“maximum marginal rate”
The decision most relied on for maximum marginal rate is 1. Father Mullers Charitable Institutions 363 IT 230 (Kar.) 2. DIT(E) v. Sheth Mafatlal Gagalbhai Foundation Trust (249 ITR 533), cited in 108 judgments on BharatTax.
Leading authorities on maximum marginal rate
Income of a trust that is taxable at the maximum marginal rate should be taxed accordingly, while other income is eligible for exemption under Section 11 of the Income-tax Act.
Violation of investment mandates under Section 13(1)(d) of the Income Tax Act, 1961, for a charitable trust results in the complete denial of exemption under Section 11 of the Act.
Income received by a trust from sources like extra fees can be taxed at the maximum marginal rate, while other income remains eligible for exemption under Section 11 of the Income Tax Act.
Where the shares of beneficiaries in a trust are determinate, trustees must be assessed separately for each beneficiary's share, treating each beneficiary as an individual. The income is then taxed at the marginal rate applicable to individuals, not at the maximum rate for an association of persons.
When an exemption is denied under Section 13(1)(c) or (d), the denial of exemption applies only to the portion of income that violates these provisions, not the entire income.
Disallowance under Section 40A(2)(b) is not maintainable when both the payer and payee are assessed at the maximum marginal rate, as it results in a revenue-neutral situation.
Income received by a trust that is considered 'extra fees' is taxable at the maximum marginal rate, while other income of the trust is eligible for exemption under Section 11.
The definition of maximum marginal rate under section 2(29C) can be interpreted to determine the applicable surcharge rates, particularly for income including dividends, as per the First Schedule to the Finance Act. This affects how surcharge is calculated on taxable income.
