Anshul Jagruchi Trust Vs ITO (ITAT Jaipur)
Private Trust Taxed at MMR: Surcharge Must Follow Finance Act Slab Rates, Rules ITAT
The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) directed the CPC/Assessing Officer to compute surcharge on a private family trust’s income-tax according to the applicable slab rates prescribed in the Finance Act. Following the Special Bench decision in Araadhya Jain Trust v. ITO, the Tribunal held that taxation at the maximum marginal rate did not warrant automatic application of the highest surcharge rate.
The assessee, Anshul Jagruchi Trust, was a private family trust deriving income solely from capital gains, interest and dividends. For Assessment Year 2025-26, it filed its return opting for the new tax regime under Section 115BAC of the Income-tax Act, 1961.
The trust paid tax at the maximum marginal rate under Section 164 and applied surcharge at 25%. While processing the return, however, the CPC applied surcharge at 37% on its normal income and 15% on dividend income.
The assessee challenged the 37% surcharge before the CIT(A), who upheld the CPC’s computation. It consequently appealed to the Tribunal.
Dispute Confined to Surcharge Computation
Before the Tribunal, liability to tax at the maximum marginal rate was undisputed. The issue concerned the rate of surcharge applicable to that tax.
The assessee argued that it had opted for the new regime under Section 115BAC and that surcharge on normal income should be restricted to 25%. Its grounds also questioned whether the CPC’s adjustment fell within the permissible scope of processing under Section 143(1).
During the hearing, the assessee relied on the Special Bench decision in Araadhya Jain Trust v. ITO, ITA No. 4272/Mum/2024, dated 9 April 2025.
Special Bench Ruling Requires Application of Surcharge Slabs
The Special Bench had examined whether private discretionary trusts taxable at the maximum marginal rate were liable to surcharge at the highest applicable rate or according to the prescribed slabs.
It held that surcharge must be computed with reference to the slab rates under the heading “Surcharge on income-tax” in Paragraph A, Part I of the First Schedule to the Finance Act applicable to the relevant assessment year.
The assessee requested that this ruling be applied to its case. The Departmental Representative could not point out any distinguishing facts.
CPC/AO Directed to Recompute Surcharge
The Tribunal held that the issue was covered by the Special Bench decision. It accordingly directed the CPC/Assessing Officer to levy surcharge according to the prescribed Finance Act slab rates.
The appeal was allowed in these terms. The operative direction requires computation under the applicable surcharge slabs; the Tribunal did not independently prescribe a flat 25% surcharge for the trust.
Cases Discussed
- Araadhya Jain Trust Vs ITO (ITAT Mumbai) — ITA No. 4272/Mum/2024, order dated 09.04.2025. Special Bench ruling followed; surcharge must be computed according to the applicable Finance Act slabs, even where income is chargeable at the maximum marginal rate.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
The present appeal has been filed by the assessee against the order passed by the Office of the Commissioner of Income Tax, Appeal Addl./JCIT(A) 09, Mumbai (hereinafter referred to as “Ld. CIT(A)”), dated 18.03.2026 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The grounds raised by the assessee read as under:-
1. That under the facts and in the circumstances of the case the ADDL./JCIT Appeal 9 has erred in holding that provisions of section 164 are applicable. Consequently, income is liable to be taxed at Maximum Marginal Rate. Accordingly, the action of CPC in applying Maximum Marginal Rate along with applicable surcharge is upheld.
2. Under the facts and circumstances of the case and in law, the Centralized Processing Center is acted beyond the scope of its lawful authority by charging surcharge at 37 percent instead of 25 percent as required by section 115BAC. The adjustment made is not an arithmetical error OR an apparent incorrect claim as stipulated u/s 143. Consequently, the said Intimation is illegal, void ab initio
3. Under the facts and in the circumstances of the case, the learned ADDL./JCIT erred in law and on facts in dismissing the appeal and upholding charging a Surcharge at 37 percent on the Normal income when the Appellant has specifically opted for the New Tax Regime u/s 115BAC, WHARE the maximum Surcharge rate is capped at 25 percent
4. That the appellant craves permission to add to OR amend to any of the grounds of appeal OR to withdraw any of them.
3. The solitary issue in the present appeal pertains to the levy of surcharge at the rate of 37% instead of 25% as applied by the assessee.
4. The facts relating to the case is that, the assessee is a Private Family Trust deriving income solely from capital gains, interest and dividends. The assessee for the impugned year had filed return of income opting for the new tax regime u/s 115BAC of the Act. The assessee had paid taxes at Maximum Marginal Rate (in short “MMR”) as per Section 164 of the Act. Surcharge on the tax was paid at the rate of 25%.TheCPC while processing the return of income, however applied a surcharge of 37% on its normal income and 15% on its dividend income. The assessee challenged the levy of 37% surcharge on its normal income by the CPC before the Ld. CIT(A), who in turn dismissed the appeal of the assessee, upholding the levy of 37% surcharge.
5. We have heard both the parties. The fact that the assessee is liable to taxed at the MMR is not disputed. The only dispute is vis-à-vis the levy of surcharge thereon. The ld. Counsel for the assessee has drawn our attention to the decision of the Special Bench of the Tribunal in the case of Araadhya Jain Trust Vs. ITO in ITA No.4272/Mum/2024 dated 09.04.2025 pointing out that the Special Bench in the said case has categorically held that in the case of private discretionary trusts whose income is chargeable to tax at MMR, surcharge is to be levied as per the slab rates prescribed in the Finance Act . He drew our attention to the issue, which was there before the Special Bench as under:-
“Whether, in the case of private discretionary trusts whose income is chargeable to tax at maximum marginal rate, surcharge is chargeable at the highest applicable rate or at a slab rates?”
5.1. And thereafter to para 32 of the order holding the surcharge to be levied in the case of the private discretionary trust at the slab rates prescribed in the Finance Act as under:-
……
Thus, in the ultimate analysis, we hold, in case of Private Discretionary Trusts, whose income is chargeable to tax at maximum marginal rate, surcharge has to be computed on the income tax having reference to the slab rates prescribed in the Finance Act under the heading ‘surcharge on income tax’ appearing in Paragraph A, Part 1, First Schedule, applicable to the relevant assessment year.
……
6. He pleaded therefore that the ratio lay down by the Special Bench be applied in the case of the assessee accordingly.
7. Ld. DR was unable to point out any distinguishing facts in the present case.
8. In view of the above , the issue before us stands covered by the decision of the Special Bench of the ITAT in the case of Araadhya Jain Trust (Supra).The CPC/AO is directed to levy surcharge as per prescribed slab rates in the Finance Act as held by the Special Bench of the ITAT.
9. With the aforesaid direction, the appeal of the assessee stands allowed in above terms.
Order pronounced in the Open Court on 15.10.2026
