TaxTMI 
TaxTMI 
2024 (11) TMI 1508
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..... 3. The learned CPC erred in interpreting Section 2(29C) by levying Maximum marginal rate on the whole of the Income which was against the judicial precedent in [2003] 1 SOT 579 (Hyderabad) [01-02-2001] Income Tax Officer v. Tayal Sales Corporation. 4. Any other ground that may be taken during the course of appeal proceedings. 2. Brief facts of the case are that the assessee is a Private Trust and constitutes as an AOP. The assessee e-filed its Return of Income for the A.Y. 2023-24 on 29.07.2023 in the status of an AOP vide acknowledgement no. 822269230290723 declaring Total Income of Rs. 41,69,630/- under the head Income from Other Sources only. The Income of the assessee consisted of Interest income of Rs. 7,35,862/- and the dividend income from Domestic companies of Rs. 34,31,064/-. Thereafter the return was processed by the CPC u/s 143(1) of the Act on 18.12.2023 with a demand of Rs. 4,35,180/-. 2.1 While processing the return of Income, the Taxable Income declared by the assessee was accepted by the CPC. The Calculation of Tax by the assessee and the CPC u/s 143(1) of the Act are given below for ease of reference which is only the moot issue in the pre....
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....y be:" (Emphasis supplied)." 3.1 The ld. ADDL/JCIT(A) is of the opinion that the rate of MMR has to be calculated as per the provisions of section 2(29C) of IT Act r.w.s. 164 or 167B of the IT Act. The Finance Act of every year is only relevant to know the highest slab of rate of tax & surcharge. After considering both the rates of tax & surcharge of highest slab mentioned in the Finance Act, MMR is to be calculated and charged. The word "if any" in the section 2(29C) is relevant if the surcharge to the highest slab of income is mentioned in the relevant Finance Act and it will be applicable for a particular AY. For example, no surcharge was applicable for AY 2010-11 & 2011-12 to slab of income of individual and AOP. Therefore, the word "if any" is relevant. Here the word surcharge "if any" has relevance to levy of surcharge if mentioned in the Finance Act. The word "if any" is related to the specification/mandate of surcharge mentioned in the schedule of Finance Act. If surcharge of highest slab is mentioned in the Finance Act, then the surcharge will be included in the tax and MMR will be calculated accordingly. If no surcharge for highest slab is mentioned in the schedule of ....
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.... if any" that means "if any" words means the charging of surcharge only after the income of assessee crosses the threshold limit as mentioned in the first schedule of relevant Finance Act. In short the assessee, contends that while deciding the MMR the surcharge is to be included only when the income crosses the threshold limits as mentioned in the Finance Act, 2022 applicable for this AY 2023-24. The ld. A.R. for the assessee heavily relied on the decisions of Hyderabad Tribunal in the case of ITO Vs. Tayal Sales Corporation (2003) 1 SOT 579 (Hyd.) as well as Sriram Trust vs. ITO(Exemptions) in ITA No. 439-441/Hyd/2024 dated 19/06/2024, in which it is held that no surcharge is to be included while calculating the MMR, if the threshold limit of income is not crossed. 3. On the other hand, the ld. D.R. submitted that the MMR will not be applicable in parts like in one part of highest slab rate for basic tax i.e. 30% is levied and in one part no surcharge is levied. The MMR always constitutes highest slab tax rates and highest slab surcharge if any prescribed in Finance Act unless specifically excluded like income from LTCG and STCG. The income of dividend shown by the assessee in....
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....e Finance Act of the relevant year. We agree with the view taken by the ld. CIT(A) that Finance Act of every year is only relevant to know the highest slab of rate of tax and surcharge. The word "if any" in the section 2(29C) of the Act is relevant, if the surcharge to the highest slab of income is mentioned in the relevant Finance Act and it will be applicable for a particular assessment year. Here the word "surcharge, if any" has relevance to levy of surcharge, if mentioned in the Finance Act. If surcharge of highest slab is mentioned in the Finance Act, then surcharge will be included in the tax and MMR will be calculated accordingly. If no surcharge is mentioned in the schedule of Finance Act, then no surcharge will be included in the tax quantum for calculating the MMR. This word does not remedially suggest to include surcharge in MMR as per different slab rates of income. We are of the opinion that the information that is enclosed with a pair of brackets can be removed from a sentence and still make sense as they are mostly just extra information. Therefore, if surcharge is not specified in the Finance Act, then it will not be a part of maximum marginal rate and only rate of ....
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....has also quoted it extensively. We tend to agree with this view. 13. Language of law is also clear that maximum Marginal rate shall be Maximum rate of tax which is tax and surcharge of the highest rate in case of an individual. 14. If the surcharge was to be charged according to the slab rates of the assessee, it was not required to be mentioned in section 2 (29C) of the Act. There would not have been any need to mention surcharge u/s 2 (29C) of the act because it would have been then computed under the finance Act as per slab applicable to income of the assessee. Thus, the purpose of mentioning surcharge in that section is to tax MMR as the Highest rate of tax for tax and surcharges. We should not read the section in the manner that word 'surcharge' mentioned in section 2 (29C) becomes redundant. 15. It is immaterial whether the CPC in one of the years accepted the ROI filed by the assessee, but when the issues are raised before us, we cannot hold that unsustainable view of revenue is in accordance with the law. 16. Honourable Kerala High court in case of C.V. Divakaran Family Trust[2002] 122 Taxman 405 (Kerala)/[2002] 254 ITR 222 (Kerala) held ....
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....ontained in Explanation 2. We, therefore, find that the Assessing Officer has rightly applied the 'maximum marginal rate' at 55 per cent which was the rate applicable on the highest slab of income for association of persons under the relevant Finance Act. We find that the Calcutta High Court in Surendranath Gangopadhyaya Trust v. CIT [1983] 142 ITR 149 ^1 and the Madhya Pradesh High Court in Piarelal Sakseria Family Trust v. CIT [1982] 136 ITR 583 have taken a similar view in the matter. In view of our interpretation, the questions have necessarily to be answered in favour of the revenue and against the assessee and we do so." 17. Honourable Supreme Court in case of Gosar Family Trust, Jamnagar and Ors. Vs. Commissioner of Income Tax, Rajkot and Ors.(28.04.1995 SC) - MANU/SC/0316/1995 has held that "12. We must say that the policy of law as disclosed from Section 164(1) is to discourage discretionary trusts by charging the income of such trusts in the hands of trustees at the maximum marginal rate except in certain specified situations. The trust deed concerned herein is a discretionary trust of an extremely unusual type." 18. Thus, Levy of maximu....
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...., the surcharge rate should also be highest rate of surcharge applicable in case of an individual. 9. Section 2(29C) of the Act defines maximum marginal rate. It provides that maximum marginal rate means the rate of income tax (including surcharge on income tax, if any) applicable in a relation to the highest slab of income in the case of an individual as specified in the Finance Act of the relevant year. Thus, according to the provisions, when assessee is to be taxed at maximum marginal rate, same is to be arrived at by taking highest slab of tax and highest slab of surcharge applicable in case of an individual. This view is already expressed in the commentary on Income Tax by Chaturvedi and Pithisaria as well as of the book published by Mr. Vinod Singhania. Even otherwise, language of law is clear that maximum marginal rate shall be maximum rate of tax and surcharge of the highest rate in case of an individual. If the surcharge was to be levied according to the slab rate of the assessee, it was not required to be mentioned in Section 2(29C) of the Act that rate of income tax (including surcharge of income tax, if any) applicable in relation to the highest slab of income ....