Taxation of society

Tax queries 1207 views 4 replies

Guest

A society (club) has a PAN as AOP and has profit from sale of tickets for a programme (from non members too) of Rs 20000 and Rs 25000/- as bank Fd interest.

So total Income is Rs 45000/-

Will this be taxed at 30%? or as per slabs?

Is the following circular still valid?

CBDT Circular : No. 320 [F. No. 131(31)/81-TP(Pt.)], dated 11-1-1982.

SECTION 167A l ASSESSMENT WHERE SHARES OF MEMBERS UNKNOWN

909. Whether the section is applicable to income received by trustees on behalf of provident funds created exclusively for the benefit of employees

1. A reference is invited to paragraphs 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 167A, as inserted by the Finance Act, 1981.

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 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 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.

Circular : No. 320 [F. No. 131(31)/81-TP(Pt.)], dated 11-1-1982.

Replies (4)

Dolly

CA Job

28 Points Joined July 2015

Madam,

I presume that in your case members are not entitled to any share in income of AOP . In such a case, circular mentioned by you comes into effect. Hence the income of such AOP will be governed by ordinary rates applicable to it and not MMR. This view is supported in judgement of Secunderabad Club vs Assistant Commissioner Of Income Tax (ITAT - Hyderabad - 5 March, 2002). Nothing has yet come into effect for withdrawl of such circular. So it can be said that such circular is still valid.

Inspite of such circular being in operation, income tax department issues notices for levy of MMR to income of such AOP where members are not entitled for any share in income of AOP.

jvratnam

Others

109 Points Joined May 2015

The income of the cooperative housing societies registered under the cooperative societies act is subjected to Income tax at the following rates, the idea being to discourage undertaking any commercial activities by the society;

upto Rs 10,000, ---- 10%

Up to Rs 20,000--------20 %

Above Rs.20,000------30 %

Plus cess at 3%

The interest on FDR and income on sale of tickets iattracts Income tax at the above rates as the income is received from non members of the society.