Loading judgment…
Facts
The assessee, a private discretionary trust, declared a total income of Rs. 1,18,07,380/- for AY 2022-23. The AO/CPC levied surcharge at 37% instead of the 15% claimed by the assessee, which was upheld by the CIT(A).
Held
The Tribunal held that for private discretionary trusts with income chargeable at the maximum rate, the surcharge should be computed based on the slab rates prescribed in the Finance Act. For income between Rs. 1 crore and Rs. 2 crores, the surcharge is 15%.
Key Issues
Whether the surcharge on income of a private discretionary trust for AY 2022-23 should be levied at 37% or 15% based on the income bracket.
Sections Cited
164, 143(1), 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE “A” BENCH : PUNE
Before: SHRI RAMA KANTA PANDA, VICE- & Ms. ASTHA CHANDRA
This appeal filed by the assessee is directed against the order dated 21.06.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Year (“AY”) 2022-23.
The assessee has raised the following grounds of appeal:-
1. On the facts and in the circumstances of the case and in law, Ld. CIT has erred in calculating the surcharge at 37% on the income of Rs. 1,18,07,380/- by invoking the provisions of sec. 164 of Income Tax Act and by rejecting the appellants contention that surcharge should be levied at the rate of 15% only.
2. On the facts and in the circumstances of the case and in law, Ld. CIT has erred in considering the fact that CPC has not correctly processed the return & intimation served under 143(1) is not correct in law.”
3. The sole grievance of the assessee is that Ld. CIT(A) erred in affirming the action of the Ld. Assessing Officer / Centralized Processing Centre (“AO/ CPC”) levying surcharge of 37% on the tax calculated on the income of assessee trust at Maximum Marginal Rate (“MMR”).
2 ITA.No.1711/PUN./2024 (Archita Trust) 4. At the outset, the Ld. AR submitted that the impugned issue is covered in favour of the assessee by the decision of the of the Hon'ble Mumbai ITAT Special Bench in the case of Araadhya Jain Trust Vs. ITO (ITA No. 4272/Mum/2024 dated 09.04.2025.
The Ld. DR conceded with the above submission of the Ld. DR.
We have heard the Ld. Representatives of the parties and perused the material available on record and the decision of the Special Bench of the Mumbai Tribunal in the case of Araadhya Jain Trust (supra) as well. It is an admitted fact that the assessee is a private discretionary trust and declared total income of Rs. 1,18,07,380/- in the return of income filed for AY 2022-23. The assessee paid tax at the MMR of 30% of Rs. 35,42,214/- on income of Rs. 1,18,07,380/- and further adding Surcharge @ 15% on tax of Rs. 5,31,332/- and Cess @ 4% on tax plus surcharge of Rs. 1,62,942/-, paid the total tax amounting to Rs. 42,36,488/-. The return of the assessee was processed by CPC under section 143(1) of the Act accepting the income of Rs. 1,18,07,380/- returned by the assessee and calculating the tax liability @ 30% of Rs. 35,42,214/- plus Surcharge @ 37% of Rs. 13,10,619/- and then adding Cess @ 4% on tax plus surcharge of Rs. 1,94,113/-. As the CPC levied surcharge @ 37% instead of 15% paid by the assessee, the assessee filed a rectification application under the provisions of section 154 of the Act for reprocessing of return. However, rectification order under section 154 was passed again calculating tax as per intimation under section 143(1) of the Act determining total taxes paid of Rs. 50,68,976/- resulting in increase of Rs. 82,905/- and refund of Rs. 22,030/- . On appeal against such order of the Ld. AO/CPC passed under section 154 of the Act, the the Ld. CIT(A) confirmed the order of the Ld. AO/CPC for the reasons recorded in para 5 of his impugned appellate order dated 21.06.2024.
7. We have perused the decision of the Special Bench of the Mumbai Tribunal in the case of Araadhya Jain Trust (supra) and find that the impugned issue stands decided in favour of the assessee. We observe that the said decision of the Special Bench was not available when the impugned order was passed by the Ld. CIT(A). The Special Bench of the Mumbai Tribunal in the case of Araadhya Jain Trust (supra) Special bench in case of Araadhya Jain Trust (Supra) has held that “in case of 3 ITA.No.1711/PUN./2024 (Archita Trust) Private Discretionary Trusts, whose income is chargeable to tax at maximum chargeable rate, surcharge has to be computed on the income tax having reference to the slab rates prescribed in the Finance Act under the heading “Surcharge on Income Tax” appearing in Para A, Part 1, First Schedule, applicable to the relevant assessment year.”
The levy of surcharge depends on the amount of income of the assessee. Admittedly, the income offered for tax by the assessee and accepted by the Ld. AO/ CPC for AY 2022-23 is Rs. 1,18,07,380/-. For the relevant AY 2022-23 under consideration, surcharge is leviable (subject to marginal relief) when the income of the assessee exceeds 50,00,000/- and the maximum rate of surcharge of 37% is leviable if the income exceeds Rs. 5 crore. Where the income falls within the bracket of more than Rs. 1 crore upto 2 crores (as in the case of the assessee in the instant case), surcharge is leviable at the rate of 15% as rightly claimed by the assessee in his return of income and rectification application thereafter. Thus, in light of the ratio laid down by the Mumbai ITAT Special Bench in the case of Araadhya Jain Trust (supra), in our considered view, the Ld. AO/ CPC erred in leving surcharge @ 37% on the assessee which was confirmed by the Ld. CIT(A).
Considering the facts of the case and legal position set out above and in the absence of any objection raised and any contrary material brought on record by the Revenue, respectfully following the decision of the Special Bench of Mumbai Tribunal (supra), we set aside the order of the Ld. CIT(A) and direct the Ld. AO/CPC to modify the assessment allowing the claim of the assessee. Ground nos. 1 and 2 of appeal of the assessee are accordingly allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 22.05.2025.