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Facts
The assessee, a Private Limited Company, opted for the lower tax rate under Section 115BAA for AY 2021-22 but inadvertently failed to file Form 10IC within the due date. Consequently, the return was processed under Section 143(1) with a 30% tax rate, and the benefit of Section 115BAA was denied, a decision upheld by the ld. CIT(Appeals). The assessee argued that the turnover did not exceed Rs. 400 crores in FY 2018-19, making it eligible for 25% tax, and that the failure to file Form 10IC was an inadvertent mistake.
Held
The Tribunal held that since the assessee had validly exercised the option under Section 115BAA for AY 2021-22 and revenue authorities had not found any error in such claim and allowed the option for that year, the assessee was not required to exercise the option again for subsequent assessment years as per Section 115BAA(5). Therefore, the assessee is eligible for the lower tax rate of 25% under Section 115BAA.
Key Issues
Whether the assessee is eligible for the lower tax rate under Section 115BAA, despite failing to file Form 10IC within the due date, when the option was otherwise validly exercised and implicitly accepted by the revenue authorities for the initial assessment year, and whether the option needs to be re-exercised for subsequent assessment years.
Sections Cited
115BAA, 115BA, 115BAB, 139(1), 143(1), 234B, 234C, 10AA, 32(1)(iia), 32AD, 33AB, 33ABA, 35(1)(ii), 35(1)(iia), 35(1)(iii), 35(2AA), 35(2AB), 35AD, 35CCC, 35CCD, 80JJAA, 72A, 32, 80LA, 2(zc)
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Income Tax Appellate Tribunal, ‘SMC’ BENCH, KOLKATA
Before: Shri Duvvuru RL Reddy, Vice-(KZ)
Assessment Year: 2021-2022 M/s. Baid Trade Fina Pvt. Ltd.,……...………Appellant S.S. Chambers, 5, C.R. Avenue, 4th Floor, Kolkata-700072 [PAN:AABCB1875A] -Vs.- Income Tax Officer,…………………………….…Respondent Ward-1(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee square, Kolkata-700069 Appearances by: Shri Sujay Sen, Advocate, appeared on behalf of the assessee Shri Susanta Saha, Addl. CIT, appeared on behalf of the Revenue Date of concluding the hearing: March 10, 2025 Date of pronouncing the order: April 30th, 2025 O R D E R
The present appeal is directed at the instance of assessee against the order of ld. ADDL/JCIT(A)-3, Chennai dated 7th November, 2024 passed for assessment year 2021-22.
The grounds of appeal
raised by the assessee read as under:- “(1) For that in view of the facts and in the circumstances, ld. CIT(A) was wholly unjustified in affirming the action of 1. (A.Y. 2021-2022) M/s. Baid Trade Fina Pvt. Ltd. the AO in denying the benefit of section 115BAA merely on the ground that form 10IC was not filed along with return of income nor subsequently and in view of the facts and in the circumstances the AO may kindly be directed to allow such benefit as the mistake was inadvertent and it may kindly be considered sympathetically and judiciously. (2) Without prejudice to Ground No. 1 above, ld. CIT(A) was wholly unjustified in affirming the action of the AO in charging tax at the rate of 30% instead of 25% since the turnover of the assessee company did not exceed Rs.400 crores during the FY 2018-19 and in view of the facts and in the circumstances the AO may kindly be directed to recompute the tax payable at the rate of 25%. (3) for that in view of the facts and in the circumstances, the ld. CIT(A) was wholly unjustified in not adjudicating regarding interest of Rs.22,426/-, and Rs.5932/- u/s 234B and 234C of the Act and it may be held accordingly.
3. The sole grievance of the assessee is that ld. CIT(Appeals) was not justified in confirming the rate of tax charged @ 30% instead of 25%, even when the assessee has exercised the option under section 115BAA(5) of the Act.
The facts in brief are that the assessee is a Private Limited Company and it furnished its return of income on 07.02.2022 declaring total income of Rs.21,08,930/-. The assessee company had opted for provision of section 115BAA. The assessee forgot to file form 10IC within the due date of filing the return of income as specified under section 139(1). The said eturn was processed under section 143(1) on 24.08.2022 whereby the benefit of provision of section 115BAA was denied because the form 10IC which is the prerequisite to claim benefit of section 115BAA was not filed within the due date as specified under section 139(1). Moreover, tax was computed at the rate of 30% instead of 25% 2 (A.Y. 2021-2022) M/s. Baid Trade Fina Pvt. Ltd. through the turnover of the assessee-company for the AY 2018-19 did not exceed Rs.400 crores. It is noticed that while filing the return of income since the assessee company had opted for provision of section 115BAA, the clause whether turnover during the financial year 2018-19 exceeds Rs.400 crores or became non- fileable and hence, the same was neither reported in negative not in affirmative. The ld. Assessing Officer/CPC without verifying the facts from the return of income filed for FY 2018-19, proceeded t4o compute tax at the rate of 30% through the turnover for FY 2018- 19 did not exceed Rs.400 crores. Hence, the company was liable to pay tax at the rate of 25% instead of 30% charged by the ld. Assessing Officer/CPC. In the return, the assessee has calculated tax liability @ 25%. However, CPC calculated tax @ 30% and did not give the benefit of lower rate of tax provided under section 115BAA of the Act on the ground that the assessee has not opted for falling under this scheme by filing Form 10IC. When the assessee carried the matter to the ld. CIT(Appeals), the ld. Addl./ JCIT(Appeals) was of the view that since the assessee failed to opt for the provision under section 115BAA of the Act for the year under consideration and the concerned column of the form of return of income in ITR is blank, therefore, the assessee did not deserve to get the benefit of the provision of section 115BAA of the Act. Aggrieved, the assessee is in appeal before the Tribunal.
