Registered Society Cannot Be Subjected to Maximum Marginal Rate Simply for Filing Return as AOP/BOI: ITAT Visakhapatnam

Case Background

Case Name: Wings Educational Society Vs ITO (ITAT Visakhapatnam)
Assessment Year: 2024-25
Forum: Income Tax Appellate Tribunal, Visakhapatnam
Date of Order: 21st August, 2026

Overview of the Dispute

This case revolves around a fundamental question of tax rate applicability — whether a society registered under the Societies Registration Act, 1860 can be subjected to the maximum marginal rate of tax solely on the basis that it filed its return of income under the status of an Association of Persons (AOP) or Body of Individuals (BOI).

Wings Educational Society, registered under the Andhra Pradesh Societies Registration Act, 2001, filed its return of income for Assessment Year 2024-25 on 31.07.2024, declaring a total income of Rs. 2,47,640/-. Notably, this declared income fell below the taxable limit under prevailing provisions of the Income Tax Act, 1961. Despite this, the Centralized Processing Center (CPC) processed the return and applied the maximum marginal rate along with applicable surcharge and cess, resulting in a tax computation of Rs. 96,580/- and interest charges of Rs. 11,628/-, culminating in an aggregate demand of Rs. 1,08,210/-.

This mechanical application of the higher tax rate — without due regard to the nature and registration status of the assessee — formed the crux of the dispute that eventually reached the ITAT Visakhapatnam.

Grounds of Appeal Raised by the Assessee

The assessee raised multiple substantive and procedural grounds before the Tribunal, which can be broadly categorized as follows:

1. Erroneous Application of Section 167B

The assessee contended that the Ld. Addl./Joint Commissioner of Income Tax (Appeals), Panaji, committed a grave error both in law and on facts by upholding the CPC's action of taxing the returned income of Rs. 2,47,640/- at the maximum marginal rate, resulting in a demand of Rs. 1,08,210/-, instead of applying the normal rates of tax.

Ground 2 of the appeal read: "The Learned Addl/ Joint Commissioner of Income Tax (Appeals), Panaji, erred both in law and on facts in holding that, Section 167B of the Income-tax Act, 1961 is applicable to the appellant and thereby upholding the adjustment made by the Centralized Processing Center, wherein the returned income of Rs. 2,47,640/- was taxed at the Maximum Marginal Rate in place of normal rates, resulting in a demand of Rs. 1,08,210/-."

2. Mischaracterisation of the Assessee's Status

The assessee further argued that its return of income clearly indicated its sub-status as a "Society registered under the Societies Registration Act, 1860 or any law corresponding to that state", and that the appellate authority failed to appreciate this essential fact. The assessee maintained that Section 167B was wholly inapplicable in its case and that its tax liability, correctly computed under normal applicable rates, was nil.