Surcharge on AOP tax liability must follow Finance Act slab rates, with 15% applied instead of 25%.

Surcharge on an AOP's tax liability was held to be computable at 15% rather than 25%, following the view that surcharge must be applied with reference to the slab rates prescribed in the Finance Act for the relevant assessment year. The higher rate adopted by the authorities was found unsustainable because the issue was treated as settled by Special Bench authority dealing with private discretionary trusts taxed at the maximum marginal rate. The assessee's claim for surcharge at 15% was therefore accepted.

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Issues: Whether, in computing tax on the assessee AOP, surcharge was leviable at 25% as applied by the authorities or at 15% as claimed by the assessee.

Analysis: The issue was treated as no longer res integra in view of the Special Bench decision holding that, in the case of private discretionary trusts whose income is chargeable at the maximum marginal rate, surcharge has to be computed with reference to the slab rates prescribed in the Finance Act under the head of surcharge on income tax applicable to the relevant assessment year. Following that view, the lower authority's approach of applying surcharge at 25% was found to be unsustainable, and the assessee's claim for surcharge at 15% was accepted.

Conclusion: The surcharge was required to be computed at 15% and not at 25%, and the issue was decided in favour of the assessee.

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