M V SUBRAMANIAN FAMILY TRUST,CHENNAI V. ITO, NCW-1(1), CHENNAI

ITA 1087/CHNY/2025

AI Insights

The case involves M/s. M V Subramanian Family Trust, which appealed against the order of the Additional/JCIT(A)-4, Mumbai, concerning the assessment year 2021-22. The primary contention was the erroneous application of a 37% surcharge on dividend income, instead of the 15% surcharge mandated by the Finance Act, 2021. The trust argued that its income, which comprised capital gains and dividend income, should be taxed at the MMR with a surcharge not exceeding 15%. The Tribunal examined various precedents and the specific provisions of the Finance Act, 2021, and concluded that the surcharge should indeed be capped at 15% for the income types specified under sections 111A and 112A of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772018 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2021-2022
• Other Referred Cases: Araadhya Jain Trust vs. ITO, Mahalaxmi Construction Co. vs. ADIT, Sow Rachna Rathi Family Trust vs. DDIT, Clestra Foundation vs. ITO, V.Meera Charitable Trust vs. ITO, Anant Bajaj Trust vs. Dy. DIT, Kapur Family Trust vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITHA
• Assessee Lawyers: ASHWIN
• Keywords: Capital Gains; Rectification of order; Charitable institution; Residential status; Maximum Marginal Rate
• Section: 154; 11; 234B; 115JB

Judgement Text

"आयकर अपीलȣय अͬधकरण,‘सी’ Ûयायपीठ,चेÛनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI Įी मनु क ुमार ͬगǐर, ÛयाǓयक सदèय एवं Įी एस.आर.रघुनाथा, लेखा सदèय क े सम¢ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1087/CHNY/2025 िनधाᭅरण वषᭅ/Assessment Year:2021-22 M/s. M V Subramanian Family Trust, 10, Valliammai Achi Road, Kotturpuram, Chennai – 600 085. Vs. The Income Tax Officer, Non-Corporate Ward 1(1), Chennai. PAN: AAETM 9151C (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri Ashwin, CA ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Ms. Anitha, Addl.CIT सुनवाई कᳱ तारीख/Date of Hearing : 24.07.2025 घोषणा कᳱ तारीख/Date of Pronouncement : 25.08.2025 आदेश /O R D E R PER MANU KUMAR GIRI, JM: This appeal filed by the assessee is directed against the order of Addl/JCIT(A)-4, Mumbai dated 28.02.2025 for the Assessment Year 2021-22. 2. The assessee has raised the following grounds of appeal:- Ground No 1 Printed from counselvise.com -2 - ITA. No:1087/Chny/2025 1.The order of the Respondent is contrary to law, facts and circumstances of the case. 2.Ground No 2 - Erroneous consideration of surcharge at 37% instead of 15% 2.1 On the facts and circumstances of the case and in law, the Ld. Respondent has failed to appreciate that the applicable surcharge rate is 15% and not 37%. 2.2 While the Ld. Respondent was correct in taxing the Appellant as an Associations of Persons (AOP)at the Maximum Marginal Rate (MMR), he failed to provide due cognizance of the fact that the entire income of the Appellant amounting to INR 82,21,860 comprised only of special incomes in the nature of capital gains and dividend income. 2.3 The Ld. Respondent erred in considering the surcharge at the rate of 37% by completely disregarding the provisions of the Finance Act, 2021, which imposes a cap of 15% on surcharge where the total income includes dividend income or incomes chargeable under sections 111A or112A of the Act 2.4 The Ld. Respondent ought to have appreciated that section 2(29C) of the Act defines \"Maximum Marginal Rate\" as the rate of income tax (including surcharge on income tax, if any) applicable in relation to the highest slab of income in case of an individual, AOP or BOI as specified under the Finance Act of the relevant year. 3. Ground No 3 - Levy of interest under section 234B & 234C 3.1. On the facts and circumstances of the case and in law, the Ld. Respondent has erred in levying interest under sections 234B and 234C of the Act. 3.2. The Interest under section 234C has been erroneously levied at INR 5,813 by disregarding the fact that the same is required to be levied only on the returned income. 4. Ground No.4-General The Appellant craves leave to add, alter, amend, substitute, rescind, modify and/or withdraw in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal. 3. The brief facts of the case are that the assessee is a private discretionary trust and is an India Tax resident. The assessee trust has income from capital gains and income from other sources. The assessee trust has filed its return of income for the relevant Printed from counselvise.com -3 - ITA. No:1087/Chny/2025 assessment year on 18.11.2021 declaring an income of Rs.82,21,860/-. An intimation u/s.143(1) of the Income Tax Act (hereinafter the ‘Act’) dated 13.10.2022 was issued by considering surcharge at the rate of 37% on dividend income instead of 15%. The assessee trust has filed rectification application online for reprocessing of return of income. Subsequently, rectification order u/s.154 of the Act was passed by the CPC confirming the tax demand raised vide intimation dated 13.10.2022 without considering the assessee’s rectification request. Aggrieved, assessee filed an appeal before the Ld.CIT(A) who dismissed the appeal. Aggrieved by the order of the Ld. CIT(A), the assessee preferred an appeal before us. 4. The ld. AR submitted as under:- Erroneous consideration of surcharge at 37% instead of 15% 1. The income of the private discretionary trust was assessed to tax as Association of Persons (\"AOP\") at Maximum Marginal Rate (\"MMR”). 2. MMR has been defined under section 2(29C) of the Act as maximum marginal rate means the rate of income-tax including surcharge on income- tax applicable in relation to the highest slab of income in the case of an individual , association of persons or body of individuals as specified in the Finance Act of the relevant year. 3. In this regards, the provisions of Section 2 of the Finance Act, 2021(Chapter Il - Rates of Income-tax) read with Paragraph A of Part I of First schedule to Finance Act 2021 wherein, in respect of AOP, where the total income includes any income by way of dividend or income chargeable Printed from counselvise.com -4 - ITA. No:1087/Chny/2025 under section 111A and section 112A of the Income-tax Act, the rate of surcharge on the amount of income-tax computed in respect of that part of income shall not exceed fifteen per cent. are to be considered. The relevant provisions as in Finance Act, 2021 is attached below: \"Provided that in case where the total income includes any income by way of dividend or income chargeable under section 11 1A and section 112A of the Income-tax Act, the rate of surcharge on the amount of income-tax computed in respect of that part of income shall not exceed fifteen percent.” 4. Hence, the Appellant files that, for computation of MMR applicable to the Appellant for the AY 2021-22, considering that the taxable income is in the nature of dividend, MMR should have been arrived at by applying surcharge at the rate of 15% and not 37% as computed in the order. 5. Thereby, an amount of Rs.6,80,320/- was determined as tax demand. 5. The Ld.AR further submitted that in one of the family trusts of Murugappa Group, Meenakshi Murugappan Family Trust, an issue similar to the assessee’s had arisen. In that trust, the CIT(A) opined that the Ld.AO is not justified in applying the surcharge at 37% of the tax amount. However, the CIT(A) justified the assessee’s stand of applying the surcharge at 15% and the assessee’s appeal was allowed. The Ld.AR also relied upon the Co-ordinate Bench order of the Tribunal in the case of V.Meera Charitable Trust vs. ITO in ITA No.2140/CHNY/2024, Assessment year 2022-23, order dated 07.02.2025. The Ld.AR further relied upon the following orders of the Tribunal:- Printed from counselvise.com -5 - ITA. No:1087/Chny/2025 i. ITAT, Mumbai Special Bench in the case of Araadhya Jain Trust vs. ITO, reported in [2025] 173 taxmann.com 343 (Mumbai – Trib) ii. ITAT, Mumbai Bench in the case of Mahalaxmi Construction Co. vs. ADIT in [2025] 174 taxmann.com 292 (Mumbai-Trib.) iii. ITAT, Pune Bench in the case of Sow Rachna Rathi Family Trust vs. DDIT, reported in [2025] 174 taxmann.com 854 (Pune-Trib). 6. Per contra, the Ld.DR, Ms. Anitha, Addl.CIT relied upon the order of the Bangalore Bench of the Tribunal in the case of Clestra Foundation vs. ITO, reported in [2024] 169 taxmann.com 46 (Bangalore-Trib) and pleaded for affirmation of the impugned order. 7. Heard both the parties, perused the orders of the authorities below and case law citation relied. In the instant appeal it is undisputed fact that the assessee is classified as a private discretionary trust and is recognized as a tax resident of India. This trust has generated income from capital gains as well as from other sources. The trust submitted its income tax return for the pertinent assessment year on 18.11.2021, reporting an income of Rs.82,21,860/-. An intimation under section 143(1) of the Income Tax Act (hereinafter referred to as the ‘Act’) was issued on 13.10.2022, which applied a surcharge of 37% on dividend income rather than the correct rate of 15%. In response, the assessee trust submitted an online rectification application for the reprocessing of Printed from counselvise.com -6 - ITA. No:1087/Chny/2025 its income tax return. Following this, a rectification order under section 154 of the Act was issued by the CPC, which upheld the tax demand indicated in the intimation dated 13.10.2022, neglecting the rectification request made by the assessee. Dissatisfied with this outcome, the assessee filed an appeal with the Ld.CIT(A), who subsequently dismissed the appeal. 8. We find that the issue is squarely covered by the decision of the Special Bench of Tribunal Mumbai in the case of Araadhya Jain Trust vs. ITO, reported in [2025] 173 taxmann.com 343 (Mumbai – Trib) which held as under: 21. We have given a thoughtful consideration to the rival submissions and perused materials on record. We have also applied our mind to the judicial precedents cited before us. The short issue arising for consideration before us is, 'whether the definition of maximum marginal rate in terms with section 2(29C) of the Act can be interpreted in a manner to suggest that not only the rate of tax on the total income of assessee would be at the highest rate, but even the surcharge to be computed on such tax would be at the highest rate'. 22. Before we proceed to deal with the issue, let us understand what is meant by a 'Private Discretionary Trust'. A 'Discretionary Trust' is generally a Trust registered under the Indian Trusts Act, 1882, whereunder, the Trustees hold the power to decide the class of beneficiaries who can receive either capital or income from the Trust at the discretion of the Trustees. However, no one beneficiary has an absolute entitlement either to income or capital. In other words, in a discretionary trust, distribution of all capital and income is completely at the discretion of the Trustees. Generally speaking, in these kind of trusts not only the beneficiaries but even the shares of beneficiaries remain indeterminate. These Trusts/Association of Persons/Body of individuals are covered either u/s.164 or 167B of the Act. These provisions provided that the income of such Trusts/AOPs/BOIs are brought to tax at the maximum marginal rate. The expression \"maximum marginal rate\" has been defined u/s.2(29C) of the Act as under: Printed from counselvise.com -7 - ITA. No:1087/Chny/2025 \"maximum marginal rate\" means the rate of income-tax (including surcharge on incometax, if any) applicable in relation to the highest slab of income in the case of an individual, association of persons or, as the case may be, body of individuals as specified in the Finance Act of the relevant year; 23. A plain reading of the aforesaid definition clause would indicate that the 'maximum marginal rate' would mean the rate of income tax, including surcharge on income tax, if any, applicable to the highest slab of income of an individual, association of person or body of individual as specified in the Finance Act of the relevant year. In other words, at the first instance, the tax on the total income of the discretionary trust has to be determined by applying the maximum marginal rate, as applicable to the highest slab of income relating to an individual, association of person or body of individual specified in the Finance Act of the relevant year. Thereafter, the surcharge, if any, has to be computed on such income tax. 24. As could be seen from a conjoint reading of sections 164/167B of the Act, these provisions provide for computation of income-tax at the maximum marginal rate. However, in these provisions there is no reference to levy of surcharge. Whereas, the definition of 'maximum marginal rate' u/s. 2(29C) of the Act refers to surcharge. But, this definition clause by itself does not fix the rate of tax, instead, refers to the rate prescribed under the Finance Act of the relevant year. Thus, what should be the maximum marginal rate of income-tax is to be determined based on the rate of income-tax provided in Finance Act of the relevant year. The rates of income tax is provided u/s.2 of the Finance Act. A reference to section 2 of Finance Act, 2023, makes it clear that as per sub- section (1) of section 2, for the A.Y. 2023-24 income-tax shall be charged at the rate specified in Paragraph A, Part (I) of First Schedule to the Finance Act- 2023 and such tax shall be increased by a surcharge, collected for the purposes of the Union, calculated in each case in the manner provided therein. Of- course, sub section (1) of section 2 is subject to the provisions of sub-sections (2) and (3). Sub section (2) of section 2 speaks of an assessee having net agricultural income exceeding five thousand rupees, in addition to total income, hence, is not relevant for our purpose. However, sub section (3) of section 2 of Finance Act provides that in case of assessee's covered under Chapter XII or XII-A or section 115JB or section 115JC or Chapter XII-FA or Chapter XII-FB or sub-section (1A) of section 161 or section 164 or section 164A or section 167B of the Income-tax Act, the tax chargeable shall be determined as provided in those Chapters or sections, and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be. Thus, sub section 2(1) of Finance Act, which is subject to the provisions of sub-section (3), though, provides that income-tax shall be charged at the rate specified in Part 1 of the specified schedule, however, sub-section (3) carves out an exception in case of certain class of income or assessees by providing that the chargeable tax shall be determined Printed from counselvise.com -8 - ITA. No:1087/Chny/2025 in terms with those Chapters or sections, and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be. 25. In case of discretionary trusts, sections 164/167B of the Act, do not by themselves specify the rate of tax. They only say that tax on total income is to be determined at the maximum marginal rate. The definition of 'maximum marginal rate' u/s.2(29C) of the Act, in turn, refers to the rate of income-tax applicable to the highest slab as provided under the Finance Act of the relevant year. Thus, for determining the maximum marginal rate of tax, one has to revert back to the rate prescribed in Paragraph A, Part (I) of First Schedule to the Finance Act-2023. Sub-section 2(1) of the Finance Act, further provides that the tax so determined shall be increased by a surcharge collected for the purposes of Union, calculated under each case in the manner provided in the First Schedule. ………………………………………… ………………………………………… Surcharge on income-tax The amount of income-tax computed in accordance with the preceding provisions of this Paragraph, or the provisions of section 111A or section 112 or section 112A or the provisions of section 115BAC of the Income- tax Act, shall be increased by a surcharge for the purposes of the Union, calculated, in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act,— (a) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act) exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten per cent of such income-tax; (b) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act) exceeding one crore rupees, but not exceeding two crore rupees, at the rate of fifteen per cent of such income- tax; (c) having a total income (excluding the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act) exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent of such income-tax; (d) having a total income (excluding the income by way of dividend or income under the provisions of section 111A, section 112 and section Printed from counselvise.com -9 - ITA. No:1087/Chny/2025 112A of the Income-tax Act) exceeding five crore rupees, at the rate of thirty-seven per cent of such income-tax; and (e) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A) exceeding two crore rupees but is not covered under clauses (c) and (d), shall be applicable at the rate of fifteen per cent of such in-come-tax: Provided that in case where the total income includes any income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Income-tax Act, the rate of surcharge on the amount of income-tax computed in respect of that part of income shall not exceed fifteen per cent: Provided further that in case of an association of persons consisting of only companies as its members, the rate of surcharge on the amount of Income- tax shall not exceed fifteen per cent: Provided also that in the case of persons mentioned above having total income exceeding,— (a) fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees; (b) one crore rupees but does not exceed two crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees; (c) two crore rupees but does not exceed five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of two crore rupees by more than the amount of income that exceeds two crore rupees; (d) five crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of five crore rupees by more than the amount of income that exceeds five crore rupees. 