Whether the income of the assessee club would be taxable at maximum marginal rate u/s.167B of the Act or at slab rates applicable to AOP?

This case concerns whether an assessee club's income should be taxed at the maximum marginal rate under Section 167B of the Income Tax Act or at the slab rates applicable to an Association of Persons (AOP). The assessee argued that historically, they were taxed at slab rates, and the shift to electronic filing caused the software to automatically apply the maximum marginal rate. The Income Tax Appellate Tribunal agreed to restore the issue to the Assessing Officer for a fresh decision.

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C‘ BENCH
MUMBAI

BEFORE: SHRI MAHAVIR SINGH, VICE PRESIDENT
 &
SHRI M.BALAGANESH, ACCOUNTANT MEMBER

ITA No.5431/Mum/2019
(Assessment Year :2014-15)

M/s. Parsee Gymkhana
C/o. Kalyaniwalla and Mistry
LLP,2nd Floor, Esplanade House
29, Hazarimal Somani Marg
Fort, Mumbai – 400 001
PAN/GIR No.AAAAP0177E
(Appellant) .. 

Vs. 

Asst. Commissioner of
Income Tax,
Circle 18(2)
Mumbai
Room No.302, 3rd Floor
Earnest House
Nariman Point
Mumbai – 400 021
(Respondent)

Assessee by Shri M.M. Golvala
Revenue by Ms. Shreekala Pardeshi

Date of Hearing 29/06/2021
Date of Pronouncement 01/07/2021

 O R D E R

PER M. BALAGANESH (A.M):
 
This appeal in ITA No.5431/Mum/2019 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in appeal No.CIT(A)-53/IT-376/ACIT-18(2)/2018-19 dated 18/06/2019 (ld. CIT(A) in short) against the order of assessment passedu/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act)  dated 05/12/2016 by the ld. Asst. Commissioner of Income Tax 18(2), Mumbai (hereinafter referred to as ld. AO).

2. The only effective issue to be decided in the instant appeal is that whether the income of the assessee club would be taxable at maximummarginal rate u/s.167B of the Act or at slab rates applicable to Association Of Persons (AOP).

3. We have heard rival submissions and perused the materials available on record. We find that the assessee formed Members Club on25/02/1885. The assessee is managing a Gymkhana namely “Parsee Gymkhana” located at New Marine Lines, Mumbai. The assessee filed its return of income for the A.Y.2014-15 on 24/07/2014 electronically declaring total income of Rs.1,36,86,560/- in the status of AOP wherein the tax rate was automatically picked up to be chargeable at maximum marginal rate by the income tax return filing software. The ld. AR pleaded that till A.Y.2010-11, where the returns were filed manually before the Income Tax department, the assessee club had been offering income totax at slab rates applicable to AOP and which was accepted by the department. However, commencing from A.Y.2011-12 onwards, when electronic filing was made mandatory, once the status of the assessee isaccepted as AOP, the ld. AR pleaded that the return filing software automatically taxes the income to be chargeable at maximum chargeable rate. The ld. AR also stated that in the A.Y.2014-15, assessment wascompleted u/s.143(3) of the Act wherein assessee was charged tax onlyat slab rates and provisions of Section 167B of the Act were not made applicable. Accordingly, the ld. AR pleaded that this appeal may be restored back to the file of the ld. AO to decide in light of assessment framed for the A.Y.2014-15 in the hands of the assessee. The ld. DR fairly agreed to the said proposition of the ld. AO. Considering the facts of the case and arguments advanced hereinabove by the parties, we deem it fit to restore this issue to the file of the ld. AO for denovo adjudication in accordance with law.

4. In the result, appeal of the assessee is allowed for statistical purposes.

Order pronounced on 01/07/2021 by way of proper mentioning in the notice board.

Sd/-                                                        Sd/-
(MAHAVIR SINGH)                               (M.BALAGANESH)
VICE PRESIDENT                                ACCOUNTANT MEMBER

Mumbai; Dated 01/07/2021
KARUNA, sr.ps

Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT
5. DR, ITAT, Mumbai
6. Guard file

//True Copy//
BY ORDER,

(Asstt. Registrar)
ITAT, Mumbai