Loading judgment…
Facts
The assessee, a private discretionary trust, filed its return of income declaring a total income of Rs. 6,73,590 for AY 2022-23. The AO/CPC processed the return under section 143(1) and levied a surcharge of Rs. 74,768, resulting in a lower refund than claimed. The CIT(A) upheld the surcharge.
Held
The Tribunal noted that surcharge on income tax is leviable only when the total income exceeds Rs. 50 lakhs, as per the First Schedule to the Finance Act, 2022. Since the assessee's total income was below this threshold, the levy of surcharge was incorrect.
Key Issues
Whether surcharge is leviable when the total income of the assessee is below Rs. 50 lakhs, despite the tax liability falling under the maximum marginal rate.
Sections Cited
143(1), 234B, 234C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
O R D E R Per Kavitha Rajagopal, J M:
The captioned appeals have been filed by the assessee Trust, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Years (‘A.Y.’ for short) 2023-24 & 2022-23.
2485/Mum/2024 for A.Y. 2022-23 as a lead case.
The grounds of appeal raised by the assessee reads as under:
Ground No. 1: Validity of the adjustments made in the Intimation u/s 143(1) 1. The learned CIT(A) erred in not quashing the impugned intimation order passed under section 143(1) of the Income Tax Act, 1961 as no opportunity of being heard was provided to the Appellant before levying surcharge and additional interest. Ground No. 2: Incorrect levy of surcharge amounting to Rs.74,768/- despite total income being less than 50 lakhs 1. The learned CIT(A) erred in not appreciating that surcharge on tax is not applicable as the total income of the Appellant is below the threshold limit of Rs 50 lakhs.
The learned CIT(A) failed to appreciate that the surcharge on tax is applicable only if the total income is above 50 lakhs as outlined in the First Schedule to Finance Act, 2021.
3. Your Appellant prays that the surcharge of Rs.74,768/- levied in the impugned intimation order is incorrect, bad in law and hence the same may please be deleted.
The brief facts are that the assessee company is an irrecoverable private Discretionary Trust incorporated in 2012 under the Indian Trust Act, 1882. The assessee Trust had filed its return of income dated 16.07.2022, declaring total income at Rs.6,73,590/- and the same was processed u/s. 143(1) of the Act.
The learned Assessing Officer (ld. A.O. for short)/CPC issued intimation u/s. 143(1) of the Act dated 16.03.2023, levying a surcharge of Rs.74,768/- @ 37%, as against Nil computed by the assessee and thereby issuing a refund of Rs.1,80,670/- as against the refund claimed of Rs.2,48,010/-.
The assessee was in appeal before the first appellate authority, challenging the said intimation of the ld. A.O/CPC.
A.O./CPC on the ground that the maximum marginal rate is applicable in the case of the assessee, for which the surcharge @ 37% is attracted for maximum marginal rate @ 42.74% for the year under consideration.
Aggrieved the assessee is in appeal before us, challenging the order of the ld. CIT(A).
The learned Authorised Representative (ld. AR for short) for the assessee stated that the ground no. 1 which is challenging the validity of the adjustment made in intimation u/s. 143(1) of the Act, was not pressed by the assessee and proceeded to ground no. 2, challenging the levy of surcharge made by the ld. A.O. and upheld by the ld. CIT(A). The ld. AR contended that surcharge on tax is applicable only for total income exceeding Rs.50 lacs, as per the first schedule to Finance Act, 2022, which proposition has been upheld by the decision of co-ordinate bench in the case of Ujjwal Business Trust vs. ITO (in vide order dated 28.06.2024) and vide order dated 09.07.2024). The ld. AR prayed that the surcharge levied on the assessee be deleted.
The learned Departmental Representative (ld. DR for short) relied on the order of the lower authorities.
We have heard the rival submissions and perused the materials available on record. The only issue that requires adjudication is whether surcharge could be levied where the total income is less than Rs.50 lacs. The ld. CIT(A) has contended that since the assessee’s tax liability would fall under the maximum marginal rate, surcharge would contention that as per the Finance Bill, 2022 surcharge could be applicable only when the assessee in case of Individual, Hindu Undivided Family or Association of Person or Body of individuals having a total income, exceeding Rs.50 lacs of such income tax. The relevant extract of the same is cited herein under:
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 provision 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-five 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: Provided that in case where the total income includes any income by way of dividend or income chargeable under section 111A and section 112A of the Income-tax Act, the rate of surcharge on the amount of income-tax computed in respect of that part of income shall not exceed fifteen per cent.: Provided further that in the case of persons mentioned above having total income exceeding,— (a) fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees; (b) one crore rupees but does not exceed two crore rupees, the total amount payable as income- tax and surcharge on such income shall not exceed the total amount payable as income-tax and to 2486/M/2024 (A.Ys.2023-24 & 2022-23) surcharge on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees; (c) two crore rupees but does not exceed five crore rupees, the total amount payable as income- tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of two crore rupees by more than the amount of income that exceeds two crore rupees; (d) five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of five crore rupees by more than the amount of income that exceeds five crore rupees.
From the above, it is observed that only when the total income exceeds Rs.50 lacs then surcharge is leviable, where the rate of surcharge is fixed according to the slab of income. During the year under consideration, the income of the appellate was assessed by the ld. A.O./CPC at Rs.6,73,590/- which is less than Rs.50 lacs and, therefore, levying of surcharge would not be applicable for the same. We, therefore, direct the ld. A.O. to delete the surcharge levied in the hands of the assessee Trust. Ground no. 2 raised by the assessee is hereby allowed. and 2486/Mum/2024.
Ground no.3 raised by the assessee in and ground no. 4 pertains to the levy of additional interest u/s. 234B and 234C of the Act. The ld. A.O. is directed to recompute the interest u/s. 234B and 234C of the Act consequentially as per the relief granted in ground no. 2. relates to the mismatch in tax payable and the net amount payable where the demand resulted in increase by Rs.23,195/-. As this ground requires factual verification, we remand this issue to the ld. A.O. to verify the same and determine the actual demand accordingly.
In the result, all the appeals filed by the assessee are allowed.
Order pronounced in the open court on 22.10.2024.