The CPC has processed my trust's return at the maximum marginal rate, saying s.115TD applies. But the trust gave up its registration back in March 2015. Can s.115TD reach it at all?
Not on those facts. Section 115TD was inserted by the Finance Act 2016; the order records it as taking effect from 1 June 2016 in one place and from assessment year 2016-17 in another. On either date, where the trust's registration had already ceased with effect from 20 March 2015 there was no registered trust for the section to bite on, and the total income had to be charged at the slab rates and not at the maximum marginal rate.
Decided by the ITAT (Kavitha Rajagopal, Judicial Member and Girish Agrawal, Accountant Member) on 2024-10-29, reported as ITA No. 1946/MUM/2024 (ITAT Mumbai, 'G' Bench); Assessment Year 2021-22. It bears on section 115TD, section 12A, section 143(1), section 234A, section 234B, section 234C of the Income Tax Act 1961, in Charitable Trusts & Exemption, Capital Gains Exemptions and Assessment & Scrutiny matters.
This is the temporal boundary of the exit tax, and it is the only defence available to a trust that walked away from registration before the section existed. It is a narrow defence and it is shrinking: the Finance Act 2022 widened s.115TD so that the charge is now triggered not only by cancellation of registration but also where a trust fails to apply for re-registration within the time allowed under s.12A(1)(ac), or under the first proviso to s.10(23C); that limb operates with effect from 1 April 2023. A trust whose default is a missed Form 10A or Form 10AB in the 2021 regime gets nothing from this order. Read the order also for what it does not decide: the demand in fact arose from a s.143(1) intimation that recomputed tax on the RETURNED total income at the maximum marginal rate, not from any separate assessment of accreted income under s.115TD(1) read with Rule 17CB, and the Tribunal did not separate the two. Do not cite it for the proposition that a s.115TD(1) charge on net asset value can be resisted on the merits.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee is a public charitable trust created by a trust deed dated 14 February 1975 and registered under s.12A(a) on 10 March 1976 with registration number TR/10904. On 12 March 2015 it applied to the CIT (Exemptions), Mumbai to discontinue availing the benefits of that registration. A show-cause notice was issued on 13 March 2015 and the proceedings were recorded in the order sheet on 20 March 2015 with the noting 'heard'. In the trust's own appeal for AY 2019-20 (ITA No. 7240/Mum/2019, order pronounced 24 March 2021) a coordinate bench had held, following Navajbai Ratan Tata Trust v. PCIT (ITA No. 7238/Mum/2019), that the cancellation took effect from 20 March 2015, the date on which the show-cause hearing concluded. For AY 2021-22 the trust filed its return in ITR-5 on 29 September 2021 declaring total income of Rs 50,08,440, computing tax at slab rates at Rs 13,15,032, surcharge at 10 per cent of Rs 1,31,503 restricted to Rs 5,908 after marginal relief, and cess of Rs 52,838; self-assessment tax of Rs 7,35,000 was paid and a refund of Rs 2,40,250 claimed. By intimation under s.143(1) dated 13 October 2022 the CPC accepted the total income as returned but recomputed the tax, surcharge and cess at the maximum marginal rate, converting the refund into a demand. The CIT(A), Thiruvananthapuram, dismissed the appeal by order dated 23 February 2024. The trust appealed, contending that s.115TD, introduced by the Finance Act 2016 with effect from 1 June 2016, could not apply to a registration surrendered on 20 March 2015.
The appeal was allowed. Since the cancellation of registration took effect from 20 March 2015 and s.115TD became effective only from assessment year 2016-17, the trust had lost the status of a registered trust before the provision applied to it, and the tax on total income had to be calculated at the slab rates applicable to an individual and not at the maximum marginal rate, with surcharge and cess likewise at the prevailing rates (paras 4.2 and 5).
The Tribunal treated the effective date of cancellation as settled by the trust's own earlier appeal, where a coordinate bench had held on 24 March 2021 that the cancellation order operated from 20 March 2015, being the date on which the hearing on the show-cause notice concluded, following Navajbai Ratan Tata Trust (paras 3 and 3.1). It then applied the coordinate bench decision in Tata Education Trust v. DCIT (ITA No. 1221/Mum/2024, dated 8 August 2024), which had held on identical facts that once registration is cancelled with effect from 20 March 2015 the trust loses its status as a registered trust and tax on total income falls to be computed at slab rates and not at the maximum marginal rate (para 3.2). Recording that the facts were undisputed and uncontroverted, the Tribunal noted that the assessment year before it was 2021-22, that the registration had been surrendered in financial year 2014-15, and that s.115TD became effective only from assessment year 2016-17, so the issue was squarely covered by the trust's own case and by Tata Education Trust (para 4.2). The remaining ground, on denial of a hearing by the CIT(A), was rendered academic.
Assessment year in the present case is 2021-22 and assessee had surrendered its registration in financial year 2014-15 whereas section 115TD became effective from Assessment Year 2016-17.
