Maximum marginal rate for discretionary trust includes highest surcharge slab, and section 143(1) processing may correct surcharge errors.

For a private discretionary trust taxable at the maximum marginal rate, section 2(29C) requires the surcharge to be applied at the highest surcharge slab applicable under the relevant Finance Act, not at a lower trust-specific slab; the challenge to that computation fails. In summary processing under section 143(1), the Central Processing Centre may correct an incorrect surcharge calculation while determining the tax payable on returned income; there is no legal bar to varying the surcharge rate at that stage. The intimation based on the corrected computation was therefore upheld.

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Issues: (i) Whether, for a private discretionary trust liable to tax at the maximum marginal rate, the surcharge must also be taken at the highest surcharge slab while computing the maximum marginal rate. (ii) Whether the Central Processing Centre could vary the surcharge rate while processing the return under section 143(1).

Issue (i): Whether, for a private discretionary trust liable to tax at the maximum marginal rate, the surcharge must also be taken at the highest surcharge slab while computing the maximum marginal rate.

Analysis: The definition of maximum marginal rate in section 2(29C) includes the rate of income-tax, including surcharge on income-tax, applicable in relation to the highest slab of income in the case of an individual as specified in the relevant Finance Act. On that construction, the computation is not confined to the highest basic tax rate alone but extends to the highest surcharge rate also. Treating surcharge according to the trust's own slab would render the statutory reference to surcharge redundant and would dilute the statutory scheme applicable to discretionary trusts.

Conclusion: The surcharge is to be computed at the highest applicable rate, and the assessee's challenge on this issue fails.

Issue (ii): Whether the Central Processing Centre could vary the surcharge rate while processing the return under section 143(1).

Analysis: The processing provisions under section 143(1)(b) and section 143(1)(c) empower computation of the correct tax and sum payable on the returned income. Where the surcharge has been wrongly computed in the return, the processing authority can correct the amount while issuing the intimation. No legal bar was found against such correction in the course of summary processing.

Conclusion: The Central Processing Centre had the power to vary the surcharge rate while processing the return, and the assessee's challenge on this issue fails.

Final Conclusion: The computation made in the intimation was upheld, and the assessee's appeal was rejected in entirety.

Ratio Decidendi: For an assessee taxable at the maximum marginal rate, section 2(29C) requires surcharge to be applied at the highest surcharge rate applicable to an individual, and the processing authority may correct an incorrect surcharge computation while acting under section 143(1).

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