THE EXECUTOR OF SOBHAGMAL M PATNI (DECEASED ),MUMBAI vs. INCOME TAX OFFICER , WARD 30(1)(1), MUMBAI

PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 25.03.2025 passed by the Ld. Commissioner of Income- tax(Appeals)-National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2021-22, raising following grounds: In the fact and the circumstances of the case, and in law, the learned Addi/Joint Commissioner of Income-tax (Appeals) -(A)1 Kolkata, erred in confirming the respect of the r 1. In confirmin maximum marg maximum rate this case is 42. 2. In not appre 54,99,430/- vi the applicable r as per clause relevant Financ 3. In concluding a) The MMR a surcharge, if an b) Part applicab c) Once the ap surcharge for h 2. Briefly stated th Estate of the decea representative of the return of income for 54,99,430/- and c 12,19,419/- on suc However, the CPC wh has calculated the Maximum Marginal R surcharge) was worke 3. Aggrieved by th challenged it before t The Executo ITA variation in the intimation u/s 143(1) made rate of surcharge and erred: ng that the since the appellant is liable to ginal rate, the applicable rate of surcharge is of surcharge and hence the maximum marg .74%. eciating that since the total income of the app iz. more than Rs. fifty lakhs but less than R rate of surcharge ought to be 10 per cent (a) in Paragraph A of Part I to the First Sch ce Act. g that lways constitutes highest slab tax rates & ny, prescribed in Finance Act bility of MMR is not permissible ppellant is subject to MMR, surcharge applic highest slab only he facts of the case are that the ased Mr. Sobhagmal Patni an e deceased assessee. The app r A.Y. 2021-22 declaring total alculated tax (including sur ch total income at the norm hile processing the return u/s. 1 tax and surcharge on such t Rate (MMR) whereby the tax pa ed out to Rs. 15,18,733/-. his adjustment made by the CP the CIT(A) who held that once or of Sobhagmal M Patni 2 A No. 2774/MUM/2025 e by CPC in o pay tax at 37% viz. the rginal rate in pellant is Rs. s. one crore, hedule of the highest slab cable will be e appellant is an nd is the legal pellant filed the l income of Rs. charge) of Rs. mal rate of tax. 143(1) of the Act total income at ayable (including PC, the assessee the appellant is subject to MMR, the @37% for which the extract of the CIT(A)’s “F 7] The sub and not surch is 42.74%. Th part-l of Finan the extent of r the MMR is ap Here it is ne which determ applicable. Th subject to pr Therefore, wh specified in P MMR purpose Finance Act is "In cases to w or section 115 XII-FB or sub- 164A or secti (hereinafter r chargeable sh that section, section (1) or the case may Hence it is specified in p calculating M cases by virt 2020. The rat of section 2(2 IT Act. The Fi highest slab o rates of tax of mentioned in The word "if surcharge to relevant Finan For Ex. no su to slab of inc The Executo ITA levy of surcharge is to be at t assessee is in appeal before u s order is as under:- bmission of the appellant that MMR is fo harge, is not correct. The MMR for this A. he rates of taxation provided in the firs nce Act, 2020 are applicable to the appel rates of highest slab of tax and surcharge applicable to the appellant. There is no di cessary to refer the Finance Act, 2020, mines/specifies the rates of income he section 2 starts with non-obstante wor rovision of sub-section 2 & 3 for A.Y here sub-section 2 & 3 are applicable Part-l of first schedule required to be a e. The relevant part of sub-section 3 of s s as under: which the provisions of Chapter XII or Ch 5JB or section 115JC or Chapter XII-FA -section (1A) of section 161 or section 164 ion 167B of the Income-tax Act, 1961 (4 referred to as the Income-tax Act) app hall be determined as provided in that and with reference to the rates impose the rates as specified in that Chapter or be:" (Emphasis supplied) clear that, where MMR is applicable part-l of schedule are only relevant to th MMR and MMR will be charged in the tue of sub-section 3 of section 2 of Fi te of MMR has to be calculated as per the 9C) of IT Act r.w.s. 164 of the nance Act of every year is only relevant t of rate of tax & surcharge. After consideri of highest slab as well as surcharge of h the Finance Act MMR is to be calculated f any" in the section 2(29C) is relev the highest slab of income is mentio nce Act and it will be applicable for a par rcharge was applicable for A.Y. 2010-11 come of individual and AOP. Therefore, t or of Sobhagmal M Patni 3 A No. 2774/MUM/2025 the highest slab us. The relevant for Tax only Y. 2021-22 st schedule- llant only to e. It is clear ispute on it. , chapter-Il, tax to be rds such as Y. 2021-22. e, the rates adopted for section 2 of hapter XII-A or Chapter 4 or section 43 of 1961) ply, the tax Chapter or ed by sub- r section, as e the rates he extent of applicable inance Act, e provisions to know the ing both the highest slab & charged. vant if the ned in the rticular A.Y. & 2011-12 the word "if any" is releva to levy of surc any" is related in the schedu mentioned in in the tax a surcharge fo Finance Act quantum for suggest to inc of income/d mentioned in are not applic Act charging Nature of inco at MMR calcu The provision case of this Ap Therefore, it i as under on th Tax rates for Surcharge for Education Ces Therefore MM The MMR is commentary mentioned ar Income - henc Assessment year 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 The Executo ITA ant. Here the word surcharge "if any" ha charge if mentioned in the Finance Act. T d to the specification/mandate of surchar ule of Finance Act. If surcharge of high the Finance Act then this surcharge will and MMR will be calculated accordin r highest slab is mentioned in the s then no surcharge will be included calculating the MMR. This word does n clude surcharge in MMR as per different different income like dividend incom para -A, part-I, 1st schedule for divide cable to the appellant. Provisions of sectio the tax at MMR are applicable to the ome is not relevant as appellant is liable f ulated as per provisions of section 2(29C n claimed is applicable for Fils only and ppellant. is crystal clear that MMR is required to be he basis of provisions of section 2(29C) of highest slab - 30% - 30 r highest slab -37% - 11.11 ss -4% -1.63 MR for this A.Y.2023-24 will be 42.74%. s also calculated by this method on of Sampath lyengar. The year wi re as under: (Here Surcharge is not on ce 20% of tax => 12% of Income) r Maximum rate of tax Surcha 60% 12% 60% 6% 60% 6% 60% 6% 60% 7% 55% 6.88% 50% nil 50% nil 50% 5% or of Sobhagmal M Patni 4 A No. 2774/MUM/2025 as relevance The word "if rge mention hest slab is be included ngly. If no schedule of in the tax not remotely t slab rates me. Rates end income on 164 of IT e appellant. for taxation C) of IT Act. d not in the e computed f IT Act: nly in the ise details Tax but on arge % %