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Handle my notice → Ask a CA on WhatsAppNot on those facts. Section 115TD was inserted by the Finance Act 2016; the order records it as taking effect from 1 June 2016 in one place and from assessment year 2016-17 in another. On either date, where the trust's registration had already ceased with effect from 20 March 2015 there was no registered trust for the section to bite on, and the total income had to be charged at the slab rates and not at the maximum marginal rate. This was decided by the ITAT (Kavitha Rajagopal, Judicial Member and Girish Agrawal, Accountant Member) and bears on section 115TD, section 12A, section 143(1), section 234A, section 234B, section 234C of the Income Tax Act 1961. It is reported as ITA No. 1946/MUM/2024 (ITAT Mumbai, 'G' Bench); Assessment Year 2021-22. This is the temporal boundary of the exit tax, and it is the only defence available to a trust that walked away from registration before the section existed. It is a narrow defence and it is shrinking: the Finance Act 2022 widened s.115TD so that the charge is now triggered not only by cancellation of registration but also where a trust fails to apply for re-registration within the time allowed under s.12A(1)(ac), or under the first proviso to s.10(23C); that limb operates with effect from 1 April 2023. A trust whose default is a missed Form 10A or Form 10AB in the 2021 regime gets nothing from this order. Read the order also for what it does not decide: the demand in fact arose from a s.143(1) intimation that recomputed tax on the RETURNED total income at the maximum marginal rate, not from any separate assessment of accreted income under s.115TD(1) read with Rule 17CB, and the Tribunal did not separate the two. Do not cite it for the proposition that a s.115TD(1) charge on net asset value can be resisted on the merits. If it applies to you, the first step is this: Fix the exact date on which registration ceased and prove it from the order sheet or the cancellation order, not from the date the application to surrender was filed — here the Tribunal took 20 March 2015, the date the show-cause hearing concluded, following the trust's own earlier appeal.
The assessee is a public charitable trust created by a trust deed dated 14 February 1975 and registered under s.12A(a) on 10 March 1976 with registration number TR/10904. On 12 March 2015 it applied to the CIT (Exemptions), Mumbai to discontinue availing the benefits of that registration. A show-cause notice was issued on 13 March 2015 and the proceedings were recorded in the order sheet on 20 March 2015 with the noting 'heard'. In the trust's own appeal for AY 2019-20 (ITA No. 7240/Mum/2019, order pronounced 24 March 2021) a coordinate bench had held, following Navajbai Ratan Tata Trust v. PCIT (ITA No. 7238/Mum/2019), that the cancellation took effect from 20 March 2015, the date on which the show-cause hearing concluded. For AY 2021-22 the trust filed its return in ITR-5 on 29 September 2021 declaring total income of Rs 50,08,440, computing tax at slab rates at Rs 13,15,032, surcharge at 10 per cent of Rs 1,31,503 restricted to Rs 5,908 after marginal relief, and cess of Rs 52,838; self-assessment tax of Rs 7,35,000 was paid and a refund of Rs 2,40,250 claimed. By intimation under s.143(1) dated 13 October 2022 the CPC accepted the total income as returned but recomputed the tax, surcharge and cess at the maximum marginal rate, converting the refund into a demand. The CIT(A), Thiruvananthapuram, dismissed the appeal by order dated 23 February 2024. The trust appealed, contending that s.115TD, introduced by the Finance Act 2016 with effect from 1 June 2016, could not apply to a registration surrendered on 20 March 2015. The matter was decided on 2024-10-29 by the ITAT (Kavitha Rajagopal, Judicial Member and Girish Agrawal, Accountant Member). On those facts the ITAT held as follows. The appeal was allowed. Since the cancellation of registration took effect from 20 March 2015 and s.115TD became effective only from assessment year 2016-17, the trust had lost the status of a registered trust before the provision applied to it, and the tax on total income had to be calculated at the slab rates applicable to an individual and not at the maximum marginal rate, with surcharge and cess likewise at the prevailing rates (paras 4.2 and 5).
The Tribunal treated the effective date of cancellation as settled by the trust's own earlier appeal, where a coordinate bench had held on 24 March 2021 that the cancellation order operated from 20 March 2015, being the date on which the hearing on the show-cause notice concluded, following Navajbai Ratan Tata Trust (paras 3 and 3.1). It then applied the coordinate bench decision in Tata Education Trust v. DCIT (ITA No. 1221/Mum/2024, dated 8 August 2024), which had held on identical facts that once registration is cancelled with effect from 20 March 2015 the trust loses its status as a registered trust and tax on total income falls to be computed at slab rates and not at the maximum marginal rate (para 3.2). Recording that the facts were undisputed and uncontroverted, the Tribunal noted that the assessment year before it was 2021-22, that the registration had been surrendered in financial year 2014-15, and that s.115TD became effective only from assessment year 2016-17, so the issue was squarely covered by the trust's own case and by Tata Education Trust (para 4.2). The remaining ground, on denial of a hearing by the CIT(A), was rendered academic. In the words reproduced by the source cited on this page: "Assessment year in the present case is 2021-22 and assessee had surrendered its registration in financial year 2014-15 whereas section 115TD became effective from Assessment Year 2016-17." The decision followed or applied Tata Education Trust v. DCIT, ITA No. 1221/Mum/2024 dated 8 August 2024 (ITAT Mumbai) — followed; Sarvajanik Seva Trust's own case, ITA No. 7240/Mum/2019 pronounced 24 March 2021 (ITAT Mumbai) — followed on the effective date of cancellation; Navajbai Ratan Tata Trust v. PCIT, ITA No. 7238/Mum/2019 (ITAT Mumbai) — relied upon.
