ATTAK MACHINERY PRIVATE LIMITED,KANPUR vs. DEPUTY COMMISSIONER OF INCOMETAX, CIRCLE-1, KANPUR

The facts of the case are, that the assessee is a Domestic company that was established on 19.02.2021. The assessee filed its first return of income on 7.11.2022 for the assessment year 2022-23, declaring total income of Rs.1,34,44,460/-. The assessee had opted for the alternative tax regime under section 115BAA of the Income Tax Act, 1961. As per the information contained in the return of income, the assessee had furnished its form 10 IC vide acknowledgment no. 274346891250221 dated 25.02.2021. A return was processed under section 143(1) of the Income Tax, in which this claim for taxation under the alternative tax regime of section 115BAA was denied to the assessee. The assessee, thereafter, filed a rectification application in respect of which an order under section 154 of the Act was passed on 11.04.2023, determining its total income at Rs.1,34,45,740/- and the tax payable at Rs.5,67,810/-. 3. Aggrieved with the said rectification order denying its application, the assessee filed an appeal before the NFAC. Before the NFAC, it was submitted that the assessee was a Domestic Private Company. It had been established on 19.02.2021 and as such the total turnover of gross receipts were nil during the previous year 2019-20. Therefore, the rate of income tax applicable to the company was 25% of assessed income. However, the assessee had opted for the alternative tax regime under section 115BAA of the Income Tax Act and in this respect, it had furnished Form 10 IC on 25.02.2021. Accordingly, it was submitted that the income tax applicable on the A.Y. 2022-23 Attak Machinery Private Limited assessee’s income was 22% and not 30%, as charged to it during the assessment under 143(1). It was, therefore, submitted by disallowing the assessee’s application to be taxed under the alternative tax regime of section 115BAA of the Income Tax Act an unjust levy of Rs.5,67,810/- had been foisted upon it. It was further submitted that even otherwise, the ld. AO was unjustified in applying an income tax rate of 30% on the assessed income as the said tax rate was only applicable when the total turnover or gross receipts exceeded Rs.400 Crores during the previous year 2019-20. Since, the assessee company came into existence after the said date, the total gross receipts for the F.Y. 2019-20 was nil and therefore, it could only be assessed at 25% of its assessed profit. However, since it had furnished the Form No. 10 IC on 25.02.2021, it was entitled for further concession in the rate of tax and was to be taxed on the reduced rate of 22%. It was submitted, that since the since the issue was a prima facie error, the ld. AO had made a mistake in refusing to rectify the intimation under section 143(1)(a) and therefore, it was submitted that relief may kindly be allowed to the assessee in this regard. The ld. CIT(A) observed that perusal of the ITBA System revealed that the assessee had not filed Form No.10 IC for the assessment year 2022-23. On perusal of the submission of the assessee, he noted that the Form 10 IC pertained to the assessment year 2020-21. Hence, he held that the contention of the assessee was incorrect and since the assessee had not filed Form 10 IC for assessment year 2022- 23, the ld. AO had made no mistake by not allowing the assessee the benefits of section 115BAA of the Income Tax Act. The ld. CIT(A) also held that there was no mistake in the AO charging the assessee, income tax @ 30%, because since the assessee company did not exist in the previous year 2019-20, it could not claim that its turnover for that year was nil. This was because, turnover of any entity could only be determined when there was some business activity and business activity could not be carried out without the company being in existence. Hence, since the company was not in existence during the F.Y. 2019-20, it is not eligible to claim tax rates @ 25% even otherwise. Therefore, he upheld the decision of the ld. AO to tax the assessee @ 30%. A.Y. 2022-23 Attak Machinery Private Limited

The assessee is aggrieved at this order of the ld. CIT(A) and has accordingly filed this appeal. Sh. B.P. Yadav, Advocate (hereinafter referred to as the ld. AR) arguing the matter before us, submitted that the ld. CIT(A) was completely incorrect in stating that the assessee was obliged to file Form 10 IC once again for the A.Y. 2022-23, once it had already filed the same on 25.02.2021. The ld. AR invited our attention to pages. 2 and 3 of his paper book, which contained a copy of the Form 10 IC filed on 25.02.2021, and drew our attention to the fact that the said form had been filed for the previous year 2019-20 and subsequent years. Furthermore, the ld. AR drew our attention to the first page of the ITR filed for the assessment year 2022-23, to establish the fact that the assessee had opted for taxation under section 115BAA of the Act, by filing Form No. 10IC. Drawing specific reference to Column No. PART A-GEN-(e), the ld. AR pointed out that the option had been exercised in the said column and the date of the filing of the Form No. 10 IC with the acknowledgment number had also been indicated in the said return. Thereafter, the ld. AR invited our attention to the decision of the ITAT Delhi Bench in the case of Concentrix Daksh Services India Pvt. Ltd., vs. ACIT, Circle-2 in ITA No.2552/DEL/2023 for the assessment year 2021-22 and invited our specific attention to paragraph 6 of the said order, wherein the ITAT had held that the second proviso to section 115BAA (5) makes its abundantly clear, that once option for concessional tax regime under section 115BAA of the Act is exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year. The ITAT also held, that the Department had issued a FAQ clearly stating that if an assessee has opted for concessional rate of tax once, it shall apply to subsequent assessment years and cannot be withdrawn. Furthermore, in the instructions issued by the Department for the filing of Form ITR-6, it has been specifically mentioned that Form 10 IC is required to be filed only in the first year wherein the concessional rate of taxes is opted for the first time by an assessee. Thus, the ITAT had held that both the statutory provisions and the clarifications issued by the Department made it clear, that the assessee has to exercise its option in Form 10 IC only once in the initial assessment A.Y. 2022-23 Attak Machinery Private Limited year and thereafter, there is no need for exercising the option again. Ld. AR, thereafter invited our attention to the decision of the ITAT, Ahmedabad in the case of Energy Mission Machineries (India) Pvt. Ltd., vs. DCIT in ITA No. 411/AHD/2024 where the Hon’ble ITAT had held, by relying on the earlier judgments in the case of Narayani Laxmi Viniyog (P.) Ltd. 166 taxman.com 373 (Kol-Trib) and Concentrix Daksh Services India Pvt. Ltd., (supra), that there was no dispute to the proposition that once the assessee had claimed the concessional rate of tax under section 115BAA of the Income Tax Act, there was no requirement under the relevant statutory provisions for the assessee to make a fresh claim for each subsequent year, by way of filing Form 10 IC with respect to each subsequent year of the claim, if the Revenue authorities had not found any error in the claim made earlier and had allowed the same. The ld. AR, thereafter invited our attention to the decision of the ITAT ‘A’ Bench Ahmedabad in the case of Makevale vs. ADIT, CPC, Bengaluru in ITA No.566/Ahd/2023, where the assessee had not filed the Form 10IC alongwith the ITR but met the substantive requirements of section 115 BAA of the Act, as all necessary details were provided in the ITR and the Tax Audit Report. In such case, the assessee had cited legal proceedings where Courts had held that procedural requirements like filing of specific forms with ITR were directory not mandatory and the substantive compliance with the conditions of section 115 BAA of the Act should suffice for the tax benefits. The ITAT placing reliance on the CBDT Circular No. 19/2023 dated 1.11.2023, quoted from paragraph 3 of the said Circular and noted that the delay of filing Form 10 IC as per Rule 21AE for the A.Y. 2021-22 was to be condoned in cases where the following conditions were satisfied. i. The return of income for the relevant assessment year had been filed on or before the due date specified under section 139(1) of the Act. ii. The assessee company had opted for taxation under section 115 BAA of the Act in item (e) of ‘filing status’ in ‘PART-A-GEN’ of the form of return of income ITR-6 and A.Y. 2022-23 Attak Machinery Private Limited iii. Form No. 10 IC is filed electronically on or before 31.01.2024 or three months from the end of the month in which this circular is issued, whichever is later. Thereafter, the ITAT holding that, the assessee had satisfied the conditions specified in the circular, had held that it was eligible to get the benefit of reduced rate of tax under section 115 BAA. The ld. AR then invited our attention to copy of Form 10 IC filed on 25.02.2021, copy of the acknowledgment first page of ITR filed for A.Y. 2022- 23 and the copy of the audited balance-sheet and statement of profit and loss for the F.Y. 2021-22 (which was the first year), to show that the assessee had fulfilled all the conditions laid down in the said Circular. He therefore, prayed that on the strength of these aforesaid ITAT judgments, the assessee was eligible to be assessed at a lower rate of tax in accordance with the provisions of section 115 BAA. On the issue of the