2025 (4) TMI 1356

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....rd to levy of surcharge @37% instead of 10% applicable to the assessee as per the Income Tax Act 1961 and relevance Finance Act for the A.Y.2021-22; and in A.Y. 2022-23 levy of surcharge @37% instead of 25% applicable as per the Relevance Finance Act and thereby raising additional demand. 3. The brief facts are that assessee is an AOP engaged in the business of real estate development. It has a definite and pre-decided arrangement of sharing the profit and losses of the AOP under a MoU wherein 9 members had constituted the AOP. The return of income for the A.Y. 2021-22 was filed on 08/10/2021 declaring total income of Rs.92,49,770/-. The assessee computed the tax at maximum marginal rate and also paid surcharge @10% which was applicable ....

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.... rate of surcharge on the return of income filed by the assessee for A.Y.2022-23, the slab rate of income below 3 crores, prescribed surcharge rate of 25%. The surcharge levied under the Income Tax Act is specified under the Finance Act for each year which is an additional levy imposed where income exceeds certain threshold. The Finance Act specified the income (beyond the surcharge levied) at varying percentage i.e. 10%, 15%, 25% or 37%. In the case before the Hon'ble Special Bench the key issue involved was whether the surcharge on the income of a private discretionary trust-taxable at the maximum marginal rate (MMR)-should be applied at the highest rate regardless of income, or based on slab rates as laid out in the Finance Act. The trus....

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....um/2024); 5. Lintas Employees Holiday Assistance Trust vs. CPC (ITA No. 1796/Mum/2024); 6. Jitendra Gala Navneet Trust & Dilip Sampat Navneet Trust vs. DDIT (ITA Nos. 2484 &2485/Mum/2024); 7. Lintas Employees Holiday Assistance Trust us. ITO (ITA No. 3949/Mum/2024); 8. V. Meera Charitable Trust vs. ITO (ITA No. 2140/Chny/2024) 6. Conversely, the Departmental Representative argued that the definition of MMR in Section 2(29C) must be interpreted with reference to the Finance Act and its intent to prevent tax avoidance in the case of discretionary trusts. Referring to the Memorandum to the Finance Bill, 1980 and Gosar Family Trust vs. CIT [(1995) 81 Taxman 146 (SC)), the DR submitted that the highest surc....

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.... in Section 2(1). 8. Thus, a uniform 37% surcharge irrespective of income contradicts both the Finance Act and the contextual reading of Section 2(29C). The parenthetical "if any" reflects that surcharge is not always applicable-it is conditional on the taxpayer's income exceeding thresholds. Any other interpretation would result in disproportionate taxation and violate the principle against absurd outcomes. Thus, the conclusion emerging from this line of reasoning, reinforced by Special Bench and statutory construction, is that the surcharge under Section 2(29C) is conditional and must be computed in line with the graded rates under the Finance Act-not automatically at the highest rate. After reviewing various judicial precedents ci....