Assessment yea
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
Extracts of co
30.3 It was f amendment i use of private
(No. 2) Act, 19
to section 164
medium of su
(i) A discretio marginal rate the entire inc the maximum applicable to slab of incom the assessm
The Executo
ITA ar
Maximum rate of tax
Surchar
50%
5%
50%
8%
50%
12%
50%
12%
40%
12%
40%
12.00%
40%
nil
40%
nil
40%
nil
30%
--
30%
--
30%
10%
30%
17%
30%
2%
30%
5%
30%
10%
30%
10%
30%
10%
30%
10%
30%
10%
30%
10%
30%
--
30%
-- mmentary on Income-tax by Sampath Iye felt that the provisions of section 164, n 1970, had not been fully effective in e trusts for avoiding proper tax liability. T
980, has, therefore, made the following am
4 with a view to curbing tax avoidance t uch trusts:
onary trust will be liable to tax at the e of income-tax on their entire income. A come of a discretionary trust will be liab m marginal rate of income-tax including the Finance Act of the relevant year to me in the case of an association of person ment year 1980-81, the entire inco or of Sobhagmal M Patni
5
A No. 2774/MUM/2025
rge
%
engar:
even after curbing the The Finance mendments through the e maximum
As a result, ble to tax at surcharge) the highest s. Thus, for ome of a discretionary cent (income-t the assessme tax 60 per cen
For example and highest s calculated as Tax rates for Surcharge for Therefore MM
Similarly the M
Tax rates for Surcharge for PARTMEN Y
Therefore MM
In the book of which also su will have to b
Here, there i
Moreover, the of highest sla surcharge is not correct. Th highest slab s no doubt in it tax 30% & su
The Executo
ITA trust will be charged to tax at the rate tax 60 per cent plus surcharge 12 per ce ent year 1981-82, at the rate of 66 per ce nt plus surcharge 6 per cent).
surcharge for highest slab is 20% for A.
slab tax rate of IT was 60%, then the M under:
highest slab 60% - 60
r highest slab - 20% - 12
MR for this A.Y. 1980-81 will be 72%.
MMR for 1981-82 will be as under:
highest slab - 60% - 60
r highest slab - 10% - 6
MR for this A.Y. 1981-82 will be 66%.
f Vinod Singhania also calculation the MM upports the AO CPC's reason that surcha e charged.
is no mention of any head or sources e MMR will not be applicable in parts like ab rate for basic tax i.e. 30% is levied &
levied at a particular rate of 15% of LT he MMR always constitutes highest slab surcharge if any prescribed in Finance A t. Part applicability of MMR is not permiss urcharge @15% as per schedules of releva or of Sobhagmal M Patni
6
A No. 2774/MUM/2025
e of 72 per ent) and for ent (income-
Y. 1980-81
MMR will be MR is given arge @ 37%

of Income.
in one part in one part
TCG. This is tax rates &
Act. There is sible i.e. the ant Finance

