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Facts
The appellant, a domestic company, filed its return of income for AY 2020-21 and claimed the benefit of Section 115BAA of the Income-tax Act. The Assessing Officer (AO) denied this benefit, and the Commissioner of Income-tax (Appeals) upheld the AO's decision. The appellant appealed this decision.
Held
The Tribunal held that the appellant, as a domestic company, was entitled to opt for the beneficial provisions of Section 115BAA. Despite a technical glitch in uploading Form 10-IC initially, the subsequent condonation of delay by the CBDT and the liberal interpretation of conditions for availing the benefit supported the appellant's claim.
Key Issues
Whether the appellant company is entitled to compute its tax liability under Section 115BAA of the Income-tax Act, considering the delay in filing Form 10-IC due to technical glitches.
Sections Cited
115BAA, 143(3), 144B, 250, 139(1), 21AE, 10AA, 32, 32AD, 33AB, 33ABA, 35, 35AD, 35CCC, 35CCD, 80JJAA, 80M, 72A
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT & SHRI SUNIL KUMAR SINGH
Appellant by : Shri Sukhsagar Syal Respondent by : Smt. Mahita Nair Date of Hearing 16.04.2024 Date of Pronouncement 24.04.2024 आदेश / O R D E R PER SUNIL KUMAR SINGH (J.M.) :-
This appeal has been preferred against the impugned order dated 12.09.2023 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred as the “CIT(A)”] , wherein appellant’s claim of the benefit u/s 115BAA of the Income-tax Act,1961 [hereinafter referred as “Act”] for the relevant Assessment year [A.Y.] 2020-21 has been dismissed resulting in P a g e | Madison Communications Pvt. Ltd. affirmation of assessment order dated 24.12.2021 passed u/s 143(3) r/w section 144B of the Act.
The brief facts leading to this appeal state that the appellant company filed its return of income electronically on 05.02.2021 for A.Y. 2020-21 declaring its total income of ₹43,62,97,650/-. The appellant’s case was selected for scrutiny under CASS. The appellant assessee participated in the assessment proceedings after receipt of notice. The AO did not find any discrepancy in the aforesaid total income shown by the assessee in ROI. However, the AO found that the assessee was not entitled to the benefit of section 115BAA of the Act. Aggrieved by the assessment order, appellant preferred appeal u/s 250 of the Act before the Ld. CIT(A) who dismissed the appellant’s claim affirming the said assessment order. This resulted appellant to approach this Tribunal on the following grounds . “1. On the facts and circumstances of the case an in law, the CIT(A) erred in holding that the Appellant was not entitled to compute its tax liability in terms of section 115BAA of the Act.
2. On the facts and circumstances of the case and in law, the CIT(A) failed to appreciate that the Appellant could not have computed its tax liability under section 115BAA of the Act while filling its return of income as it was unable to upload Form 10-IC due to technical glitches, and making such a claim would have been in violation of the provisions of the Act.”
3. On issuance of notice, the Ld. Departmental Representative [DR] appeared and presented herself for final arguments.
4. Perused records and heard Ld. Representatives for both the parties.
P a g e | Madison Communications Pvt. Ltd.
The main point for determination under appeal is as to whether the appellant company being a domestic company is entitled to get its tax liability computed in accordance with the provisions of section 115BBA(1) of the Act? 6. Ld. Representative for the appellant assessee has argued that the appellant is a domestic company and while filing the return of income on 05.02.2021 (before due date of filling till 31.03.2021) could not upload form 10-IC to exercise his option as prescribed under rule 21AE of the Income-tax Rules, 1962 [hereinafter called as the “Rule”] due to technical glitches. The same could be uploaded on 02.05.2021, which was permissible to be uploaded till 31.05.2021 in accordance with CBDT’s Circular No. 06/2022 dated 17.03.2022. The Ld. CIT(A) has failed to appreciate the facts & erred in applying correct law. Appellant assessee has prayed to set aside the impugned order to this extent and to direct AO to compute appellant’s tax liability on the basis of its option exercised in accordance with section 115BAA of the Act.
The Ld. DR has argued that the appellant company has not exercised its option for taxation u/s 115BAA of the Act at the time of submitting ROI electronically in accordance with condition 3(ii) of the above CBDT circular. Prayed to sustain the impugned order & dismiss the appeal.
P a g e | Madison Communications Pvt. Ltd.