26. On going through Paragraph A, Part (I) of First Schedule to the Finance Act-2023, it becomes very much clear that under Item (1), the rates of income tax applicable to individuals, Hindu undivided family or association of persons or body of individuals have been provided. As could be seen from the rates of income-tax for different income brackets, if the total income does not exceed Rs.2,50,000/-, the rate of income tax is Nil. If the total income exceeds Rs.2,50,000/-, but does not exceed Rs.5,00,000/-, the rate of income tax is 5% of the amount by which the total income exceeds Rs.2,50,000/-. Where the total income exceeds Rs.5,00,000/- but des not exceed Rs.10,00,000/-, the rate of income tax is Rs.12,500 plus 20% of the amount by which the total income exceeds Rs.5,00,000/- and lastly, where the total income exceeds Printed from counselvise.com -10 - ITA. No:1087/Chny/2025 Rs.10,00,000/-, then the rate of tax is Rs.1,12,500/-plus 30% of the amount by which the total income exceeds Rs.10,00,000/-. Thus, as per the rates of income tax prescribed in Item (1), the highest slab of income is Rs.10 lacs and above and the applicable rate of income tax is 30%. Thus, in terms with section 2(29C) of the Act, the maximum marginal rate of tax will be 30% as applicable to the highest slab of income. 26. On going through Paragraph A, Part (I) of First Schedule to the Finance Act-2023, it becomes very much clear that under Item (1), the rates of income tax applicable to individuals, Hindu undivided family or association of persons or body of individuals have been provided. As could be seen from the rates of income-tax for different income brackets, if the total income does not exceed Rs.2,50,000/-, the rate of income tax is Nil. If the total income exceeds Rs.2,50,000/-, but does not exceed Rs.5,00,000/-, the rate of income tax is 5% of the amount by which the total income exceeds Rs.2,50,000/-. Where the total income exceeds Rs.5,00,000/- but des not exceed Rs.10,00,000/-, the rate of income tax is Rs.12,500 plus 20% of the amount by which the total income exceeds Rs.5,00,000/- and lastly, where the total income exceeds Rs.10,00,000/-, then the rate of tax is Rs.1,12,500/-plus 30% of the amount by which the total income exceeds Rs.10,00,000/-. Thus, as per the rates of income tax prescribed in Item (1), the highest slab of income is Rs.10 lacs and above and the applicable rate of income tax is 30%. Thus, in terms with section 2(29C) of the Act, the maximum marginal rate of tax will be 30% as applicable to the highest slab of income. 27. The expression 'slab' is not mentioned either in sub-section (1) of section 2 or even under Paragraph A, Part (I) of First Schedule to the Finance Act-2023. However, as per the materials placed before us, it is observed that in Press Note dated 01.12.1965 issued by Government of India, copy of which is placed at pg. no. 45 of the Paper Book, submitted in case of NIK Family Trust, the expression 'slab' refers to 'income' and not the tax. In fact, even section 2(29C) of the Act refers to highest slab of income. Even Circular No. 2/2018 (F.No. 370142/15/2017-TPL] containing Explanatory Notes to Provisions of Finance Act, 2017, a copy of which is placed at pg. no. 47 of the Paper Book filed by the NIK Family Trust, refers the expression 'slab' to the various categories of income. Thus, in terms with sections 164/167B r.w.s. 2(29C) of the Act, tax as per maximum marginal rate would mean 'the rate of tax applicable to the highest slab of income' under Item (1) of Paragraph A, Part (I) of First Schedule to the Finance Act-2023. 28. Under the head 'Surcharge on income-tax' appearing in Paragraph A, Part (1), First Schedule it has been provided that the amount of income-tax computed as per the rate of income-tax under Item (1), (2) and (3) or under the provisions of section 111A or section 112 or section 112A or the provision of section 115BAC of the Income Tax Act, shall be increased by a surcharge, for the purposes of the Union, calculated in the case of particular class of Printed from counselvise.com -11 - ITA. No:1087/Chny/2025 assessees in the manner provided therein. As could be seen from items (a) to (e), provided under the head 'Surcharge on income-tax', there are different rates of surcharge on income