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Facts
The assessee, a private limited company, opted for the concessional tax rate under section 115BAA by filing Form 10-IC along with its return of income. However, Form 10-IC was filed with a delay of 19 days, and the CPC processed the return by applying the normal tax rate of 30% instead of the concessional rate of 22%. The CIT(A) upheld this decision.
Held
The Tribunal held that the assessee had acted in a bonafide manner and demonstrated its intention to opt for the concessional tax regime. The delay in filing Form 10-IC was considered a procedural lapse, which should not deprive the assessee of the substantive benefit. The Tribunal directed the AO to accept the option exercised by the assessee for the concessional taxation regime.
Key Issues
Whether denial of concessional tax rate under section 115BAA due to a procedural delay in filing Form 10-IC is justified, or if it should be allowed based on bonafide intention and substantial compliance.
Sections Cited
115BAA, 143(1), 139, 119(2)(b)
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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R.RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
These two appeals filed by the assessee are directed against the separate order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), dated 07.03.2024 and 21.03.2025 arising out of the assessment order passed by CPC u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) for AY 2022-23 and 2023-24.
:-2-: ITA. No:1507 & 1508/Chny/2025
The grounds raised by the assessee are as follows:
1. The and order opposed of the National Faceless Appeal Centre (NFAC), is wrong, illegal to facts of the instant case.
2. The NFAC erred in disallowing rate the claim of the appellant for concessional of tax under section 115BAA of the Act even though the appellant had filed form 10 IC opting for tax regime under section 115BAA.
3. The CPC while disallowing the appellants option for concessional tax under rate of section 115BAA failed to take into consideration form 10 IC filed by the appellant along with the return of income on 26.11.2022.
4. The NFAC ought to have seen that the Act of the CPC in assessing the appellant to normal rate of tax even though the appellant opted for concessional rate of tax under section 115BAA by CPC is a debatable issue, which is not permissible as a prima facia adjustment under section 143(1) of the Income Tax Act.
5. The NFAC ought to have seen that the denial of the option to the appellant to concessional rate of tax under section 115BAA is contrary to the proviso under Sec 143(1) and is patently unjust as any disallowance should follow after giving an opportunity as per proviso. In the absence of the same, the order U/S 143(1) is vitiated by the vice of ignoring a legal requirement, which renders the 143(1) order as legally untenable and bad in law.
6. The NFAC while upholding the intimation of CPC under section 143(1) failed to see that once the appellant opts for regime under section 115BA the appellant cannot revert to regular tax scheme.
1. The order of the National Faceless Appeal Centre (NFAC), is wrong, illegal and opposed to facts of the instant case.
2. The NFAC erred in disallowing the claim of the appellant for concessional rate of tax under section 115BAA of the Act even though the appellant had filed form 10 IC on 26.11.2022 opting for tax regime under section 115BAА.
3. The CPC while disallowing the appellants option for concessional rate of tax under section 115BAA failed to take into consideration form 10 IC filed by the appellant on 26.11.2022 and there is no legal requirement for fresh submission of form 10 IC for subsequent financial years.
4. The NFAC ought to have seen that the Act of the CPC in assessing the appellant to normal rate of tax even though the appellant opted for concessional rate of tax under section 115BAA by CPC is a debatable issue, which is not permissible as a prima facia adjustment under section 143(1) of the Income Tax Act.
The NFAC ought to have seen that the denial of the option to the appellant to concessional rate of tax under section 115BAA is contrary to the proviso under Sec 143(1) and is patently unjust as any disallowance should follow after giving an opportunity as per proviso. In the absence of the same, the order U/S 143(1) is vitiated by the vice of ignoring a legal requirement, which renders the 143(1) order as legally untenable and bad in law.
:-3-: ITA. No:1507 & 1508/Chny/2025
6. The NFAC while upholding the intimation of CPC under section 143(1) failed to see that once the appellant opts for regime under section 115BAA the appellant cannot revert to regular tax scheme and that Rule nowhere states that form 10 IC is required to be filed for every subsequent financial years.
Since facts are identical and issues are common, for the sake of convenience, these appeals filed by the assessee are being heard together and disposed of by this consolidated order. For the purposes of this adjudication, the facts and figures for AY 2022-23 have been taken. The decision for AY 2022-23 shall apply mutatis mutandis for appeal in AY 2023- 24.
Brief facts of the case are that the assessee is a Private Limited Company. For the year under consideration, the assessee filed its return of income for the AY 2022-23 on 26.11.2022, declaring a total income of Rs.2,55,62,040/- and due tax was paid at concessional tax rate of 22% u/s.115BAA of the Act. On the same date, the assessee opted for the concessional tax rate of 22% u/s.115BAA of the Act, and duly furnished Form 10-IC electronically as prescribed under Rule 21AE of the Income-tax Rules, 1962. The Form 10-IC was filed with a delay of 19 days. The return was processed vide intimation u/s.143(1) of the Act dated 26.06.2023 wherein a normal tax rate of 30% was applied by CPC to the total income of the assessee as against the concessional tax rate of 22% as per section 115BAA of the Act. The reason for applying the normal tax rate was that the assessee has not followed the conditions to opt for concessional rate of taxation. It was observed
:-4-: ITA. No:1507 & 1508/Chny/2025 that the assessee was required to file Form 10IC on or before the due date specified under sub section (1) of section 139 for furnishing the return of Income to avail the benefit of concessional rate of tax on total income. The assessee filed Form 10-IC and ITR on 26.11.2022 i.e. with a delay of 19 days, which was after the due date of filing of its ITR as specified under sub section (1) of section 139 of the Act. The due date of filing of ITR u/s.139(1) was on or before 07.11.2022 (extended). Accordingly, the CPC had applied normal rate of tax of 30%. The assessee also has filed a petition before CBDT seeking condonation of delay u/s.119 (2)( b) of the Act, for belated filing of Form 10-IC on account of illness of the then consulting Chartered Accountant.
5. Aggrieved, the assessee carried the matter in appeal before the Ld.CIT(A) but without any success. The ld.CIT(A) upheld and justified the rejection of the assessee’s stand with respect to taxability @ 22% primarily on the ground that the option under sub section (5) of section 115BAA, by way of filing of form 10- IC, was not exercised within the time prescribed u/s.139(1) which is a sine qua non for availing the concessional tax regime u/s.115BAA. The Ld.CIT(A) thus upheld the stand of the AO in declining the benefit of the concessional tax regime u/s.115BBA, and declined to interfere in the matter. Thus, being aggrieved by the view taken by the Ld.CIT(A) in upholding the taxability at the rate of 30%, the assessee preferred an appeal before us.
Before us, ld.AR of the assessee submits that the Form 10-IC was filed on 26.11.2022 and non submission of form 10-IC within due date was for the :-5-: ITA. No:1507 & 1508/Chny/2025 reason that the consulting Chartered Accountant was unwell. Further, the assessee also submitted that it has filed a petition before CBDT seeking condonation for delay in filing Form 10-IC belatedly u/s.119(2)(b) of the Act. It is also stated that section 115BAA specifically gave an option to the company to opt for the new tax regime. The tax computed in the ITR clearly indicates that the assessee had exercised the option to be governed by the provisions of section 115BAA of the Act, thereby substantiating both the intention and the act of opting for the new tax regime. In support of the above argument, the assessee relied on this Tribunal’s decision in the case of M/s.Chennai Noble Hospitals Private Limited vs. ITO in dated 25.03.2025.
It is also argued that as per section 143(1) of the Act, the impugned adjustment of different tax rate not does not fall within the scope of adjustment stated in Section 143(1)(a). He thus prayed that tax be charged in the case of the assessee at concessional tax rate as provided u/s.115BAA of the Act.
Per contra, the Ld. DR, on the other hand, supported the decision of the Ld.CIT(A) and argued that the assessee did not meet the necessary conditions to claim the concessional tax rate. Therefore, it was submitted that Ld. CIT(A) was justified in denying the benefit of concessional tax rate and requested that their order be upheld.
We have heard the rival contentions perused the material available on record and gone through the orders of the lower authorities. The key issue in :-6-: ITA. No:1507 & 1508/Chny/2025 this appeal pertains to the denial of the benefit u/s.115BAA of the Act, which allows for a concessional rate of tax, on the grounds that Form 10-IC was not filed within the prescribed time, i.e., before the due date specified u/s.139(1) of the Act for filing the return of income.
It is evident that the assessee had acted in a bonafide manner while opting for the concessional tax regime u/s.115BAA of the Act. This is clear from the return of income, where the assessee explicitly exercised the option u/s.115BAA of the Act and computed tax at the concessional rate of 22%. There appears to be no ulterior motive or advantage for the assessee in failing to e-file the Form 10-IC within the due date, especially when the intention to opt for Section 115BAA of the Act was transparently declared in the ITR filed. Substantial compliance is evident and tax was paid at the prescribed concessional rate of 22%. It is observed that there was a delay of 19 days in filing Form 10-IC, for which the assessee has filed a petition before CBDT seeking condonation of delay u/s.119(2)(b) of the Act. Thus, the assessee has clearly demonstrated its intention to opt for the concessional tax regime through the return of income and filing Form 10-IC. The tax was computed accordingly, which supports the bona fide nature of the claim and the eligibility for the beneficial tax rate u/s.115BAA of the Act.
