Rahulkumar Bajaj Charitable Trust Vs DCIT (ITAT Mumbai)
MMR ≠ Highest Surcharge: ITAT Mumbai Holds Charitable Trust Taxable at 30% with Slab-Based Surcharge, Not Flat 37%
ITAT Mumbai (D Bench) in Rahulkumar Bajaj Charitable Trust vs DCIT (ITA Nos. 1768 to 1770/Mum/2025; AYs 2021-22 to 2023-24; order dated 23.12.2025) has partly allowed the appeals, holding that while tax may be computed at Maximum Marginal Rate (MMR), surcharge cannot be levied mechanically at the highest rate of 37%.
The Assessee, a charitable trust without registration u/s 12A, was assessed as an AOP. While processing returns u/s 143(1), CPC levied tax @30% and surcharge @37%, treating the trust as a private discretionary trust. CIT(A) upheld the action.
Reversing this, ITAT relied on the Special Bench decision in Araadhya Jain Trust vs ITO and held that MMR u/s 2(29C) r.w.s. 164/167B means tax at the highest slab rate (30%), but surcharge must be applied strictly as per slab thresholds prescribed in the relevant Finance Act.
Key findings:
- “Highest slab” in s.2(29C) refers to income slab, not the highest surcharge rate
- Surcharge has to follow Finance Act slabs, not a blanket 37%
- For total income between ₹50 lakh and ₹1 crore, surcharge is only 10%, even in MMR cases
- Applying 37% surcharge irrespective of income level would render surcharge slabs otiose and absurd
Since the Trust’s income was ₹59.04 lakh, ITAT held that surcharge @10% alone was applicable, not 37%. AO was directed to recompute tax and surcharge accordingly.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
