Loading judgment…
Facts
The assessee, a private limited company, opted for the concessional tax regime under Section 115BAA by filing Form 10-IC on 29.03.2022 for AY 2021-22 onwards. The CPC rejected the claim for AY 2022-23, contending that Form 10-IC for AY 2021-22 was filed belatedly after the due date, thus invalidating the option. The Ld. CIT(A) granted relief, asserting that the Supreme Court's extension of due dates made the filing timely for AY 2021-22, rendering the assessee eligible for the benefit for AY 2022-23.
Held
The Tribunal affirmed the Ld. CIT(A)'s decision, ruling that an option once exercised under Section 115BAA(5) applies to subsequent assessment years and cannot be withdrawn. It clarified that a belated filing of Form 10-IC for an earlier year does not prevent the assessee from claiming the benefit for subsequent years, especially since Section 115BAA is a beneficial legislation. The Tribunal also noted that any ambiguity in taxing statutes should be interpreted in favor of the assessee.
Key Issues
Whether the belated filing of Form 10-IC for an initial assessment year (AY 2021-22) under Section 115BAA of the Income Tax Act, 1961, invalidates the assessee's claim for the concessional tax regime for subsequent assessment years (AY 2022-23).
Sections Cited
115BAA, 115BAA(5), 139(1), 143(1), 143(1)(a), 36(1)(va), 80LA, Rule 21AE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD
Before: SHRI LALIET KUMAR & SHRI MADHUSUDAN SAWDIA
सुिवधई की तधरीख/Date of hearing: 07/01/2025 घोर्णध की तधरीख/Pronouncement on: 16/01/2025 O R D E R PER LALIET KUMAR, J.M :
The appeal filed by the Revenue and the cross objection filed by the assessee is directed against the common order of Commissioner of Income Tax (Appeals), Addl/JCIT(A)-5, Delhi dt.21.05.2024 for A.Y. 2022-23. Since facts are identical and issues are common, for the sake of convenience, both the appeal filed by the Revenue and Cross Objection field by the assessee are being disposed of, by this consolidated order.
The grounds of appeal filed by the Revenue read as under :
“1. he Ld.Addl/3CIT(Appeals)-5, Delhi erred in law and on facts by holding that the Form 10-IC filed by the assessee on 29.03.2022 for A.Y.2021-22 was valid. This form was filed after the due date of 15.03.2022 as per CBDT's circular No. 19/2022. Therefore, it cannot be considered valid for A.Y.2021- 22 or for A. Υ.2022-23.
3 Sandor Medicaids Private Limited
2. 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.
3. 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
4 Sandor Medicaids Private Limited due to mismatch in disallowance made by the assessee in the return of income vis-a-vis Form 3CD. Finally, the said return was processed u/s 143(1) of the Act by determining a total income of Rs11,02,37,300/- by making a addition of Rs 15,11,380/- u/s 36(1)(va) and raising a demand of Rs 1,30,42,070/- While processing the return of income the CPC (AO) has calculated the tax liability as per the normal provisions instead of calculating the tax u/s 115BAA though Form 10IC was already fled by the assessee.
4. 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 :
“Ground No. (2) to (6) are w.r.t rejecting the claim of calculating tax liability u/s 115BAA. (ii) In this regard, it is reiterated that the appellant filed its ITR for the year under consideration on 01.11.2022 declaring total income of Rs. 11,02,37,300/-. Further, while filing ITR the appellant had opted for taxation u/s 115BAA of the Act. However, the said claim of the appellant was rejected by the CPC while processing u/s 143(1) of the Act. In this regard, it is appropriate to mention here that the appellant had filed Form 10-IC on 29.03.2022 opting for provisions of section 115BAA of the Act for AY 2021-22 onwards. In other words, the assessee had filed Form 10-IC opting the new tax regime before the due date of filing of return of income for AY 2022-23. Hence, the assessee was eligible to claim the new tax benefit as per section 115BAA of the Act for AY 2022- 23. However, the CPC (AO) has not given the benefit of 115BAA and calculated the tax as per normal provisions for AY 2022-23 while processing the return u/s 143(1) of the Act. As per the above provisions of section 115BAA of the Act, once the provision of section 115BAA are 5 Sandor Medicaids Private Limited opted, the assessee cannot opt out of the said new tax regime u/s 115BAA of the Act subsequently and the tax on income of the assessee has to be calculated as per section 115BAA of the Act for AY 2022- 23 only. The below is the extract of the 2nd proviso to sub section 5 of section 115BAA which states as under:
"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." Further, the due date for filing return of income and Form 10-IC for AY 2021- 22 as per CBDT was 15.03.2022. However, the Hon'ble Supreme Court vide its order dated 10.01.2022, MA No. 21 of 2022 had extended the due dates. In the appellants case, the actual due date as per Income Tax Act for filing return of income was 31.10.2021 which was extended to 15.03.2022 by CBDT. As the original due date i.e. 31.10.2021 falls in between the period "15.03.2020 to 28.02.2022", the extended due date as per order of Hon'ble Supreme Court will be 30.05.2022. In the appellant's case for AY 2021-22 the assessee has filed return of income and Form 10IC on 29.03.2022 i.e. before 30.05.2022 which is within the due date as directed by Hon'ble Supreme Court. Therefore, the Form 10-IC was filed within the due date for AY 2021-22 and the appellant is entitled to get the benefit of provisions of section 115BAA. Accordingly, the Assessing Officer is directed to recompute tax liability as per new taxation regime. This ground of appeal is allowed.”
