Surcharge Applies Only When Income Tax Is Computed on Total Income Exceeding ₹50 Lakhs: ITAT [Read Order]
Considering that the assessee’s income was well below the statutory threshold, the Tribunal concluded that the additional demand raised due to surcharge was unsustainable.
![Surcharge Applies Only When Income Tax Is Computed on Total Income Exceeding ₹50 Lakhs: ITAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/05/surcharge-ITAT-TAXSCAN.jpg "Surcharge Applies Only When Income Tax Is Computed on Total Income Exceeding ₹50 Lakhs: ITAT [Read Order]")
The Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) recently ruled that surcharge under the Income Tax Act, 1961 applies only when the income tax is computed on total income exceeding ₹50 lakhs. The assessee is a trust registered under the Bombay Public Trust Act, 1950, had been engaged in charitable activities, including relief to the poor, medical aid, and promoting...
The Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) recently ruled that surcharge under the Income Tax Act, 1961 applies only when the income tax is computed on total income exceeding ₹50 lakhs.
The assessee is a trust registered under the Bombay Public Trust Act, 1950, had been engaged in charitable activities, including relief to the poor, medical aid, and promoting education. However, since it was not registered under Section 12A of the Income Tax Act during the relevant period, it was assessed as an Association of Persons (AOP).
For the assessment year 2021-22, the assessee reported total income of only ₹44,690 and paid taxes and interest and penalty totaling ₹36,096. However, the Centralized Processing Centre (CPC) made an additional demand of ₹15,250 under Section 143(1), and the reason given for this was the addition of surcharge. The assessee objected to this on the grounds that surcharge comes into play only when income exceeds ₹50 lakh, as under Section 167B of Income tax law.
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The assessee argued before the Tribunal that the CIT(A) erred by misinterpreting the definition of “maximum marginal rate” under Section 2(29C) of the Act. According to the assessee, the maximum marginal rate (including surcharge) applies only to the highest slab, and the legislative intent was clear that surcharge is triggered only beyond ₹50 lakh of income.
The assessee relied on cases including Ujjwal Business Trust vs. ITO, Lintas Employees Holiday Assistance Trust vs. CPC, Shriram Trust vs. ITO, and ITO vs. Tayal Sales Corporation, which consistently held that surcharge can only be levied when the statutory threshold is met.
The departmental representative (DR), on the other hand, defended the CIT(A)’s decision, arguing that the maximum marginal rate includes surcharge by default, regardless of whether the income crosses ₹50 lakh, as it is embedded in the rate structure under the Finance Act.
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The bench of Suchitra Kamble found merit in the assessee’s arguments. It specifically relied on the recent decision in Ria Zaveri Trust vs. ACIT, where the Tribunal had ruled that surcharge is applicable only when the total income exceeds ₹50 lakh. Considering that the assessee’s income was well below the statutory threshold, the Tribunal concluded that the additional demand raised due to surcharge was unsustainable.
Accordingly, the ITAT allowed the appeal of the assessee, setting aside the surcharge demand.
To Read the full text of the Order CLICK HERE
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