CIT(A) holding that since the assessee was not in existence during the previous year 2019-20, it was not eligible for income tax chargeable @ 25%, the ld. AR invited our attention to the order of the ITAT Mumbai Bench in ITA No. 4776/MUM/2023 in the matter of Transcreek Engineers Private Limited vs. DCIT wherein the Tribunal had quoted from the earlier decision of the Kolkata Bench of the Tribunal in AR Overseas Tradecom (P.) Ltd. vs. DCIT (ITA No.651/KOL/2022), that where the total turnover of the gross receipt of a domestic company did not exceed Rs. 400 Crores, then for such domestic company, the income tax rate of 25% was applicable. The ld. AR argued that since the assessee company was not in existence in F.Y. 2019-20, its turnover for that year had to be taken as nil and therefore, it was even otherwise eligible to be assessed on a tax rate of 25%. 5. On the other hand, Sh. Deepak Yadav, DR (hereinafter referred to as the ld. DR), submitted that the assessee had not filed Form No. 10 IC for a particular year and therefore, the ld. CIT(A) was justified in rejecting the application of the assessee. He also argued that the assessee had filed the Form 10 IC in a year where he did not claim the deduction and therefore, there was a requirement of fresh filing. With regard to A.Y. 2022-23 Attak Machinery Private Limited the decision of the ld. CIT(A) to reject the alternative claim of the assessee for computation of tax at 25%, the ld. Sr. DR pointed out that since the company was not in existence on the said date, it could not be said that it was a company that had a turnover of less than Rs. 400 Crores in that year, which might enable it to claim the concessional rate of tax at 25%. Therefore, the ld. CIT(A) was justified in holding that the company was to be taxed at 30% of its assessed income. 6. We have duly considered the facts and circumstances of the case. The main issue before us is whether the Form No. 10 IC that have been filed by the assessee on 25.02.2021 was valid, so as to facilitate the assessee in its claim to be taxed under section 115 BAA. It is seen that the application was filed on 25.02.2021 i.e. immediately after the incorporation of the company. Perusal of Form 10 IC reveals that it has been filed for the assessment year 2020-21 and subsequent assessment years. It could be argued that the said form is not valid for a period in which the assessee company did not come into existence. However, there can be no doubt that the said form quite clearly states the option for being taxed under section 115BAA of the Income Tax Act for all subsequent years. Thus, as pointed out by the ITAT Delhi Bench in the case of Concentrix Daksh Services India Pvt. Ltd., (supra) and followed by the ITAT Ahmedabad Bench in the case of Energy Mission Machineries (India) Pvt. Ltd., (supra), once the assessee had filed a valid form under section 10 IC for any assessment year, there was no requirement for filing the same again and again in subsequent years, since the provisions of the Act (second proviso to section 115BAA(5) of the Act) themselves state, that once option for concessional tax regime under section 115 BAA of the Act is exercised for any previous year, it cannot subsequently be withdrawn for the same or any other previous years. Therefore, the option once exercised is automatic. In the instant case, as this is the first year of the company filing a return and claiming the concessional tax rate, there is no reason to deny the same to it unless it could be shown that the assessee did not fulfil the conditions, as laid down under sub A.Y. 2022-23 Attak Machinery Private Limited section 2 of the said section. Neither the ld. AO nor the ld. CIT(A) have pointed out that the assessee did not fulfil the conditions laid down under sub section 2. Therefore, the Form 10 IC filed by the assessee cannot be regarded to be invalid within the meaning of the first proviso to sub section 5 of section 115 BAA. It is also observed that the assessee meets all the criteria that has been laid down by the CBDT in paragraph 3 of the Department’s Circular No.19/2023 which the Board had issued for condonation of delay in filing Form 10 IC, for the assessment year 2021-22. Therefore, this coupled with the fact of the filing of Form 10 IC exercising the option before the due date of the filing of the return, to our mind qualifies the assessee to avail the benefit of concessional tax rate under section 115 BAA. Accordingly, ground nos. 1 and 2 are allowed. As the matter relating to the eligibility for concessional tax regime under section 115 BAA has already been decided in favour of the assessee, vide the aforesaid grounds, the remaining grounds are rendered infructuous. Accordingly, they are dismissed as such. 7. In the result, the appeal of the assessee is partly allowed.