The co-ordinate bench in the case of M/s.Chennai Noble Hospitals Private Limited vs. ITO in dated 25.03.2025 has held as under:
:-7-: ITA. No:1507 & 1508/Chny/2025 “10. After hearing the submissions of the Counsels of the respective parties, we has perused the order and the facts of the case. The facts of the present case of the assessee are that the assessee filed its Form 10- IC on 30.12.2022 and return of income for the AY 2022-23 on 31.12.2022 after the due date 07.11.2022 however, the return of income for this AY 2023-24 filed on 12.10.2023 well within due date. The AO who is seized with matter for AY 2023-24 denied the benefit of new tax regime u/s 115BBA of the Act to the assessee for the reason that return for AY 2022-23 was filed after due date for filing the return and Form 10 – IC was filed after due date of filing the return. Section 115BBA of the Act was introduced for the purpose of granting benefit of reduced corporate tax rate for the domestic companies. In order to avail the benefit, such companies are required to exercise the option in prescribed manner on or before due date specified u/s 139(1) of the Act for furnishing the return of income. As per Rule 21E of the Income Tax Rules, 1962, such option can be exercised by filing Form 10-IC. Sub section (5) of Section 115BBA of the Act, makes it mandatory to file this form on or before the due date of furnishing the return of income as specified u/s 139(1) of the Act.
11. In the present case, while we perused the order of ld. CIT(A), it appears to us that the ld. CIT(A) has denied the claim of the assessee with respect to the allowing the benefit of new tax regie u/s 115BAA of the Act. On perusal of the order of the ld. CIT(A), it appears to us that appellant filed its return of income for the relevant assessment year on 12.10.2023 although filed Form- 10IC on 30.12.2022 and return of income for AY 2022-23 on 31.12.2022. We also note that in AY 2022-23, there is no finding to the effect that the assessee has failed to satisfy the conditions in sub-section (2) of section 115BBA of the Act. The assessee has also complied with all three ingredients of the CBDT circular mentioned supra. The word ’relevant assessment year’ means the return for the claim year. The section 115BBA gives right to the assessee to claim relief under section 115BBA for any year however, subject to the filing of Form – 10IC within stipulated due date u/s 139(1) of the Act. We also gather from this section that Form -10IC is required to be filed only once and it cannot be required to file every time of claim. Therefore, we direct the AO to allow benefit of new tax regime u/s 115BBA as claimed by the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.”
12. In the previous years, the CBDT itself had extended due dates for filing similar forms, thereby acknowledging the existence of genuine procedural challenges. These Circulars reflect a recognition of administrative flexibility and the principle that procedural lapses, by themselves, should not deprive an assessee of substantive benefits. A denial of benefit merely on the ground of such a procedural lapse would be contrary to the principles of equity and justice, particularly when the assessee’s substantive eligibility for the :-8-: ITA. No:1507 & 1508/Chny/2025 concessional rate of tax is undisputed. Applying the principle of beneficial interpretation, it is well settled that procedural requirements cannot be allowed to override substantive rights. Judicial precedents have consistently taken a liberal view in cases where substantive benefits were denied solely on account of procedural non-compliance.
The Hon’ble Supreme Court has repeatedly emphasized that while making of a claim is mandatory, the form, manner, or timing of such claim is directory in nature.
In view of the above facts and by respectfully following judicial pronouncement cited above, in our considered opinion assessee should not be deprived from the concessional rate of tax available in the statute merely for the procedural lapse. Accordingly, we direct the AO to accept the exercise of the option by the assessee for the concessional taxation regime u/s.115BAA of the Act. The assessee must therefore get the relief, as admissible, on the application of the scheme of taxation u/s.115BAA of the Act. Accordingly, the ground of appeal Nos.1 to 8 raised by the assessee are allowed.
14. We find the issue in A.Y.2023-24 are similar to the facts and circumstances relevant to A.Y.2022-23 in , wherein, we have set aside the order of ld.CIT(A) and directed the AO to accept the exercise of the option by the assessee for the concessional taxation regime under section 115BAA of the Act (supra). Therefore, we hold our findings
:-9-: ITA. No:1507 & 1508/Chny/2025 would be equally applicable to the assessment year under consideration. Thus, the grounds raised by the assessee for AY 2023-24 are allowed.
In the result, both the appeals of the assessee in and 1508/Chny/2025 are allowed.
Order pronounced in the court on 11th September, 2025 at Chennai.