tax, depending upon the categories of income. The rate of surcharge starts from minimum of 10% to the maximum of 37% on income-tax. The maximum rate of surcharge at 37% on income-tax is applicable in case of assessees having total income, exceeding Rs.5 crores. It further emanates that the minimum rate of surcharge @ 10% on the incometax is applicable only when the income of the assessee is above Rs.50 lacs, but less than Rs.1 crore. Thus, as per Paragraph A, Part (I) of First Schedule to the Finance Act-2023, the threshold limit for applicability of surcharge is when total income is Rs.50 lacs and above. In other words, if the total income is below the threshold limit of Rs.50 lacs, there would be no surcharge. Even the first proviso under the heading 'Surcharge on income tax' carves out an exception regarding the rate of surcharge by stating that in case where assessee's total income includes dividend income or income under the provisions of section 111A, 112A and section 112A of the Act, the rate of surcharge on the amount of income tax computed on that part of income shall not exceed 15%. In other words, if the total income of an assessee includes any income by way of dividend or income under certain provisions of the Act, the rate of surcharge on tax computed on such part of income under no circumstances would exceed 15%. 29. If we accept the contention of the Revenue that, irrespective of the nature or quantum of income, as per the definition of maximum marginal rate u/s.2(29C) of the Act, surcharge has to be computed at the highest rate of 37% applicable to the highest income bracket of Rs.5 crores and above, then the exception provided under the first proviso under the heading 'Surcharge on income-tax' would become otiose. Even, the different rates of surcharge on income-tax provided under clause (a) to (e) applicable to the different slabs of income would become meaningless so far as discretionary trusts are concerned. In our view, such an interpretation would lead to absurdity, hence, is unworkable. In our view, once the definition of 'maximum marginal rate' refers to the rate of income-tax and surcharge provided under the Finance Act of the relevant year, then the rates of incometax and applicable rate of surcharge as provided under Paragraph A, Part (I) of First Schedule to the Finance Act-2023, would apply. Any other interpretation, in our view, would lead to undesirable consequences and would be discriminatory. In our view, the expression 'including Surcharge on income-tax, if any', within the bracketed portion of section 2(29C) of the Act, would mean the surcharge as provided in the computation mechanism under the heading 'surcharge on income tax' finding place in Paragraph A, Part (I) of First Schedule to the Finance Act-2023. 30. The Revenue has taken a line of argument that the words 'if any' succeeding the words 'including surcharge on income tax' appearing in the definition of maximum marginal rate u/s. 2(29C) of the Act are only for the purpose that when levy of surcharge is specifically provided under the Finance Act of the Printed from counselvise.com -12 - ITA. No:1087/Chny/2025 relevant year, it would be included in income-tax computed at the highest rate, otherwise, not. Though, at first blush this argument of the department sounds attractive, however, on deeper analysis it is found to be superfluous, for the following reasons. As discussed earlier, Article 271 of the Constitution of India, empowers the Union to impose surcharge for the purposes of Union. Whereas, Article 265 of the Constitution of India mandates that no tax can be collected without authority of law. Therefore, levy of surcharge has to be preceded by a law enacted by the parliament authorizing such levy. Thus, in absence of any law authorising levy of surcharge, it cannot be collected. This legal position is as clear as daylight, hence, does not require further clarification with the use of words 'if any' to mean whether the Finance Act of a particular year, if at all, provides for levy of surcharge or not. Though, in our view, there is no conflict between provisions contained u/s. 164/167B, 2(29C) of the Income Tax Act and section 2 of the Finance Act, however, even assuming that there are some conflicts, a harmonious construction has to be made to avoid absurdity and make the provisions workable. Thus, in our view, the expression 'if any' used in section 2(29C) has to be read not de hors but in conjunction with the computation mechanism provided under the heading 'surcharge on income tax' provided in section 2 of Finance Act. This view of ours is further fortified by the object for which levy of surcharge was introduced to the Finance Act - to augment the Revenue of the Union for developmental work by asking persons in the highest income bracket to contribute little more than the other citizens, for nation building. 