5. 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.
6. 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
6 Sandor Medicaids Private Limited by the CIT-DR that the last date for filing the return of income for A.Y. 20021-22 was 15.03.2022 and the assessee has filed the return of income belatedly on 29.03.2022, along with Form 10-IC. It was further submitted that the LD.CIT(A) has granted the relief for A.Y. 2022-23 on the ground that the assessee has filed Form 10IC within the period provided by the Act, relying on the order passed by the Hon'ble Supreme Court dated 10.01.2022 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. However, the CIT-DR pointed out that the Hon'ble Supreme Court in the said order had not extended the time limit for filing Form 10-IC, and therefore, the order passed by the LD. CIT(A) is without any basis.
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 :
7 Sandor Medicaids Private Limited
“III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022. notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply.”
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.
8 Sandor Medicaids Private Limited
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 :
From: communication@cpc.incometax.gov.in Sent: 29 March 2022 13:38 To: subrahmanyareddy@sandor.co.in Subject: PAN: AADCS4168H, Form No. 10-IC, Acknowledgement
Dear Sir/Madam, SANDOR MEDICAIDS PRIVATE LIMITED, AADCS4168H,
The e-Filing of Form No.10-IC-Application for exercise of option under sub-section (5) of section 115BAA of the Income-tax Act, 1961 for Assessment/Financial Year 2021-22 has been successfully submitted on 29-Mar-2022 and your Acknowledgement Number (ARN) is 465910120290322.
The submitted Form would be sent for further processing. In case there is any discrepancy, a notification will be sent to your registered e-mail. Kindly check for email from e-Filing.
This is a system generated e-mail and please do not reply. Please add communication@cpc.incometax.gov.in to your white list/safe sender list.
If you did not e-file and you have received this e-mail, it may mean that somebody else has uploaded. Please contact 1800 103 4455 immediately.
Regards, e-Filing team, Income Tax Department
9 Sandor Medicaids Private Limited
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 :
Section 115BAA(5): "The option to be exercised under sub-section (1) shall be in such manner as may be prescribed, and such option once exercised shall apply to subsequent assessment years: Provided that 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 the option under sub-section (1), the income of such Unit shall, at the option of the assessee, be computed under the provisions of this section: Provided further that nothing contained in this section shall apply unless the option is exercised in accordance with the provisions of this sub- section."
10 Sandor Medicaids Private Limited 12.1 Rule 21AE of the Income Tax Rules, 1962 provides as under :
Rule 21AE - Form for exercising option under sub-section (5) of section 115BAA (1) The option to be exercised under sub-section (5) of section 115BAA by a person, being a domestic company, shall be in Form No. 10-IC. (2) The Form No. 10-IC shall be furnished electronically either under digital signature or through electronic verification code. (3) The option in Form No. 10-IC shall be furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the assessment year relevant to the previous year in which the option is exercised.”
12.2. Form 10-IC as filed by the applicant for claiming the lower tax rate under Section 115BAA(5) is as under :
-left intentionally- 11 Sandor Medicaids Private Limited 12 Sandor Medicaids Private Limited
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.
13.1 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.
14.1. 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
15 Sandor Medicaids Private Limited companies with a reduced rate of taxation. This essential provision was designed to boost the industries and reduce unnecessary litigation, and it should not be denied on account of some technical reasons.
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.
16 Sandor Medicaids Private Limited 2022-23. Furthermore, we are of the considered opinion that this beneficial provision is required to be read in light in favour of the assessee, as held by the Hon'ble Supreme Court in the case of Commissioner of Customs Vs. Dilip Kumar reported in Civil Appeal No. 3327 of 2007, has held as under :
“40.After considering the various authorities, some of which are adverted to above, we are compelled to observe how true it is to say that there exists unsatisfactory state of law in relation to interpretation of exemption clauses. Various Benches which decided the question of interpretation of taxing statute on one hand and exemption notification on the other, have broadly assumed (we are justified to say this) that the position is well settled in the interpretation of a taxing statute: It is the law that any ambiguity in a taxing statute should ensure to the benefit of the subject/assessee, but any ambiguity in the exemption clause of exemption notification must be conferred in favour of revenue – and such exemption should be allowed to be availed only to those subjects/assesses who demonstrate that a case for exemption squarely falls within the parameters enumerated in the notification and that the claimants satisfy all the conditions precedent for availing exemption. Presumably for this reason the Bench which decided Surendra Cotton Oil Mills Case (supra) observed that there exists unsatisfactory state of law and the Bench which referred the matter initially, seriously doubted the conclusion in Sun Export Case (supra) that the ambiguity in an exemption notification should be interpreted in favour of the assessee.
16.1 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
17 Sandor Medicaids Private Limited of the above, we are of the considered opinion that the grounds raised by the Revenue are dismissed.
C.O.No.13/Hyd/2024
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.
Order pronounced in the Open Court on 16th January, 2025.