MARUTI TRUST,KOLKATA vs. I.T.O., WARD - 30(1), KOLKATA
Facts
The assessee, a private trust, filed its returns of income for Assessment Years 2022-23, 2023-24, and 2024-25, declaring incomes below Rs. 50 lacs and computing tax at 30% plus 4% cess. However, the AO CPC, while processing the returns under Section 143(1) of the Income Tax Act, applied the maximum marginal rate of tax, including surcharge, thereby raising a demand for income tax against the assessee. The Ld. CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that surcharge is not applicable to the assessee as its income is below Rs. 50 lacs in each year. Following a co-ordinate bench decision, the order of the Ld. CIT(A) was set aside, and the Ld. AO was directed not to include surcharge in the maximum rate of tax. Consequently, the appeals of the assessee were allowed.
Key Issues
Whether surcharge, forming part of the maximum marginal rate of tax as defined under Section 2(29C) of the Income Tax Act, is applicable to a private discretionary trust when its income is below Rs. 50 lakhs, or if tax should only be levied at 30% plus cess.
Sections Cited
Section 139(1), Section 143(1), Section 2(29C), Section 164, Section 167B, Section 111A, Section 112, Section 112A, Section 115BAC, Section 115JB, Section 115JC, Section 161, Section 164A, Finance Act, 2023, Article 271 of the Constitution of India, Article 265 of the Constitution of India, Indian Trusts Act, 1882
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM
Per Rajesh Kumar, AM:
These are appeals preferred by the assessee against the orders of the Commissioner of Income-tax (Appeals)-4, Mumbai (hereinafter referred to as the “Ld. CIT(A)”]even dated 11.08.2025 for the AYs2022-23 & 2024-25.
The only common issue involved in various appeals is against the order of ld. CIT (A) dismissing the appeal of the assessee by holding that the maximum marginal rate of tax was correctly computed by CPC taking the rate of income tax + surcharge applicable to highest slab of income in the case of individual/AOP/BOI even when the income is below Rs. 50.00 lacs.
“AY 2022-23: ROI filed on 27/07/2022 declaring total income of Rs.38,53,090 AY 2023-24: ROI filed on 27/07/2023 declaring total income of Rs.43,28,140 AY 2024-25: ROI filed on 25/07/2024 declaring total income of Rs.25.31,550” 4. As the income of the assessee is below 50 lacs accordingly, the assessee trust computed the tax at the rate of 30% along with cess of 4% thereon . However, the ld. AO CPC while passing the order u/s 143(1) of the Act for all these three years has applied a rate of tax by taking income tax rate + surcharge + cess and thus raised the demand of income tax against the assessee.
In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee.
After hearing the rival contentions and perusing the materials available on record, we find that the assessee is a private discretionary trust and incomes in all the assessment years are below 50 lacs. Therefore, the issue before us is whether the assessee trust is eligible to be taxed at the rate of 30% + cess or at the rate of 30% + surcharge+cess. We also note that the maximum marginal rate has been defined u/s 2(29C) of the Act, which means the rate of income including the surcharge at income tax, if any, applicable in relation to highest slab of income in case of individual, association of persons or as the case may be, body of individual as specified in the Finance Act of the relevant year. We note that the trust/ association of person / body of individual are covered either u/s 164 or u/s 167B of the Act which provide that income of these entities / body are
“21. We have given a thoughtful consideration to the rival submissions and perused materials on record. We have also applied our mind to the judicial precedents cited before us. The short issue arising for consideration before us is, 'whether the definition of maximum marginal rate in terms with section 2(29C) of the Act can be interpreted in a manner to suggest that not only the rate of tax on the total income of assessee would be at the highest rate, but even the surcharge to be computed on such tax would be at the highest rate'. 22. Before we proceed to deal with the issue, let us understand what is meant by a 'Private Discretionary Trust'. A 'Discretionary Trust' is generally a Trust registered under the Indian Trusts Act, 1882, whereunder, the Trustees hold the power to decide the class of beneficiaries who can receive either capital or income from the Trust at the discretion of the Trustees. However, no one beneficiary has an absolute entitlement either to income or capital. In other words, in a discretionary trust, distribution of all capital and income is completely at the discretion of the Trustees. Generally speaking, in these kind of trusts not only the beneficiaries but even the shares of beneficiaries
Order pronounced in the open court on 26.02.2026.
Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 26.02.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata
