Sriram Trust Vs ITO (ITAT Hyderabad)
In the case of Sriram Trust vs. Income Tax Officer, the Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) addressed a dispute concerning the imposition of surcharge on the trust’s income for the assessment years 2021–22, 2022–23, and 2023–24. The trust had filed returns for each of these years declaring income below ₹50 lakh. It contended that the return preparation utility provided by the Income Tax Department did not compute any surcharge, implying that the system recognized no surcharge was due. However, upon processing the returns under Section 143(1) of the Income Tax Act, the Centralized Processing Centre (CPC) imposed surcharge on the tax payable. The trust challenged this imposition, but the Commissioner of Income Tax (Appeals) upheld the surcharge, citing that where the Finance Act mandates tax at the maximum marginal rate, surcharge must follow irrespective of income levels.
The assessee further appealed, arguing that while the maximum marginal rate may apply, the surcharge should only be imposed as per the limits defined in the Finance Act—specifically, only on incomes exceeding ₹50 lakh. Referring to Section 2(29C), Sections 164 and 167B of the Act, and past tribunal rulings, the trust contended that the surcharge should be income-based, not automatically attached to the marginal tax rate. The ITAT examined the language in the Finance Act and referred to a precedent set in ITO vs. Tayal Sales Corporation, concluding that surcharge is applicable only when total income exceeds ₹50 lakh. The tribunal ruled that applying surcharge to income under ₹50 lakh was not consistent with the Finance Act, which explicitly sets ₹50 lakh as the threshold for surcharge imposition on entities like trusts and associations of persons.
