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Facts
The assessee filed a return declaring total income and claimed TDS credit. The CPC processed the return and raised a demand by applying a surcharge rate of 25% instead of 15%. The assessee appealed to the CIT(A), who upheld the CPC's order.
Held
The Tribunal held that Part III of the First Schedule of the Finance Act, 2020, specifically section 2(9), is applicable for AY 2021-22. Clause (e) of the surcharge provisions applies to the assessee's case, mandating a surcharge rate of 15%.
Key Issues
Whether the surcharge rate of 25% applied by the CPC and upheld by CIT(A) is correct, or if the surcharge rate should be 15% as per the relevant provisions of the Finance Act, 2020 for AY 2021-22.
Sections Cited
Section 2(1) of Finance Act, 2020, Section 2(9) of Finance Act, 2020, Section 250 of the Income-tax Act, 1961, Section 111A, Section 112, Section 112A, Section 115BAC, Section 172, Section 174, Section 174A, Section 175, Section 176, Section 192, Chapter XVII-C
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Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
Assessee by : Ms. Priyanka Jain Revenue by : Shri. R. R. Makwana Date of Hearing 06.11.2024 Date of Pronouncement 29.11.2024 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 29.07.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2021-22.
The assessee has raised following grounds of appeal: “1) That on the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre ('NFAC') erred in dismissing the appeal filed by the appellant and in upholding the levy of surcharge at 25% as computed by the Centralized Processing Centre ('CPC'), A.Y. 2021
22. Darius Cavasji Shroff Bangalore, instead of the correct rate of 15% as provided under Part III of the First Schedule of the Finance Act, 2020 applicable to AY 2021-22. 2) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) / NFAC failed to appreciate that Part I of the First Schedule of the Finance Act, 2020 is applicable to AY 2020-21, whereas Part III of the same Finance Act specifically applies to AY 2021-22, and the correct rate of surcharge applicable in the Appellant's case is 15%. 3) The learned JAO/CPC may be directed to revoke the tax liability, apply surcharge of 15% as claimed by the Appellant and delete the interest and additional tax levied while processing the return of income under section 143(1). 4) That the appellant craves leave to add, amend, alter, or withdraw any grounds of appeal before or at the time of hearing.”
3. The brief facts of the case are that the assessee had filed return on 12.11.2021 declaring total income of Rs. 2,33,56,570/- for AY 2021-22. The return was processed by the Central Processing Centre, Bengaluru (CPC) on 28.12.202 allowing TDS credit of Rs. 14,08,197/- as against Rs. 15,33,197/- claimed in the return of income. A rectification request was filed on the portal in this regard. Vide rectification order dated 27.06.2023, the CPC raised demand of Rs. 7,08,970/- against the refund of Rs. 64,84,000/- determined in the original intimation by levying higher surcharge rate of 25% as against 15% applied originally.
4. Aggrieved by this order, the assessee filed an appeal before Ld. CIT(A). The Ld. CIT(A) referred to paragraph A of part I of the First schedule to the Finance Act, 2020 and came to the conclusion that the assessee’s total income exceeded Rs. 2,00,00,000/- and hence the applicable surcharge rate is 25%. Accordingly, order of the CPC applying higher surcharge rate of 25% was upheld.
Aggrieved with the order of the Ld. CIT(A), the assessee has filed an appeal before us.
We have heard the rival submissions and considered the material placed before us. Admittedly, the assessee had filed return declaring total income of Rs. 2,63,06,568/- out of which Rs. 1,58,82,026/- is dividend income. It was, therefore, contended by the Ld. AR that surcharge rate to be adopted as per the Finance Act, 2020 is 15% as the income is exceeding Rs. 2,00,00,000/-, but after excluding dividend it comes to Rs. 74,74,544/- (Rs. 2,33,56,570-Rs. 1,58,82,026) i.e. less than 2,00,00,000/-. It has been further contended that the Ld. CIT(A) wrongly applied Part I of the Finance Act, 2020. From a perusal of section 2(1) of Finance Act, 2020, it is clear that Part I applies to AY 2020- 21. On the other hand, Section 2(9) of the Finance Act, 2020 contains provision applicable to AY 2021-22 which the year under appeal before us.
Section 2(9) is reproduced below: "(9) Subject to the provisions of sub-section (10), in cases in which income-tax has to be charged under sub-section (4) of section 172 or sub-section (2) of section 174 or section 174A or section 175 or sub-section (2) of section 176 of the Income-tax Act or deducted from, or paid on, income chargeable under the head "Salaries" under section 192 of the said Act or in which the "advance tax" payable under Chapter XVII-C of the said Act has to be computed at the rate or rates in force, such income-tax or, as the case may be, "advance tax" shall be charged, deducted or computed at the rate or rates specified in Part III of the First Schedule and such tax shall be increased by a surcharge, for the purposes of the Union, calculated in such cases and in such manner as provided therein:"
A.Y. 2021-22 Darius Cavasji Shroff 6. Reliance was placed by the Ld. AR on the provisions of Part III of First Schedule of the Finance Act, 2020. We have perused the same and relevant portion applicable to the case of the assessee is reproduced below: “Surcharge on Income-tax The amount of income-tax computed in accordance with the preceding provisions of this Paragraph, or the provisions of section 111A or section 112 or section 112A or the provisions of section 115BAC, of the Income-tax Act, shall be increased by a surcharge for the purposes of the Union, calculated, in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act,- (a) having a total income (including the income by way of dividend or income under the provisions of section 111A and section 112A of the Income-tax Act) exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten per cent of such income-tax; (b) having a total income (including the income by way of dividend or income under the provisions of section 111A and section 112A of the Income-tax Act) exceeding one crore rupees but not exceeding two crore rupees, at the rate of fifteen per cent of such income- tax; (c) having a total income (excluding the income by way of dividend or income under the provisions of section 111A and section 112A of the Income-tax Act) exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent of such income-tax; (d) having a total income (excluding the income by way of dividend or income under the provisions of section 111A and section 112A of the Income-tax Act) exceeding five crore rupees, at the rate of thirty-seven per cent of such income- tax; and (e) having a total income (including the income by way of dividend or income under the provisions of section 111A and section 112A) exceeding two crore rupees, but is not covered under clauses (c) and (d), shall be applicable at the rate of fifteen per cent of such income-tax:"
From the above, it is clear that the clause (e) is applicable in the case of the assessee as its total income is exceeding Rs. 2,00,00,000/- and it is not covered by clause (c) and clause (d). Hence, the assessee’s case is covered by the clause (e) and surcharge rate has to be adopted at 15%.
We, therefore, hold that the surcharge rate of 25% has been wrongly applied in the case of the assessee, whereas rate of 15% would be applicable in this case. Accordingly, the order of the Ld. CIT(A) is set aside and AO is directed to recompute the tax/refund by applying surcharge @15%.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29.11.2024.