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Facts
The assessee, an Association of Persons (AOP), filed its return declaring an income of Rs. 6,71,350 for AY 2023-24. The CPC charged tax at the maximum marginal rate of 30% along with a 37% surcharge, leading to consequential demands for Cess and interest under Sections 234B and 234C. The assessee contended that no surcharge was leviable as its income was below Rs. 50 lacs, but the CIT(A) upheld the CPC's action.
Held
The Tribunal, proceeding ex parte, upheld the CIT(A)'s decision. It affirmed that for an AOP where the share of members is not determined, tax is chargeable at the maximum marginal rate, which includes surcharge at 37% as per Section 2(29C) and Section 164 of the Income Tax Act. Consequently, the related grounds concerning Health and Education Cess and interest were also dismissed.
Key Issues
Whether surcharge is leviable on the income of an Association of Persons (AOP) at the maximum marginal rate, including surcharge, when its total income is below Rs. 50 lacs but the shares of its members are not determined.
Sections Cited
234B, 234C, 164, 2(29C)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “SMC’’ : NEW DELHI
Asstt. Year : 2023-24 KELLOGG ALUMNI CLUB, VS. DY. DIRECTOR OF INCOME G-1, F/F, 10 CENTRAL AV., TAX CPC, MAHARANI BAGH, BANGALURU NEW DELHI – 110 065 KARNATAKA (PAN: AACTK1018J) (Appellant) (Respondent) Appellant by : None Respondent by : Shri Shyam Manohar Singh, Sr. DR. Date of Hearing 05.05.2025 Date of Pronouncement 05.05.2025 ORDER This appeal by the assessee is emanating from the order of the NFAC, Delhi in Appeal No. ITBA/APLS/250/2024-25/1071064606(1) order dated 10.12.2024.
Briefly stated, facts are that asssessee filed return of income on 30.07.2023, declaring total income of Rs. 6,71,350/-. AO accepted the said income and determined the tax at Rs. 2,01,405/-. As per the assessee, no surcharge on the same was chargeable under the Act. However, the CPC charged surcharge at 37% on the tax payable. AO has given consequential effect on Health and Education Cess, Interest u/s. 234B and S. 234C of the Act. In view of the intimation, the assessee is an AOP and therefore, the tax is chargeable at maximum marginal rate which also includes surcharge at maximum marginal rate. According to the assessee, it being an AOP, the tax is chargeable at 30%, however, no surcharge is payable considering the income was not exceeding Rs. 50 lacs.
In appeal Ld. CIT(A) dismissed the appeal of the assessee by observing as under:- “…7. Decision :- The Appellant has submitted that the status of the appellant is AOP, Resident of India. From the record it is no clear as to whether the appellant is registered as a Charitable Trust. As per the intimation status is shown as AOP. Tax rate applicable to AOP is at maximum marginal rate. The maximum marginal rate means tax rate at maximum rate which is 30% as well as surcharge is payable at 37% on the tax levied. An AOP where the share of the members is not determined, the tax is chargeable at maximum marginal rate including surcharge. 7.1 Ground No. 1 1. Surcharge of Rs. 74,520/- on income tax needs to be deleted. The appellant is an AOP and the share of its members is in determined and hence the tax is chargeable at maximum marginal rate. The appellant’s contention that no surcharge is leviable as per S.2 of Chapter II of Finance Act, 2023 read with Paragraph A of Part 1 first schedule 2 Finance Act, 2023 is not correct. As per S. 164 of the Act if the income of the AOP is chargeable to maximum marginal rate and the share of its members is in determined then the tax is payable at maximum marginal rate. The maximum marginal rate has been denied u/s. 2(29C) of the Act which states as under:- S.2(29C) “maximum marginal rate” means the rate of income-tax (including surcharge on income tax, if any) applicable in relation to the highest slab of income in the case of an individual, association of persons or, as the case may be, body of individuals as specified in the Finance Act of the relevant years;” 2 | P a g e
Accordingly, in the case of appellant maximum marginal rate of tax which will includes the surcharge payable on highest slab of income. Accordingly, the CPC has correctly charged surcharge on the tax. The ground of appellant therefore, is rejected and the surcharge at 37% is confirmed. 7.2 Ground No. 2, 3 & 4 2. Consequently Health and Education Cess needs to be reduced by Rs. 2981. 3. Consequently interest amount of Rs. 4764 under section 234B needs to be deleted.
4. Consequently interest amount of Rs. 2870 under section 234C needs to be deleted.
The appellant fails in Ground no. 1 and hence the Ground No. 2, 3 & 4 being consequential nature are also rejected. Therefore, these grounds are not allowed.”
Against the aforesaid order of the Ld. First Appellate Authority, assessee is in appeal before this Tribunal.
None appeared on behalf of the assessee, despite issue of notice for hearing, hence, I am proceeding exparate qua the assessee, after hearing the Ld. DR and perusing the records.
I have heard the Ld. DR and perused the records. Section 2(29C) stipulates that the “maximum marginal rate” means the rate of income-tax (including surcharge on income tax, if any) applicable in relation to the highest slab of income in the case of an individual, association of persons or, as the case may be, body of individuals as specified in the Finance Act of the relevant year, hence, the CPC has 3 | P a g e correctly charged surcharge on the tax @37%, and in first appeal the same was rightly confirmed by the Ld. CIT(A), which do not require any interference on my part, hence, I affirm the action of the Ld. CIT(A) on this count and reject the ground no. 1 raised by the assessee. Since other grounds are consequential in nature, hence, the same were not allowed by the Ld. CIT(A) and accordingly, we also confirm the finding of the Ld. CIT(A) on this account with respect to other grounds and reject the other grounds.
In the result, the Assessee’s appeal is dismissed. Order pronounced in the Open Court on 05.05.2025.