Act on it is no surcharge ap
Surcharge @3
be 42.74% fo this ground of The Appellan has reduced
Surcharge ch reduced to R reduced from 154 dated 09
Hence, the G have no effec
09/06/2023
4. We have carefu authorities, materia appellant and revenu by the assessee com there is no dispute o on the tax payable. T payable should be @3
or not. The appellan appellant is Rs. 54,9
than Rs. 1 crore, the clause (a) in Paragr relevant Finance Act.
Hon’ble Special Benc
Trust v. ITO (ITA no the ultimate analysis income is chargeable
The Executo
ITA ot permissible. Once the appellant is subje pplicable will be surcharge for highest
37% is integral part of MMR and therefor r A.Y. 2021-22. Hence, there is no groun f Appeal.
t has informed that by an Order u/s 15
the S C on STCG & LTCG from 37% to 1
harged u/s 143(1)(a) of Rs 1,62,265/
Rs 1,06,593/-. The Disputed Demand m Rs 3,72,430/- u/s 143(1)(a) to Rs 73
9/06/2023, without any Reason.
round No.2 is DISMISSED. However, this ct on the Rectification Order passed by t after filing of this Appeal on 13/12/2022
ully perused the orders passe al on record and the argum ue. The total income of Rs. 54,9
mprises of STCG, LTCG and oth on the applicability of Maximum
The only issue is whether surcha
37% and therefore the MMR sh nt argues that since the total
99,430/- viz. more than Rs. 50
e applicable surcharge ought to aph A of Part I to the First S
. This issue has been recently a ch of this Tribunal in the case of o. 4272/Mum/2024) wherein i s, in case of Private Discretionar e to tax at MMR, surcharge has or of Sobhagmal M Patni
7
A No. 2774/MUM/2025
ect to MMR, slab only.
re MMR will nd to allow
54, the CPC
5% and the /-has been has been 3,908/- u/s s order will the CPC on 2.”
d by the lower ments made by 99,340/- offered her income and m Marginal Rate arge on such tax hould be 42.74%
l income of the 0 lakhs but less o be 10% as per
Schedule of the addressed by the f Araadhya Jain it is held that in ry Trusts, whose to be computed on the income tax h the Finance Act un appearing in Paragra relevant assessment reproduced as under “26. On going
Finance Act-20
the rates of in family or asso provided. As co income bracket the rate of Rs.2,50,000/-, tax is 5% of Rs.2,50,000/-.
des not exceed plus 20% of Rs.5,00,000/-
Rs.10,00,000/
amount by whi per the rates of income is Rs.10
is 30%. Thus, i marginal rate o income.
27. The expres section 2 or eve
Finance Act-20
is observed t
Government of Paper Book, su
'slab' refers to the Act refers
(F.No. 370142
Provisions of F
47 of the Pap expression 'sla with sections maximum marg highest slab of Schedule to the 28. Under th
Paragraph A, P amount of inco
The Executo
ITA aving reference to the slab rate nder the heading ‘surcharge o aph A, Part 1, First Schedule, a year. The relevant portion of :- through Paragraph A, Part (I) of First Sched
023, it becomes very much clear that under ncome tax applicable to individuals, Hindu u ociation of persons or body of individuals h ould be seen from the rates of income-tax for ts, if the total income does not exceed Rs.2, income tax is Nil. If the total income but does not exceed Rs.5,00,000/-, the rate f the amount by which the total income
Where the total income exceeds Rs.5,00,0
d Rs.10,00,000/-, the rate of income tax is R the amount by which the total income and lastly, where the total income
-, then the rate of tax is Rs.1,12,500/-plus 3
ich the total income exceeds Rs.10,00,000/-.
f income tax prescribed in Item (1), the highe
0 lacs and above and the applicable rate of in in terms with section 2(29C) of the Act, the m of tax will be 30% as applicable to the highe ssion 'slab' is not mentioned either in sub-sec en under Paragraph A, Part (I) of First Sched
023. However, as per the materials placed bef that in Press Note dated 01.12.1965 is f India, copy of which is placed at pg. no.
ubmitted in case of NIK Family Trust, the ex
'income' and not the tax. In fact, even section to highest slab of income. Even Circular No 2/15/2017-TPL] containing Explanatory
Finance Act, 2017, a copy of which is placed per Book filed by the NIK Family Trust, r ab' to the various categories of income. Thus,
164/167B r.w.s. 2(29C) of the Act, tax ginal rate would mean 'the rate of tax applica f income' under Item (1) of Paragraph A, Part e Finance Act-2023. he head 'Surcharge on income-tax' appe
Part (1), First Schedule it has been provided ome-tax computed as per the rate of income-t or of Sobhagmal M Patni
8
A No. 2774/MUM/2025
es prescribed in on income tax’
applicable to the this decision is ule to the r Item (1), undivided have been r different
50,000/-, exceeds of income exceeds
000/- but Rs.12,500
exceeds exceeds
30% of the Thus, as est slab of ncome tax maximum est slab of ction (1) of dule to the efore us, it ssued by 45 of the xpression
