ACIT., CIRCLE 3(1), HYDERABAD vs. SANDOR MEDICAIDS PRIVATE LIMITED, HYDERABAD

The grounds of appeal filed by the Revenue read as under :

The Ld.AddI/JCIT (Appeals)-5, Delhi erred in law and on facts by misinterpreting the Hon'ble Supreme Court's order dated 10.01.2022 in MA No.21 of 2022. The Hon'ble Supreme Court's extension of due dates was for limitation purposes in judicial or quasi-judicial proceedings, not for the filing of returns u/s. 139(1) of the Income Tax Act, 1961. Consequently, the due date for filing Form 10-IC was not extended to 30.05.2022, and the form filed on 29.03.2022 is invalid.

The Ld.AddI/JCIT(Appeals)-5, Delhi erred in law and on facts by failing to consider the conditions specified in CBDT's circular No. 19/2023. The circular provides condonation for filing Form-10IC only if the return of income was filed on or before the due date specified u/s. 139(1). Since the assessee's return was filed late, the Form-10IC is invalid, and the claim u/s.115BAA may not have been accepted.

The Ld.Addl/JCIT (Appeals)-5, Delhi erred in law and on facts by not considering that the assessee filed Form No. 10-IC again on 28.11.2023 for A.Y.2023-24, thereby acknowledging the invalidity of the earlier form filed on 29.03.2022. The provisions of section 115BAA(5) require the filing of Form 10-IC for the first time and for one time only, making the subsequent filing an acceptance that the previous form was invalid.”

Facts of the case, in brief, are that the assessee is a private limited Company, fled its return of income for AY 2022-23 on 01.11.2022 by declaring a total income of Rs11,02,37,300/-. In the said return of income, the assessee has opted for provisions of section 115BAA details of which was provided by the assessee in the return of income under Sr. No (e) of Part A- GEN. The assessee has also fled Form 10IC on 29.03.2022 wherein the assessee has given a declaration that it will exercise the option referred to in subsection (5) of section 115BAA of the Income-tax Act, 1961 for previous year 2020-21 and subsequent financial years i.e. FY 2021-22 onwards. The assessee has received a proposal for adjustment u/s 143(1)(a) on 14.12.2022 for Rs 15,11,380/- with regard to disallowance u/s 36(1)(va) of the Act

Feeling aggrieved by the intimation dt.16.03.2023 passed u/s 143(1) of the Act by the Assessing Officer, CPC, Bangalore, assessee filed appeal before the Ld. CIT(A), who granted part relief to the assessee, by observing as under :

Feeling aggrieved with the order of ld.CIT(A), Revenue filed appeal before us and on the other hand, assessee filed Cross- Objections before us.

Before us, the CIT-DR submitted that the LD.CIT(A) has granted the benefit of low tax regime despite the failure of the assessee to file form 10-IC within the time provided for filing the return of income under Section 139(1) of the Act. It was submitted

Per contra, ld.AR has submitted that the LD.CIT(A) has passed the order after considering the submissions of the assessee, wherein the time limit for filing the application has been extended for 90 days as per the order of the Hon'ble Supreme Court dt.10.01.2022 passed in Miscellaneous Application No.21 of 2022 in Miscellaneous Application No.665 of 2021 in Suo Motu Writ Petition (C) No.3 of 2020 in reference to Cognizance for Extension of Limitation. The ld.AR has drawn our attention to para III at page 4 of the said order of Hon'ble Supreme Court, whereby the time limit had been extended. The same is reproduced hereinbelow for ready reference :

Furthermore, it was submitted by the ld.AR that the assessment for the year under consideration is for A.Y. 2022-23 and not the A.Y. 2021-22. It was submitted that the assessee has filed the income tax return along with Form 10-IC on 29.03.2022, which is in line with the direction of the Hon'ble Supreme Court. The ld.AR further submitted that the direction of the Hon'ble Supreme Court is applicable to the time limit provided for filing the application in the shape of Form 10-IC. The ld.AR has drawn our attention to page 1 of the paper book, whereby the Board has mentioned the application for seeking the applicability of the low tax rate as per Section 115BAA(5) of the Act. Further, it was submitted that the Board has not provided a specific time for filing the return of income, but only for the filing of the application for exercising of the option under sub-section (5) of Section 115BAA of the Income Tax Act, 1961, which pertains to seeking the low tax rate. Lastly, ld.AR has submitted that the reliance on the Board Circular issued in this regard, is of no use, as the power to condone the delay in filing Form 10-IC was initially conferred to the Board, but now the same power has been conferred to the Principal Commissioner of Income Tax.

The ld.AR in support of his Cross-Objection, has submitted that it is not within the power of CPC, Bangalore u/s 143(1) of the Act, to vary the adjustments and apply the normal provision of tax. For the above said purposes, he has drawn our attention to page 6 of the paper book, wherein the Revenue authority has acknowledged the receipt of Form 10-IC in accordance with law. Page 6 of the paper book is reproduced hereinbelow for ready reference :

Further, the ld.AR has also drawn our attention to Section 143(1) of the Act, whereby the CPC, Bangalore, was only authorized to make the adjustments listed under Section 143(1)(a) of the Act. On the basis of the above, it was submitted that it is not permissible for the CPC to adjust the tax rate applied by the assessee, as no power has been granted to the CPC to make such adjustments.

