The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that surcharge on income tax is applicable only to income exceeding ₹50 lakh.
Badamtam Welfare Trust,appellant-assessee,was registered in Kolkata on September 9, 2000, and aimed to provide financial support for medical expenses, education, training, and charitable donations. It was assessed as an Association of Persons(AOP) and was not registered under section 12A/12AA of the Act.
For the assessment year 2023-2024, the Trust filed its income tax return on November 15, 2023, declaring an income of ₹1,27,100. After adjusting Tax Deducted at Source ( TDS ) of ₹43,200 against the computed tax liability of ₹40,655, a refund of ₹2,545 was claimed. While the Assessing Officer ( AO ) accepted the declared income, an error was made in calculating the tax liability, which was increased to ₹56,171 by incorrectly adding a surcharge of ₹14,108 and additional cess of ₹565.
The assessee, aggrieved with the order, appealed to the Commissioner of Income Tax(Appeals)[CIT(A)], who dismissed it after reviewing the submission. The assessee then appealed before the tribunal.
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The assessee counsel argued that the surcharge was not applicable since the income was ₹1,27,095, well below the ₹50 lakh threshold for an AOP. It was also stated that the surcharge applies only to non-residents, specified funds, and foreign institutional investors, which did not include the assessee.
For the previous assessment year 2022-23, a similar surcharge was deleted by the CIT(A) in an order dated December 16, 2023. Citing ITAT decisions, the counsel requested the deletion of the surcharge and the correct calculation of tax liability.
A single member bench comprising Duvvuru RL Reddy ( Vice President ) reviewed the case and noted that the income declared in the return was Rs. 1,27,095. The dispute centered on the levy of surcharge and interest under section 234F. The Additional/Joint Commissioner of Income Tax (A)[Addl./JCIT(Appeals)] had argued that the tax should be calculated using the maximum marginal rate, which includes a surcharge as per section 2(29C) of the Act.
The tribunal explained that the surcharge applies only to income exceeding Rs. 50 lakhs, as outlined in the Finance Bill, 2022. Since the declared income in this case was far below that threshold, the surcharge was not applicable.It concluded that the Addl./JCIT(A)’s decision to impose the surcharge was incorrect and directed the AO not to levy any surcharge on the income tax.
In short,the appeal filed by the assessee was allowed.
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