Chanda Bharech Beneficiary Trust Vs ITO (ITAT Kolkata)
The case concerns a batch of three appeals filed by the assessee, a private discretionary trust, against orders passed under Section 250 of the Income Tax Act, 1961. The primary issue across all appeals was the applicability of surcharge at 37% while computing tax at the maximum marginal rate (MMR) on the trust’s income. Since the facts and issues were identical, the tribunal addressed the matter through a consolidated order, focusing first on ITA No. 3060/Kol/2025.
The assessee had declared a total income of ₹4,56,900 and computed tax accordingly, applying surcharge based on slabs applicable to individuals. However, during processing under Section 143(1), the Assessing Officer (AO) incorrectly assessed income at ₹12,20,710. Upon rectification, while correcting the income and interest computation, the AO introduced a surcharge of 37%, resulting in an additional demand. The assessee challenged this imposition, but the Commissioner (Appeals) upheld the levy, stating that the maximum marginal rate included surcharge and that the AO was empowered to apply it.
Before the tribunal, the assessee relied on a Special Bench decision which addressed whether surcharge, while forming part of the maximum marginal rate under Section 2(29C), must always be applied at the highest rate. The tribunal examined the statutory framework, including Sections 164 and 167B, which mandate taxation of discretionary trusts at the maximum marginal rate, and Section 2(29C), which defines that rate as the income-tax applicable to the highest slab, including surcharge, if any, as specified in the Finance Act.