It is an undisputed fact that the Assessment Unit of Income-tax Department has not found any discrepancy in the total income of ₹43,62,97,650/- shown by the appellant assessee in its ROI for the relevant A.Y. 2020-21. As regard the assessee’s claim of benefit u/s 115BAA of the Act, is concerned, the relevant part of this section reads as under: “115BAA, (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 under any provisions of P a g e | Madison Communications Pvt. Ltd. "[Chapter VI-A other than the provisions of section 80JJAA or section 80M); (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)xxxxxxxxxxxxxxxxxxx 4)xxxxxxxxxxxxxxxxxxx 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: …………………………………………, 9. Aforesaid provision in the Act was inserted by taxation laws (amendment) Act 2019, wherein a person, being a domestic company was given an option from the A.Y. 2020-21 onwards to exercise option for computation of tax liability @ rates of 22% u/s 115BAA of the Act & subject to the of conditions mentioned u/s 115BAA(2) of the Act. The procedure to be adopted, has been prescribed under rule 21AE of the rules which read as under:
P a g e | Madison Communications Pvt. Ltd. “21AE (1) The option to be exercised in accordance with the provisions of sub-section (5) of section 115BAA by a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day April, 2020, shall be in Form No. 10-IC: (2) The option in form No. 10-IC shall be furnished electronically either under digital signature or electronic verification code. (3) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall- (i) specify the procedure for filing of Form No. 10-IC; (ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (2), for verification of the person furnishing the said Form; and (iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form so furnished.”
In view of rule 21AE, the appellant assessee domestic company was to exercise its option for the benefit of computation of its tax liability u/s 115BAA(1) in accordance with the provision of sub-section 5 of section 115BAA for the relevant assessment year 2020-21 by furnishing prescribed form No. 10-IC electronically. It is not disputed that there was a technical problem in uploading the form 10-IC. This fact is substantiated by the referred CBDT circular dated 17.03.2022. CBDT circular condoned the delay in filing form 10-IC for the relevant A.Y. 2020-21. According to Para 2 of the circular, it is understood that the delay was condoned upon receiving representations stating that P a g e | Madison Communications Pvt. Ltd. form 10-IC could not be filed along with the ROI for A.Y. 2020-21, which was the first year of filing the form. CBDT circular condoned the delay subject to the following three conditions: “(i) The return of income for AY 2020-21 has been filed on or before the due date specified under section 139(1) of the Act; ii) The assessee company has opted for taxation u/s 115BAA of the Act in (e) of "Filing Status" in "Part A-GEN" of the Form of Return of Income ITR-6 and (iii) Form 10-1C is filed electronically on or before 30.06.2022 or 3 months from the end of the month in which this Circular is issued, whichever is later.”
There is no dispute in respect of the fulfilment of condition (i) & (iii) stated in the above CBDT circular. According to condition (i) the return of income was filed by appellant on 05.02.2021 i.e. before last date of filling return u/s 139(1) of the Act. According to Condition No. (iii), form 10-IC was electronically uploaded by the assessee domestic company on 02.05.2021 i.e. before cut off date mentioned in CBDT circular i.e. 30.06.2022.
As far as the compliance of condition No. (ii) of CBDT circular by the appellant domestic company is concerned, the option by the appellant could be exercised only by uploading from 10-IC prescribed under Rule 21AE of the rules on 02.05.2021, the delay in uploading this form 10-IC was already condoned by the CBDT. It is well established precedent that a circular of CBDT, no doubt, has the force P a g e | Madison Communications Pvt. Ltd. of law, can even supplant the law in cases where it is beneficial to the assessee and can mitigate or relax the rigors of the law. The powers of the CBDT in issuing circular for general guidance are subject to two important conditions. One is that it does not entitle the income tax authority including the Board to issue instructions or circulars contrary to the substantive provision of law or curtailing the relief to which the assessee is otherwise entitled under law. In Gestetner Duplicators (P.) Ltd. v. CIT (1979) 117 ITR 18(SC), the Hon’ble apex court has held that the circulars or directions cannot be permitted to curtails the provisions of the Act.
It is also settled law that circulars are not binding on assessee. The circular cannot therefore curtail the benefit conferred on assessee or be contradictory to the Act. Hon’ble Apex Court in Union of India V/s Wood Paper Ltd. AIR 1991 SC 2049 has held that the condition regulating the computation of benefit should be interpreted liberally. We are of the consistent view that the appellant assessee, as a domestic company, was free to opt for the beneficial part of the relevant law. The appellant company having exercised its option in consonance with aforesaid provision of law and having opted as per the procedure prescribed under the aforestated rule, is entitled to the benefit of section 115BAA(1) for the purpose of computation of income at the rate mentioned thereunder. The condition No. (ii) of CBDT dated P a g e | Madison Communications Pvt. Ltd. 17.03.2022, thus, cannot be interpreted to take away the statutory right vested in the appellant assessee under the Act. The Ld. CIT(A) has failed to rationally appreciate and diligently apply the relevant law on the facts of the present cast. We therefore set aside the order dated 12.09.2023 passed by CIT(A) along with assessment order dated 24.12.2021 to the aforestated extent. The aforesaid point related to the grounds of appeal
, is accordingly determined positively in favour of the appellant assessee. AO is thus directed to compute the tax liability of the appellant assessee, a domestic company in accordance with the mandate of Section 115BAA(1) of the Act. The matter is restored to the file of AO for the statistical purposes. The appeal is, thus, liable to be allowed in above terms.
14. In the result, appeal filed by the assessee is allowed.