Shriram Trust Vs ITO (ITAT Hyderabad)
In the case of Shriram Trust Vs. Income Tax Officer (ITO), the dispute centered around the levy of surcharge on the trust’s income tax for assessment years 2021-22, 2022-23, and 2023-24. The trust had filed returns declaring an income of less than ₹50 lakh, and the return preparation utility provided by the department accepted the returns without adding any surcharge. However, the Centralized Processing Centre (CPC) applied a surcharge while processing the returns under Section 143(1) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this surcharge, stating that if the Finance Act mandates a surcharge, it must be applied at the maximum rate, regardless of the income threshold. The CIT(A) also referred to historical commentary on the surcharge application, including references to the assessment year 1980-81.
Challenging this decision, the assessee argued that while the maximum marginal rate (MMR) applies, the surcharge should only be levied as per the Finance Act, which explicitly states that surcharge is applicable only when income exceeds ₹50 lakh. ITAT Hyderabad examined Section 2(29C) of the Income Tax Act, which defines MMR as the tax rate, including any applicable surcharge, in relation to the highest income slab. The Tribunal also considered the ruling in ITO vs. Tayal Sales Corporation, which clarified that MMR does not automatically include a surcharge unless the highest income slab requirement is met. Concluding that the surcharge was incorrectly imposed, ITAT Hyderabad ruled in favor of the assessee and directed the deletion of the surcharge. The appeal was allowed accordingly.
