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TMI Blog2025 (4) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-. The CPC had determined the tax liability by applying surcharge @37% on the total tax payable. The ld. CIT(A) held that it is an undisputed fact that maximum marginal rate is to be applied and tax and surcharge has to calculated as per the provision of Section 2(29C) of the Act r.w.s. 164 / 167B of the Income Tax Act. He held that the Finance Act of every year is only relevant to know the highest slab of rate of tax and surcharge. After his detailed reasoning, he held that MMR is required to be completed on the basis of provision of Section 2(29C) of the Act and MMR for A.Y.2022-23 and 2023-24 will be 42.74%. Accordingly, he upheld the levy of surcharge on the tax. 4. Before us it has been admitted that this issue stands covered by the decision of the Hon'ble Special Bench in the case of Araadhya Jain Trust vs. ITO and other appeals in ITA No.4272/Mum/2024. The relevant observation and the finding of the Tribunal reads as under:- "21. We have given a thoughtful consideration to the rival submissions and perused materials on record. We have also applied our mind to the judicial precedents cited before us. The short issue arising for consideration before us is, "whether the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of sections 164/167B of the Act, these provisions provide for computation of income-tax at the maximum marginal rate. However, in these provisions there is no reference to levy of surcharge. Whereas, the definition of "maximum marginal rate" u/s. 2(29C) of the Act refers to surcharge. But, this definition clause by itself does not fix the rate of tax, instead, refers to the rate prescribed under the Finance Act of the relevant year. Thus, what should be the maximum marginal rate of income-tax is to be determined based on the rate of income-tax provided in Finance Act of the relevant year. The rates of income tax is provided u/s. 2 of the Finance Act. A reference to section 2 of Finance Act, 2023, makes it clear that as per sub-section (1) of section 2, for the A.Y. 2023-24 income-tax shall be charged at the rate specified in Paragraph A, Part (I) of First Schedule to the Finance Act-2023and such tax shall be increased by a surcharge, collected for the purposes of the Union, calculated in each case in the manner provided therein. Of-course, sub section (1) of section 2 is subject to the provisions of sub-sections (2) and (3). Sub section (2) of section 2 speaks of an assessee havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which any other Paragraph of this Part applies,- Rates of income-tax (1) where the total income does not exceed Rs. 2,50,000 Nil; (2) where the total income exceeds Rs. 2,50,000 but does not exceed Rs. 5,00,000 5 per cent of the amount by which the total income exceeds Rs. 2,50,000; (3) where the total income exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000 Rs.12,500 plus 20 per cent of the amount by which the total income exceeds Rs. 5,00,000; (4) where the total income exceeds Rs. 10,00,000 Rs. 1,12,500 plus 30 per cent of the amount by which the total income exceeds Rs. 10,00,000. (II) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,- Rates of income-tax (1) where the total income does not exceed Rs. 3,00,000 Nil; (2) where the total income exceeds Rs. 3,00,000 but does not exceed Rs. 5,00,000 5 per cent of the amount by which the total income exceeds Rs. 3,00,000; (3) where the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, section 112 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 in-come-tax: Provided that in case where the total income includes any income by way of dividend or income under the provisions of section 111A, section 112 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 case of an association of persons consisting of only companies as its members, the rate of surcharge on the amount of Income-tax shall not exceed fifteen per cent: Provided also 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act-2023. However, as per the materials placed before us, it is observed that in Press Note dated 01.12.1965 issued by Government of India, copy of which is placed at pg. no. 45 of the Paper Book, submitted in case of NIK Family Trust, the expression "slab" refers to "income" and not the tax. In fact, even section 2(29C) of the Act refers to highest slab of income. Even Circular No. 2/2018 (F.No. 370142/15/2017-TPL] containing Explanatory Notes to Provisions of Finance Act, 2017, a copy of which is placed at pg. no. 47 of the Paper Book filed by the NIK Family Trust, refers the expression "slab" to the various categories of income. Thus, in terms with sections 164/167B r.w.s. 2(29C) of the Act, tax as per maximum marginal rate would mean "the rate of tax applicable to the highest slab of income" under Item (1) of Paragraph A, Part (I) of First Schedule to the Finance Act-2023. 28. Under the head "Surcharge on income-tax" appearing in Paragraph A, Part (1), First Schedule it has been provided that the amount of income-tax computed as per the rate of income-tax under Item (1), (2) and (3) or under the provisions of section 111A or section 112 or section 112A or the provision of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the definition of "maximum marginal rate" refers to the rate of income-tax and surcharge provided under the Finance Act of the relevant year, then the rates of income-tax and applicable rate of surcharge as provided under Paragraph A, Part (I) of First Schedule to the Finance Act-2023, would apply. Any other interpretation, in our view, would lead to undesirable consequences and would be discriminatory. In our view, the expression "including Surcharge on income-tax, if any", within the bracketed portion of section 2(29C) of the Act, would mean the surcharge as provided in the computation mechanism under the heading "surcharge on income tax" finding place in Paragraph A, Part (I) of First Schedule to the Finance Act-2023. 30. The Revenue has taken a line of argument that the words "if any" succeeding the words "including surcharge on income tax" appearing in the definition of maximum marginal rate u/s. 2(29C) of the Act are only for the purpose that when levy of surcharge is specifically provided under the Finance Act of the relevant year, it would be included in income-tax computed at the highest rate, otherwise, not. Though, at first blush this argument of the department s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying upon certain decisions of Hon'ble Kerala High Court and Hon'ble High Court of Bombay. As discussed elsewhere in the order. 32. However, upon carefully going through these decisions, we are of the considered view that the issue arising in the present case never fell for consideration before the Hon'ble Courts. The issue in dispute in those cases was primarily concerning what should be the maximum marginal rate and its applicability. The issue "whether the rate of surcharge would also be at the highest rate while computing tax at maximum marginal rate" was never the issue before the Hon'ble Courts. Thus, in our view, the view expressed by the co-ordinate benches in decisions referred to in Paragraph 10(supra) lay down the correct proposition of law. Thus, in the ultimate analysis, we hold, in case of Private Discretionary Trusts, whose income is chargeable to tax at maximum marginal rate, surcharge has to be computed on the income tax having reference to the slab rates prescribed in the Finance Act under the heading "surcharge on income tax" appearing in Paragraph A, Part 1, First Schedule, applicable to the relevant assessment year. Hence, reference is decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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