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Facts
The assessee, a Discretionary Private Trust, declared an income of Rs. 56,60,520/- including dividend income and interest income. The assessee calculated a surcharge at 10%, but the CPC computed tax liability with a surcharge of 37% on interest income. The CIT(A) affirmed the CPC's action.
Held
The Tribunal held that the surcharge is to be levied based on the slab rates provided in the First Schedule. Since the assessee's total income was less than Rs. 1 crore, the surcharge leviable was 10%, not 37%.
Key Issues
Whether the surcharge on income-tax is to be levied based on the Maximum Marginal Rate or the slab rates specified in the First Schedule, considering the total income of the assessee.
Sections Cited
2(29C), 164, 167B, 111A, 112, 112A, 115BAC, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2023-24 Ashok Patni Family Trust, Vs. A/DCIT, Circle-7, Pune. S. No.1A, F-1, Irani Market Compound, Yerwada, Pune- 411006. PAN : AAGTA3844A Appellant Respondent Assessee by : Shri Kiran Sanmane Revenue by : Mrs. Indira Adakil Date of hearing : 08.05.2025 Date of pronouncement : 16.05.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 18.12.2024 passed by Ld. Addl/JCIT(A), Faridabad for the assessment year 2023-24.
Facts of the case, in brief, are that the assessee is a Discretionary Private Trust and has furnished its return of income on 18.07.2023 declaring income of Rs.56,60,520/-. For the year under consideration, the assessee earned dividend income of Rs.41,10,541/- from companies and interest of Rs.15,49,979/- from saving accounts. Assessee calculated the surcharge at the rate of 10% only. CPC vide intimation order dated 27.05.2024 computed the tax liability of Rs.20,73,261/- including surcharge. While doing so, the CPC calculated the surcharge at the rate of 37% on interest income.
Aggrieved assessee preferred appeal before Ld. Addl/JCIT(A), Faridabad and the Ld. Addl/JCIT(A), Faridabad affirmed the action of the CPC on the ground that rate of Maximum Marginal Rate has to be calculated as per the provisions of section 2(29C) r.w.s. 164 of the IT Act by virtue of sub-section 3 of section 2 of Finance Act, 2021.
4. Now, the assessee is in appeal before this Tribunal by raising the following grounds : “
In the fact and the circumstances of the case, and in law, the learned Addl/Joint Commissioner of Income-tax ((Appeals)- Faridabad, erred in confirming the variance in the intimation u/s 143(1) made by CPC in respect of the rate of surcharge and erred :
1. In holding that in the case of the appellant provisions of section 167B rws 2(29C) are applicable and therefore the appellant is subjected to taxation at the highest slab of income tax (including surcharge) as applicable for the given AY which is 37% surcharge in the case of the appellant for the given AY.
2. In holding that when the provisions of section 167B rws 2(29C) are applicable, the whole income would be subjected to highest slab of taxation for the given income, irrespective of the nature of income.
3. In not appreciating that the words "rate of income-tax (including surcharge on income-tax, if any)" in section 2(29C) denotes two separate levies and hence MMR does not automatically include higher rate of surcharge.
In not appreciating that the total income of the appellant (including dividend income) is Rs. 56,60,520/- and accordingly, as per clause (a) under the heading "Surcharge on income-tax" in Paragraph A of Part I of the First Schedule to the Finance Act, 2023, the applicable rate of surcharge ought to be 10 per cent.
The Appellant craves leave to add to, withdraw or modify any of the grounds of appeal
at the time of hearing.”
5. At the outset, Ld. Counsel for the assessee submitted that the case of the assessee’s is squarely covered by the decision of Hon’ble Special Bench in the case of Araadhaya Jain Trust vs. ITO in order dated 09.04.2025 where it has been held that surcharge shall be levied based on the slab rate in First schedule under the heading “surcharge on income tax” appearing in Paragraph A, Part 1, First Schedule, applicable to the relevant assessment year. Referring to the said decision Ld. Counsel for the assessee submitted that for the relevant year under consideration as per the tax rate slab the income of the assessee falls under the head where surcharge is levied @10% whereas the CPC has levied surcharge @37%.
6. On the other hand, Ld, Departmental Representative supported the orders of the subordinate authorities.
We have heard Ld. Counsels from both the sides and perused the material available on record. The only issue for our consideration is that whether surcharge at the rate of 37% by CPC on the income declared by the assessee was justified. We notice that the assessee is a Family Trust and the income earned is liable to be taxed at the Maximum Marginal Rate (MMR). For the year under consideration, the assessee has calculated 10% surcharge however, the CPC calculated the surcharge at the rate of 37%. Before us, Ld. Counsel for the assessee has referred to the Special Bench decision in the case of Araadhaya Jain Trust (supra) where the Special Bench affirmed the view taken by various coordinate benches referred in Para 10 of the order and for the sake of convenience Para 10 is reproduced below :- “10. Referring to sub-section (3) of section 2 of Finance Act, 2023, he submitted, it only refers to charge of income tax for the purpose of section 164/167B of the Act and does not refer to the charge of surcharge. He submitted, insofar as, surcharge is concerned, the charging provision is specifically provided u/s. 2(1) of Finance Act, 2023, which refers to the First Schedule and provides for levy of surcharge at slab rates, meaning thereby, the highest rate of surcharge at 37% can be made applicable only when the income exceeds Rs.5 crores. Thus, he submitted, unless the threshold limit of Rs.5 crores is reached, surcharge at the highest rate of 37% cannot be levied. He Rs.4,85,290/-, though, the applicable rate of income tax would be at 30%, being the maximum marginal rate, however, no surcharge would be leviable, as the quantum of income is less than Rs.50 lacs. In support of such contention, Id. Counsel relied upon the following decisions: 1. ITO vs. Tayal Sales Corporation [2003] 1 SOT 579 (Hyd.) 2. Lintas Employees Professional Development Trust vs. ITO (ITA No. 4791/Mum/2023 decided on 29.05.2024) 3. Sriram Trust, Hyderabad vs. ITO (ITA Nos. 439, 440 & 441/Hyd./2024, decided on 19.06.2024) 4. Ujjwal Business Trust vs. CPC (in decided on 28.06.2024) 5. Lintas Employees Holiday Assistance Trust vs. CPC (ITA No. 1796/Mum/2024 decided on 26.07.2024) 6. Jitendra Gala Navneet Trust vs. DDIT and Dilip Sampat Navneet Trust vs. DDIT (ITA Nos. 2484 & 2485/Mum/2024 decided on 22.10.2024) 7. Lintas Employees Holiday Assistance Trust vs. 3949/Mum/2024 decided on 20.01.2025) ITO (ITA No.
8. V. Meera Charitable Trust vs. ITO (ITA No. 2140/Chny/2024 decided on 07.02.2025).”
Now in the light of above decision of the Special Bench and examining the facts of the instant case, we notice that the surcharge is to be levied based on the slab rates referred in First Schedule, Paragraph A of Part 1. First Schedule to the Finance Act, 2023 is also reproduced below for necessary guidance :-
From going through above schedule for rate of surcharge we find that in the instant case the total income is less than Rs.57,00,000/- and is between the slab rate of Rs.50.00 lakh to Rs.1 crore and therefore surcharge is leviable @10% and therefore CPC erred in charging surcharge @37%. Thus, finding of CIT(A) with