Trust Not Liable to Pay Surcharge Just Because Its Income is Taxable at Maximum Marginal Rate | ITAT

Case Details: Jitendra Gala Navneet Trust vs. Deputy Director of Income-tax - [2024] 169 taxmann.com 11 (Mumbai-Trib.)

Judiciary and Counsel Details

• Ms Kavitha Rajagopal, Judicial Member & Ratnesh Nandan Sahay, Accountant Member
• Sanjay Parikh for the Assessee.
• R.R. Makwana for the Respondent.

Facts of the Case

The assessee was a private discretionary trust registered under the Indian Trust Act. The assessee filed its return of income for the relevant assessment year. The return of income was processed under section 143(1), and the assessee was entitled to a refund of Rs. 1,80,670.

However, the Assessing Officer (AO) assessed the income of the assessee at Rs. 6.73 lakhs and levied a surcharge at the rate of 37 per cent as against nil computed by the assessee. The assessee contended that the surcharge was levied despite the total income being less than Rs. 50 lakh.

The matter was carried to the CIT(A), wherein the surcharge was upheld. The assessee preferred an appeal to the Mumbai Tribunal.

ITAT Held

The Tribunal held that the only issue that required adjudication was whether a surcharge could be levied where the total income was less than Rs. 50 lakhs. CIT(A) contended that since the assessee’s tax liability would fall under the maximum marginal rate, a surcharge would be applicable in the assessee’s case as per section 2(29). The contention of the CIT(A) was incorrect.

The relevant provisions of the Finance Act 2022 stated that the surcharge was applicable only when the assessee, in the case of an Individual, Hindu Undivided Family or Association of Persons or Body of individuals, had a total income exceeding Rs. 50 lakh of such income tax.

Thus, the surcharge was leviable only if the total income exceeded Rs. 50 lakh. During the year under consideration, the assessee’s income was assessed at Rs. 6,73,590, less than Rs. 50 lakh. Therefore, levying of surcharge would not be applicable.

List of Cases Referred to

• Ujjwal Business Trust v. ITO ITA No. 602/Mum/2024 (para 9)
• Alwar v. ITO ITA No. 1401/Mum/2024 (para 9).