Anil Gala Navneet Trust Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) in Mumbai has ruled in favor of Anil Gala Navneet Trust, a private discretionary trust, regarding an incorrect levy of surcharge and interest by the Centralised Processing Centre (CPC). The trust’s total income for the Assessment Year 2023-23 was Rs. 1,80,11,780, which falls into the tax bracket of over Rs. 1 crore but under Rs. 2 crore. The trust, therefore, applied a surcharge rate of 15% as per the First Schedule to the Finance Act, 2021. However, during the processing of its return, the CPC levied a surcharge of 37%, which is applicable only to incomes exceeding Rs. 5 crore. This incorrect calculation resulted in an erroneous demand of Rs. 53,420 from the trust, instead of a refund of Rs. 13,61,410.
The ITAT’s decision was based on a precedent set by a Special Bench of the Mumbai ITAT in the case of Aradhya Jain Trust vs. ITO. In that case, the Special Bench had definitively held that for private discretionary trusts whose income is taxed at the maximum marginal rate, the surcharge must be calculated based on the slab rates specified in the Finance Act, not at the highest possible rate. Applying this judicial precedent, the ITAT concluded that the correct surcharge rate for Anil Gala Navneet Trust was indeed 15%, not 37%.
