfully following the aforesaid order of the Co-ordinate Bench of Tribunal relied upon by Ld. AR for the assessee, we hold that the tax has to be charged at a normal rate of tax as against MMR. Accordingly, ground raised in above appeal pertaining to rate of tax i.e. ground Nos. 2.1 & 2.2 are allowed.
7. Regarding ground Nos. 3.1 & 3.2 pertaining to the erroneous levy of surcharge, on perusal of the impugned order, we have noticed that the ld. CIT(A) has already granted relief by directing the AO, observing in para 4 & 5 as under:
“4…………………………
B. Surcharge on Dividend Income
The Finance Act limits the surcharge on dividend income and income under sections 111A, 112, and 112Ato 15%.
* The appellant’s total income is Rs. 3,41,70,890.
* Dividend income is Rs. 3,25,16,940.
* Non-dividend income is Rs. 16,53,945.
As the non-dividend income does not exceed the specified threshold for higher surcharge rates (Rs. 2 crores), the surcharge on the entire income, including dividends, should be capped at 15%.
5. Conclusion
The AO is directed to verify the trust deed and the status of beneficiaries to determine the eligibility for slab rates. Furthermore, the AO is directed to re-compute the surcharge in accordance with the caps provided for dividend income under the Finance Act while the order giving effect passed. Interest under Section 234B and 234C is consequential and must be re-calculated accordingly.”
Hence, this grounds is rendered in fructuous.
8. In the result, the appeal of the assessee is partly allowed.
Order Pronounced in the Open Court on 03/07/2026.
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