2(29C) of o. 2/2018
Notes to at pg. no.
refers the , in terms x as per able to the (I) of First earing in d that the tax under Item (1), (2) and 112 or section Tax Act, shall Union, calculat manner provid provided unde different rates categories of in 10% to the ma surcharge at 3
having total in the minimum ra only when the than Rs.1 crore to the Finance surcharge is w words, if the to there would b heading 'Surch the rate of sur income include section 111A, surcharge on income shall no assessee inclu certain provisio on such part of 29. If we accep the nature or q marginal rate u the highest rat
Rs.5 crores an proviso under otiose. Even, th under clause ( would become concerned. In absurdity, hen
'maximum ma surcharge prov the rates of inc under Paragrap would apply. A undesirable co the expression bracketed port surcharge as heading 'surch
(I) of First Sche
The Executo
ITA d (3) or under the provisions of section 111A
112A or the provision of section 115BAC of th be increased by a surcharge, for the purpos ted in the case of particular class of assesse ded therein. As could be seen from items er the head 'Surcharge on income-tax', t s of surcharge on income tax, depending ncome. The rate of surcharge starts from mi aximum of 37% on income-tax. The maximu
37% on income-tax is applicable in case of a come, exceeding Rs.5 crores. It further eman ate of surcharge @ 10% on the incometax is a income of the assessee is above Rs.50 lacs e. Thus, as per Paragraph A, Part (I) of First e Act-2023, the threshold limit for applic when total income is Rs.50 lacs and above.
otal income is below the threshold limit of Rs be no surcharge. Even the first proviso u harge on incometax' carves out an exception rcharge by stating that in case where assess es dividend income or income under the prov
112A and section 112A of the Act, the the amount of incometax computed on tha ot exceed 15%. In other words, if the total inco udes any income by way of dividend or inco ons of the Act, the rate of surcharge on tax c f income under no circumstances would excee ept the contention of the Revenue that, irresp quantum of income, as per the definition of m u/s.2(29C) of the Act, surcharge has to be com te of 37% applicable to the highest income b nd above, then the exception provided under the heading 'Surcharge on income-tax' woul he different rates of surcharge on income-tax
(a) to (e) applicable to the different slabs o e meaningless so far as discretionary tr our view, such an interpretation would nce, is unworkable. In our view, once the def arginal rate' refers to the rate of income vided under the Finance Act of the relevant y cometax and applicable rate of surcharge as ph A, Part (I) of First Schedule to the Finance A Any other interpretation, in our view, woul nsequences and would be discriminatory. In 'including Surcharge on income-tax, if any', w tion of section 2(29C) of the Act, would m provided in the computation mechanism u arge on income tax' finding place in Paragrap edule to the Finance Act-2023. or of Sobhagmal M Patni
9
A No. 2774/MUM/2025
or section he Income ses of the ees in the (a) to (e), there are upon the inimum of m rate of assessees nates that applicable s, but less
Schedule cability of . In other s.50 lacs, under the regarding see's total visions of e rate of at part of ome of an me under computed ed 15%.
pective of maximum mputed at bracket of r the first d become x provided of income rusts are d lead to finition of e-tax and year, then s provided
Act-2023, d lead to our view, within the mean the under the ph A, Part

Copy of the Order forwarded
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

The Executo
ITA um marginal rate' was never the issue b s. Thus, in our view, the view expressed nches in decisions referred to in Paragraph correct proposition of law. Thus, in the hold, in case of Private Discretionary Trust rgeable to tax at maximum marginal rate, s puted on the income tax having reference to ed in the Finance Act under the heading 'surc appearing in Paragraph A, Part 1, First S the relevant assessment year. Hence, ref our of the assessee. The records may be retur ve benches for deciding the appeals according llowing the decision of the H ned to hold that the surcharge been levied based on the slab ra nd of appeal of the assessee he appeal filed by the assessee is d in the open Court on 30/06/202 GOSAIN)
(OM PRAK
MEMBER
ACCOUNTA d to :

BY ORDER

(Assistant Regi

ITAT, Mum or of Sobhagmal M Patni
11
A No. 2774/MUM/2025
before the d by the 10(supra) ultimate ts, whose surcharge o the slab charge on Schedule, ference is rned back gly.”
Hon’ble Special e in the present ates and not on are accordingly s allowed.
5. d/-
KASH KANT)
ANT MEMBER
R, istrar) mbai