It was decided by the ITAT on 2024-10-29 and is reported as ITA No. 1946/MUM/2024 (ITAT Mumbai, 'G' Bench); Assessment Year 2021-22. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 115TD, section 12A, section 143(1), section 234A, section 234B, section 234C, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed. Since the cancellation of registration took effect from 20 March 2015 and s.115TD became effective only from assessment year 2016-17, the trust had lost the status of a registered trust before the provision applied to it, and the tax on total income had to be calculated at the slab rates applicable to an individual and not at the maximum marginal rate, with surcharge and cess likewise at the prevailing rates (paras 4.2 and 5). It arises in Charitable Trusts & Exemption, Capital Gains Exemptions and Assessment & Scrutiny matters, on section 115TD, section 12A, section 143(1), section 234A, section 234B, section 234C of the Income Tax Act 1961, and was decided by Kavitha Rajagopal, Judicial Member and Girish Agrawal, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If that date is before 1 June 2016, take the commencement point first: s.115TD simply did not exist, and no question of accreted income arises. Check what the intimation actually did. If the CPC has recomputed tax on the returned total income at the maximum marginal rate rather than raising a separate charge on accreted income, say so — the two are different charges and the arithmetic in the intimation will usually show which one you are facing. If your trust's problem is instead a missed Form 10A or Form 10AB under the post-1 April 2021 regime, do not rely on this order: the Finance Act 2022 limb of s.115TD covers failure to apply for re-registration, with effect from 1 April 2023, and that limb is not affected by anything decided here. Where the registration has genuinely gone, compute the tax on total income at the rates applicable to an individual or association of persons and claim marginal relief on surcharge, as the trust did in its return here.
Validity check could not be completed. Validity check could not be completed. No appeal against this order, and no decision doubting it, was searched for or located. What is known is that the same bench-level view was applied to the same trust for AYs 2022-23 and 2023-24 by the SMC bench in ITA Nos. 1947 and 1948/Mum/2024, pronounced 28 January 2025, which reproduces this order. Note separately that the reasoning is confined to the pre-Finance Act 2022 shape of s.115TD: the Finance Act 2022 extended the charge, with effect from 1 April 2023, to a trust that fails to apply for re-registration within the time allowed under s.12A(1)(ac) or under the first proviso to s.10(23C), and nothing in this order addresses that limb. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two separate retrievals of this order were made and one passage differs between them. The first rendering of para 4.2 compressed the sentence about Tata Education Trust into 'and tax must use slab rates, not MMR'; the second rendering, and the companion order for AYs 2022-23 and 2023-24 which reproduces this order in full, both give the sentence as 'once the registration of Trust is cancelled w.e.f. 20.03.2015, the Trust lost its status of a registered Trust and therefore, tax on total income has to be calculated at slab rates applicable to an individual and not at MMR'. The key_quote used here is the one sentence that appeared identically in both retrievals and was separately confirmed by exact-phrase retrieval. Second, indiankanoon dates the companion order (ITA Nos. 1947 and 1948/Mum/2024) 27 January 2025 while the order itself records the date of pronouncement as 28 January 2025; the hearing was on 21 January 2025. Third, the order refers throughout to 'accreted income' but the figures set out in para 4 and 4.1 are of total income returned and the tax recomputed on it, so the Tribunal appears to have used the ground as framed rather than adjudicating a Rule 17CB computation. Fourth, the appeal number for the trust's own earlier 2021 order is printed once as 'ITA 7240/Mum/2019' and once, in the grounds, as 'FFA No 72404MUM/2019'; the former is plainly correct. Fifth, the order is not self-consistent on when s.115TD took effect. Para 2.1, the Tribunal's own framing of the issue, records that 'the provisions of section 115TD were introduced by Finance Act, 2016 with effect from 01.06.2016'; para 4.2, quoted below, says the section 'became effective from Assessment Year 2016-17'. Those are not the same date. Both are reproduced here as the order gives them. On these facts the difference is immaterial, because the registration ceased on 20 March 2015, before either. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed. Since the cancellation of registration took effect from 20 March 2015 and s.115TD became effective only from assessment year 2016-17, the trust had lost the status of a registered trust before the provision applied to it, and the tax on total income had to be calculated at the slab rates applicable to an individual and not at the maximum marginal rate, with surcharge and cess likewise at the prevailing rates (paras 4.2 and 5).
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