2025 (2) TMI 1168 - AT - Income Tax

Levy of surcharge - CIT (A) relying on the Section 2(29)(C) has held that surcharge is leviable on the AOP as the tax has been charged at the maximum marginal rate - assessee is an AOP (Trust) - HELD THAT - We are in complete agreement with the order of Hon ble ITAT Mumbai in the case of Jitendra Gala Navneet Trust v. DDIT 2024 (11) TMI 233 - ITAT MUMBAI . We therefore hold that the assessee is not liable for the levy of surcharge because assessee s income has not breached Rs. 50 Lakhs. In view of the above the appeal filed by the assessee is allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered in this judgment is whether a surcharge is applicable to an Association of Persons (AOP) when their total income is below Rs. 50 Lakhs. Specifically, the question is whether the levy of a surcharge of Rs. 1,16,126/- on the assessee, whose income was Rs. 10,46,180/-, was appropriate under the relevant provisions of the Income Tax Act.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework involves Section 2(29)(C) of the Income Tax Act, which addresses the levy of surcharge. The Finance Bill, 2022, also plays a crucial role in determining the applicability of surcharge based on income thresholds. The precedent case referenced is Jitendra Gala Navneet Trust v. DDIT, where the ITAT Mumbai adjudicated that surcharge is not applicable if the total income is below Rs. 50 Lakhs.

Court's interpretation and reasoning:

The Tribunal examined the provisions of the Finance Bill, 2022, which stipulates that surcharge is applicable only when the total income exceeds Rs. 50 Lakhs. The Tribunal noted that the income of the assessee was Rs. 10,46,180/-, which is below the threshold for surcharge applicability.

Key evidence and findings:

The key finding was that the assessee's income, as assessed by the CPC, Bengaluru, was Rs. 10,46,180/-. This figure is significantly below the Rs. 50 Lakhs threshold set by the Finance Bill, 2022, for the imposition of a surcharge.

Application of law to facts:

The Tribunal applied the provisions of the Finance Bill, 2022, to the facts of the case, concluding that since the assessee's income did not exceed Rs. 50 Lakhs, the surcharge was not applicable. The Tribunal's decision was consistent with the precedent set in the Jitendra Gala Navneet Trust case.

Treatment of competing arguments:

The Tribunal considered the arguments presented by both the assessee's representative and the Departmental Representative. The Departmental Representative supported the levy of surcharge as confirmed by the CIT(A) based on the maximum marginal rate. However, the Tribunal found the assessee's reliance on the precedent case compelling and consistent with the Finance Bill, 2022.

Conclusions:

The Tribunal concluded that the surcharge levied on the assessee was not justified, as the income did not exceed the Rs. 50 Lakhs threshold. Consequently, the appeal filed by the assessee was allowed, and the surcharge was directed to be deleted.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The Tribunal quoted the ITAT Mumbai's decision in the Jitendra Gala Navneet Trust case, emphasizing 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."

Core principles established:

The core principle established is that surcharge under the Income Tax Act is only applicable when the total income exceeds Rs. 50 Lakhs, as per the Finance Bill, 2022. This principle is reinforced by the precedent set in the Jitendra Gala Navneet Trust case.

Final determinations on each issue:

The Tribunal determined that the surcharge levied on the assessee was not in accordance with the applicable legal provisions, as the income was below the threshold for surcharge applicability. The appeal was allowed, and the surcharge was ordered to be deleted.