In rebuttal, CIT-DR has submitted that the Board Circular pertains to the power of respective authority to condone the delay in filing Form 10-IC. However, no power has been granted to the authority to extend the time limit for filing the return of income. It was submitted that the filing of return of income should precede for the filing of Form 10-IC, or both should be done concurrently.

We have heard the rival submissions and perused the material on record. Section 115BAA provides as under :

1 Rule 21AE of the Income Tax Rules, 1962 provides as under :

2. Form 10-IC as filed by the applicant for claiming the lower tax rate under Section 115BAA(5) is as under :

From the conjoint reading of Sub-Section (5) of Section 115BAA, Rule 21AE of the Income Tax Rules, 1962 and Form 10- IC, it is abundantly clear that the assessee, who is willing to opt Section 115BBA of the Act for tax on the income is required to 13 Sandor Medicaids Private Limited exercise the option, in the manner provided by Rule 21AE and Form 10-IC on or before the due date specified by Section 139(1) of the Act for the previous year relevant to the assessment year and after 1st day of April, 2020. It also provides that such option exercised once by the assessee, shall apply to subsequent assessment years. In the present case, the assessee had exercised his option for the assessment year relevant to the assessment year commencing on 01.04.2020 on 29.03.2022. Form 10-IC, which is available at page 10 of the Paper Book filed by the assessee clearly postulates that the application for exercising the option under sub-section (5) of Section 115BAA of the Act is valid for the previous year i.e., for A.Y. 2020-21 and for subsequent years as well. It is clear from the bare provisions of the Act and Form 10- IC that once the assessee exercises the option for the previous year, he/she cannot specifically withdraw for the same or any other previous year.

1 The second proviso to section 115BAA(5) makes it clear that once the option for the concessional tax regime under section 115BAA is exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. The Central Board of Direct Taxes (CBDT) had also issued frequently asked questions stating that if the taxpayer had opted for the concessional rate of tax once, that option would apply to subsequent AYs and could not be withdrawn. Even in the 14 Sandor Medicaids Private Limited instructions issued by the CBDT for filing Form ITR 6, it was specifically mentioned that Form 10-IC was required to be filed only in the first year in which the taxpayer wished the concessional rate of tax to apply. Thus, not only the statutory provisions, but the periodic clarifications issued by the CBDT clearly state that a taxpayer seeking to benefit from the concessional rate of tax under section 115BAA need only exercise its option on Form 10-IC once in the initial AY; there was no requirement to exercise the option again in subsequent years.

In the present case, as admitted by both the parties, the last date of filing of return of income for A.Y. 2021-22 was 15.03.2022 and the assessee has filed the return of income along with Form 10-IC on 29.03.2022, which is relevant for the assessment year 2021-22. The issue which fell for consideration before us is whether the assessee having filed a belated form 10-IC i.e., on 29.03.2022 for the previous year 2021-22, can continue to avail the benefit of Section 115BAA of the Act in the assessment year 2022-23 or not. In our considered opinion, sub-section (5) of Section 115BAA of the Act clearly mentions that the option, once exercised, will be applicable for the subsequent assessment years.

1. If we examine the facts and law, as argued before us, it is clear that the provisions of Section 115BAA of the Act are beneficial legislation, aiming to extend certain benefits to domestic

In the present case, admittedly, the assessee has exercised his option for the previous year 2020-21 and thereafter, based on the same declaration, the assessee has filed the return of income for A.Y. 2022-23. However, the CPC, Bangalore, has rejected the claim of the assessee to opt for the regime under Section 115BAA of the Act on the pretext that the same was filed belatedly for the earlier year. In our view, the law is fairly settled when the language used in the statute is clear and simple, then literal meaning is required to be given to the words used in the Statute while interpreting the Statute.

In the present case, sub-section (5) of Section 115BAA of the Act has not restricted the application for one year alone, even if it has filed belatedly, however, it has been extended and applicable for the subsequent assessment years. However, if the application has been filed belatedly for the earlier year, as canvassed by the Revenue, on 29.03.2022 i.e., after the due date of filing of return of income on 15.03.2022, then the Revenue can withhold or deny the benefit of Section 115BAA for A.Y. 2021-22. But for the purpose of giving benefit for A.Y. 2022-23, the Revenue cannot raise this issue of filing of Form 10-IC belatedly for A.Y.

1 In the present case, though there is no ambiguity in the taxing statute, however, even if there was any, that is to be for the benefit of the assessee.

Needless to say the Frm 10-IC on 29.03.2022 for A.Y. 2021- 22, will also be treated as filed for A.Y. 2022-23 and subsequent years. Therefore, in our considered opinion, the assessee is eligible for the benefit provided u/s 115BAA for the A.Y. 2022-23. In light

Coming to the cross-objection filed by the assessee, in view of our finding in the appeal of the Revenue, the C.O., of the assessee became infructuous and thereby dismissed.

In the result, both the appeal of Revenue and Cross-Objection of assessee are dismissed.