C.N. Ramachandran Nair, J.
1. The assessee is a trust assessable to tax under Section 164 of the Income-tax Act, 1961. The assessment was completed under Section 143(1) of the Act accepting the return by levying tax at 55 per cent, plus surcharge. The assessee made an application under Section 154 of the Income-tax Act, 1961, for rectification of the assessment on the ground that the 'maximum marginal rate' referred to in Explanation 2 to Section 164(3) of the Act is not the maximum rate of tax applied by the Assessing Officer. The Assessing Officer rejected the application holding that there was no mistake in the rate applied and the tax computed. On first appeal, the first appellate authority held that the issue regarding the interpretation of 'maximum marginal rate' was a debatable issue and therefore no application for rectification was maintainable and hence he dismissed the appeal. On further appeal, the Tribunal allowed the assessee's case by holding that the 'maximum marginal rate' was to be computed after providing the slab rate of tax for the first Rs. 1 lakh. The Department has sought reference of the questions which are common for all the three assessment years 1985-86, 1986-87 and 1987-88, and the Tribunal has referred the following two questions for our decision :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that there can be no two views on the meaning of maximum marginal rate of tax ?
2. Whether, on the facts and in the circumstances of the case, the principles laid down and the calculation reached by the Tribunal in regard to the computation of maximum marginal rate are correct in law ?'
2. We have heard Sri P.K.R. Menon, senior counsel for the Revenue and Sri P. Balachandran, counsel for the assessee. Sri Menon contended that the definition 'maximum marginal rate' contained in Explanation 2 to Section 164(3) of the Act is free from doubt. Counsel for the assessee contended that the interpretation placed by the Tribunal based on another decision of the Tribunal is correct. It is his contention that 'maximum marginal rate' is not the maximum rate as rightly held by the Tribunal.
3. Explanation 2 to Section 164(3) of the Income-tax Act which is the subject-matter of these references is as follows :
'Explanation 2.--In this section, 'maximum marginal rate' means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an association of persons as specified in the Finance Act of the relevant year.'
4. There is no dispute that Section 164 is the relevant section under which the assessee has to be assessed. It is the charging section by itself and all that it says is that the 'maximum marginal rate' of tax is to be applied on the computed income. 'Maximum marginal rate' is defined as the rate of tax applicable in relation to the highest slab of income provided for associations of persons in the relevant Finance Act. We feel that the definition is not capable of any doubt, and the only meaning that it admits of is that the rate on the maximum slab of income for association of persons is to be treated as the maximum marginal rate of tax for the purpose of Section 164. The Finance Act for each year prescribes various slabs for each category of assessees and the corresponding rates of tax applicable. We find that the rate of tax on the highest slab for association of persons under the relevant Finance Act is 55 per cent, and therefore the Assessing Officer rightly levied the same. The interpretation placed by the Tribunal for providing marginalisation is against the definition contained in Explanation 2 to Section 164(3). When the statute says that the 'maximum marginal rate' is the rate applicable on the highest slab of income, there is no scope for enquiry on the meaning of 'marginal' and we feel the Tribunal committed an error by assigning a literal interpretation to the definition clause contained in Explanation 2. We therefore find that the Assessing Officer has rightly applied the 'maximum marginal rate' at 55 per cent, which was the rate applicable on the highest slab of income for associations of persons under the relevant Finance Act. We find that the Calcutta High Court in Surendranath Gangopadhyaya Trust v. CIT : [1983]142ITR149(Cal) and the Madhya Pradesh High Court in Piarelal Sakseria Family Trust v. CIT : [1982]136ITR583(MP) , have taken a similar view in the matter. In view of our interpretation, the questions have necessarily to be answered in favour of the Revenue and against the assessee and we do so.