Rate of Surcharge in case of MMR

[LALIT MUNOYAT]

09-01-2022

An AOP assessable at Maximum Marginal Rate (MMR)was processed u/s 143(1) for Total Income of Rs. 94 Lakhs and tax was accordingly calculated correctly by the CPC. No dispute uptill here. However, while calculating Surcharge, it discarded the applicable Rate of Surcharge of 10% but instead applied the highest rate of Surcharge of 37% applicable for income beyond Rs. 5 Crore and worked a demand for Rs. 9 Lakhs.

As per Section 10(29C) 'Maximum Marginal Rate' means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual , association of persons or, as the case may be, body of individuals as specified in the Finance Act of the relevant year.

From the above definition it is not at clearly brought out that in every case of different level of income for which MMR is applicable, Surcharge will have to be necessarily charged at the highest rate of 37%.

The citation 2001 (2) TMI 877 - ITAT HYDERABAD Other Citation: [2003] 1 SOT 579 (HYD.) INCOME-TAX OFFICER VERSUS TAYAL SALES CORPORATION No.- IT. APPEAL NO. 1783 (HYD.) OF 1996 Dated.- February 1, 2001, may perhaps help the Ld. Members in forming their expert opinion.

Secondly, whether it is possible to file an Application for Rectification u/s 154 and an Appeal before the CIT(A) simultaneously against the said Intimation u/s 143(1)

The opinion of the Ld. Members shall be highly appreciated.

[DR.MARIAPPAN GOVINDARAJAN]

In my view charging @ the highest rate for income tax as well as surcharge is correct. You may file an appeal before the Commissioner of Income Tax (Appeals) and I hope no possibility of filing rectification application.

AI Summary

Maximum marginal rate surcharge applied at highest slab can increase tax liability; appeal available, rectification unlikely. Whether surcharge must be charged at the highest slab rate when an association of persons is assessed at the Maximum Marginal Rate is posed, asking if MMR requires use of the top statutory surcharge percentage irrespective of assessed income or if surcharge should align with the income slab; additionally, whether rectification and an appeal can be pursued simultaneously is questioned, with the recorded reply treating highest surcharge application as correct and advising an appeal while doubting rectification.