31. As we find, the Revenue has placed strong reliance upon the decision of the coordinate bench in case of Araadhya Jain Trust (supra) and couple of other decisions, which are on similar line. Pertinently, the decision rendered in case of Anant Bajaj Trust (supra) was subsequently recalled. Whereas, the bench has followed the decision of Anant Bajaj Trust (supra) while deciding the appeal of Kapur Family Trust (supra). Therefore, the decision rendered in case of Kapur Family Trust (supra) has lost its relevance. Insofar as the decision of the co-ordinate bench in the case of Araadhya Jain Trust (supra) is concerned, in our view, the bench has drawing its conclusion, primarily relying upon certain decisions of Hon'ble Kerala High Court and Hon'ble High Court of Bombay. As discussed elsewhere in the order. 32. However, upon carefully going through these decisions, we are of the considered view that the issue arising in the present case never fell for consideration before the Hon'ble Courts. The issue in dispute in those cases was primarily concerning what should be the maximum marginal rate and its applicability. The issue 'whether the rate of surcharge would also be at the highest rate while computing tax at maximum marginal rate' was never the issue before the Hon'ble Courts. Thus, in our view, the view expressed by the coordinate benches in decisions referred to in Paragraph 10(supra) lay down the correct proposition of law. Thus, in the ultimate analysis, we hold, in case of Private Discretionary Trusts, whose income is chargeable to tax at Printed from counselvise.com -13 - ITA. No:1087/Chny/2025 maximum marginal rate, surcharge has to be computed on the income tax having reference to the slab rates prescribed in the Finance Act under the heading 'surcharge on income tax' appearing in Paragraph A, Part 1, First Schedule, applicable to the relevant assessment year. Hence, reference is decided in favour of the assessee. The records may be returned back to the respective benches for deciding the appeals accordingly. 9. We find that the Bangalore Bench of Tribunal has relied upon the orders of the Mumbai Bench of Tribunal ‘Aaradhya Jain Trust v. ITO [IT Appeal No. 2197 (Mum.) of 2024, dated 7-10-2024]’ and ‘Anant Bajaj Trust v. Dy. DIT [IT Appeal No.1995 (Mum.) of 2024, dated 26-8-2024]’ has duly been considered by the Special Bench in the case of Araadhya Jain Trust vs. ITO, reported in [2025] 173 taxmann.com 343 (Mumbai – Trib) (Supra). We further find that in this instant case the ld.CIT(A) has also relied upon the order of the Mumbai Bench of Tribunal in the case of ‘Anant Bajaj Trust v. Dy. DIT [IT Appeal No.1995 (Mum.) of 2024, dated 26-8-2024]’ which has now been recalled by the Tribunal as discussed by the Special bench at para 12 referred supra. The Special bench at para 10 has also considered the order of the Chennai Bench of Tribunal in the case of V. Meera Charitable Trust v. ITO, Exemption [IT Appeal No. 2140 (Chny.) of 2024, dated 7-2-2025] as relied by the assessee. 10. Therefore, respectfully following the order of the Special Bench referred supra, we also hold that in case of Private Discretionary Printed from counselvise.com -14 - ITA. No:1087/Chny/2025 Trusts, whose income is chargeable to tax at maximum marginal rate, surcharge has to be computed on the income tax having reference to the Finance Act, 2021 which clearly imposes a cap of 15% on surcharge where the total income includes dividend income or incomes chargeable under sections 111A or112A of the Act. Hence, appeal is decided in favour of the assessee. 11. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 25th August, 2025 at Chennai. Sd/- Sd/- (एस.आर. रघुनाथा) ( मनु क ुमार िगįर) (S.R. RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद˟/ACCOUNTANTMEMBER Ɋाियक सद˟/JUDICIAL MEMBER चेÛनई/Chennai, Ǒदनांक/Date: 25.08.2025 RSR आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy to: 1. अपीलाथȸ/Appellant 2. Ĥ×यथȸ/Respondent 3. आयकरआयुÈत /CIT, Chennai 4. ͪवभागीय ĤǓतǓनͬध/DR 5. गाड[ फाईल/GF. Printed from counselvise.com "