Surcharge on Private Trusts Taxed at MMR: ITAT Jaipur Mandates Adherence to Finance Act Slabs

The computation of tax liabilities for private family trusts, particularly concerning the application of the Maximum Marginal Rate (MMR) and the corresponding surcharge, has frequently been a subject of litigation between the revenue authorities and the assessee. A critical judicial summary of the recent decision by the Income Tax Appellate Tribunal (ITAT), Jaipur Bench, in the matter of Anshul Jagruchi Trust Vs ITO, provides much-needed clarity on this front. The Tribunal definitively ruled that levying tax at the MMR does not automatically authorize the revenue to apply the highest possible surcharge rate. Instead, the surcharge must be determined in strict accordance with the slab rates specified in the relevant Finance Act.

1. Factual Matrix of the Dispute

The assessee in this matter, a private family trust, generated its revenue exclusively through dividends, interest, and capital gains. For the Assessment Year 2025-26, the assessee submitted its return of income, choosing to be assessed under the alternative tax framework provided by Section 115BAC of the Income Tax Act 1961.

Acknowledging its status and the nature of its income, the assessee discharged its tax obligations by applying the Maximum Marginal Rate as mandated by Section 164 of the Income Tax Act 1961. Accompanying this tax computation, the assessee applied a surcharge at the rate of 25%.