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Facts
The assessee, a Discretionary Private Trust, declared dividend income and saving account interest for AY 2022-23. The CPC levied surcharge on dividend income at 37%, which was upheld by the CIT(A). The assessee contested this, arguing the surcharge should not exceed 15%.
Held
The Tribunal held that for dividend income falling within the slab rate of Rs. 50 lakh to Rs. 1 crore, the surcharge is leviable at 10%. The CPC erred in charging 37% surcharge.
Key Issues
Whether the surcharge on dividend income for AY 2022-23 should be levied at 37% as determined by the CPC and upheld by CIT(A), or at 10% as contended by the assessee based on relevant schedules and case law.
Sections Cited
143(1), 250, 2(29C), 2, 164, 234B, 234C, 111A, 112, 112A, 115BAC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “B”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
1. The captioned appeal at the instance of assessee pertaining to A.Y. 2022-23 is directed against the order dated 23.10.2024 passed by Addl.JCIT(A), Prayagraj u/s.250 of the Income-tax Act, 1961 (in short ‘the Act’) arising out of the Intimation order dated 16.03.2023 passed u/s.143(1) of the Act.
Brief facts of the case are that the assessee is a Discretionary Private Trust and income of Rs.90,13,190/- declared in the return for A.Y. 2022-23 furnished on 28.07.2022. For the year under consideration, assessee earned dividend income of Rs.90,12,900/- from companies and saving account interest of Rs.285/-. Assessee calculated the surcharge on dividend @10%. CPC vide intimation order dated 16.03.2023 computed the tax liability of Rs.8,33,716/-, thereby creating a demand of Rs.10,26,350/-. While doing so, the CPC calculated the surcharge on the dividend income @37%.
3. Aggrieved assessee preferred appeal before ld.CIT(A) and the ld.CIT(A) 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) of the Income-tax Act r.w.s.164 of the 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 :
“On the facts of the case and in law:- 1.1 The Honourable CIT(A) erred in determining tax on the dividend income earned by Discretionary Trust at maximum marginal tax rate of 42.744% by considering the surcharge @ 37% on Dividend Income of Rs. 90,12,900/- ignoring that the maximum marginal rate applicable to Income from dividend is @ 35.88% (Income Tax @ 30% + Surcharge @ 15% + Health and Education Cess @ 4%). 1.2 The Honourable CIT(A) failed to appreciate that in any case, the maximum surcharge applicable on dividend income cannot exceed 15% as per the rates prescribed in Finance Act 2022. Therefore, the maximum tax rate cannot exceed 35.88% as against 42.744% adopted by the Honourable CIT(A). 2.1 The Honourable CIT(A), erred in upholding interest calculated by learned AO u.s.234B and 234C after levying surcharge @37% on assessed tax, determining tax payable of Rs. 8,33,716/- and raised the outstanding demand of Rs. 10,26,350/-.
3. The Honourable CIT(A) erred in ignoring the fact that the similar issue was covered during the appeal proceedings of AY 2021-22, wherein, the Hon'ble CIT(A) has given the decision in favour of the appellant by limiting surcharge to the 15% for dividend income.
4. The Appellant prays for appropriate relief.
5. The Appellant Trust craves leave to add to, alter, amend, modify and/or delete any or all of the above Grounds of Appeal.”
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 lower authorities.
We have considered the rival arguments made by both the sides and perused the record placed before us. The only issue for our consideration is that whether surcharge on the dividend income of Rs.90,12,900/- added by the CPC 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 income of Rs.90,12,900/- has been earned from dividend. Total income declared in the income tax return filed on 28.07.2022 at Rs.90,13,190/- on the tax liability of Rs.27,03,957/-, assessee has paid surcharge @10%. However, the CPC calculated the surcharge at Rs.10,04,464/- @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 submitted, when assessee's income is returned at 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:
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)
Sriram Trust, Hyderabad vs. ITO (ITA Nos. 439, 440 & 441/Hyd./2024, decided on 19.06.2024)
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)
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 and surcharge on Dividend Income cannot exceed 15%. 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 income is only from dividend 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) is reversed and grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on this 14th day of May, 2025.