At the time of hearing, it was the submission of the ld. Counsel for the assessee that ld. Addl./JCIT(Appeals) did not consider the provision of 115BAA. Therefore, he pleaded to set aside the order passed by the ld. Addl./JCIT(Appeals).
Before me, the ld. D.R. vehemently argued supporting the order of ld. Addl./JCIT(Appeals).
I have heard the rival submissions and perused the material available on record. The only issue for consideration by the assessee is that whether the assessee is eligible for the benefit of low tax rate of 25% as provided under section 115BAA of the Act. Admittedly for the year under consideration, the assessee has not opted for the scheme of section 115BAA in its income tax return. Before proceeding further, I would like to go through the section 115BAA of the Act, which reads as under:-
“115BAA. Tax on income of certain domestic companies. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAB, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall, at the option of such person, be computed at the rate of twenty-two per cent., if the conditions contained in sub-section (2) are satisfied: Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years. (2) For the purposes of sub-section (1), the total income of the company shall be computed, - (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub- clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or 4 (A.Y. 2021-2022) M/s. Baid Trade Fina Pvt. Ltd. under any provisions of Chapter VI-A other than the provisions of section 80JJAA; (ii) without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); (iii) without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and (iv)by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed. (3) The loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year: Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2019 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020. (4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section. Explanation. - For the purposes of this sub-section, the term "Unit" shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005. (5)Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years:
(A.Y. 2021-2022) M/s. Baid Trade Fina Pvt. Ltd. Provided that in case of a person, where the option exercised by it under section 115BAB has been rendered invalid due to violation of conditions contained in sub-clause (ii) or sub-clause (iii) of clause (a), or clause (b) of sub-section (2) of said section, such person may exercise option under this section: Provided further that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year”.
From perusal of the above provision, which is in regard to tax rate applicable to certain category of domestic companies, I notice that undisputedly the assessee falls in the category of domestic companies for the benefit of section 115BAA of the Act as provided under the Act. The assessee has not validly filed option on Form 10IC for A.Y. 2021-22 and has been given the benefit of section 115BAA of the Act and has been taxed @ 30% only. The only question before me is whether the assessee is required to opt for falling under section 115BAA of the Act in each year of its filing the income tax return or not. Sub-section (5) of section 115BAA provides that nothing contained in section 115BAA of the Act shall apply if the option is exercised by the person in the prescribed manner on or before the due date specified under section 139(1) for furnishing the return of income for any previous year relevant to the assessment year commencing on or after 1st April, 2020 and it is also provided that such option once exercised shall apply to subsequent years. 2nd proviso to section 115BAA(5) provides that once the option has been exercised for any previous year, then it cannot be subsequently withdrawn for the same or any other previous year. Now in the instant case, the fact is not disputed at the end of revenue authorities that the assessee opted for section 115BAA for the first time for A.Y. 2021-22 and Form 10IC was not 6 (A.Y. 2021-2022) M/s. Baid Trade Fina Pvt. Ltd. filed along with the return of income. Now once the assessee has validly opted for 115BAA of the Act for A.Y. 2021-22 and revenue authorities having not found any error in such valid claim and has allowed the option exercised for lower tax rate for A.Y. 2021-22, then in my humble understanding, the assessee was not required to exercise the option for the subsequent assessment year under the provision of section 115BAA(5) of the Act, unless the first option is rendered invalid due to violation of any condition contained in sub-clause (ii) or sub-clause (iii) of clause (a) or clause (b) of section 115BAB(2) of the Act. Since there is no violation at the end of assessee for A.Y. 2021-22 and the valid option has been exercised under section 115BAA for A.Y. 2021-22, the assessee is eligible for lower rate of tax for the subsequent assessment years also subject to the other conditions provided under the Act. I, therefore, set aside the finding of ld. Addl./JCIT(Appeals) and allow the sole ground of appeal raised by the assessee and direct the ld. Assessing Officer to calculate the tax liability of the assessee at the rate of 25% provided under section 115BAA of the Act.