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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2022-23) Energy Mission Machineries (India) Vs. Deputy Commissioner of Pvt. Ltd., Income Tax, 87/1, Vatva GIDC, Phase-1, Circle-2(1)(1), Vatva Industrial Estate, S.O. Ahmedabad Ahmedabad City-382445 [PAN No.AACCE6042K] (Appellant) .. (Respondent) Appellant by : Shri Vijay Kumar Singla, A.R. Respondent by: Shri Rignesh Das, Sr. DR 01.10.2024 Date of Hearing Date of Pronouncement 09.10.2024 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT(A)-11, Mumbai vide order dated 04.01.2024 passed for A.Y. 2022-23.
The Assessee has taken the following grounds of appeal:-
“1) That on the facts and in the circumstances of the case and in law, Ld C1T-A erred in sustaining the order passed by Ld AO disallowing the benefit of lower tax u/s 115BAA of the Act to the assessee resulting into tax demand of Rs. 35,11,680/- and interest of Rs. 5,45,493/-, total demand amounting to Rs. 40,57,173/-, Due to which the Intimation u/s 143(1) is bad in law, void-ab-initio and is liable to set aside in full. 2) That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the order passed by Ld AO because the assesse inadvertently while filing the Income Tax Return for the Assessment Year 2022-23 could not file Energy Mission Machineries (India) Pvt. Ltd. vs. DCIT Asst.Year –2022-23 - 2– Form 10IC on the Income Tax Portal though the same has been claimed in ITR as well as Tax Audit Report thereby giving sufficient intimation to the Income Tax Department of the assesse's intent to avail benefit u/s 115BAA. 3) That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the order passed by Ld AO because filing of form 10-IC is directive in nature which can be filed late, even at the time of assessment but can't be fatal to the assesse and the company can't be made liable for higher taxation. 4) That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the order passed by Ld AO as the Assessment order of the Ld Assessing Officer is bad in law and facts as it is prejudicial to the interests of the appellant due to lack of principles of natural justice or violation of principles of natural justice. 5) That the Appellant prays for an opportunity of being heard in person through representative and the grant of permission to add, alter, delete, modify, any or all of the grounds of appeal at any time on or before or during the time of hearing before the Hon'ble ITAT”
3. The brief facts of the case are that the assessee filed its return of income for A.Y. 2022-23 on November 7, 2022, declaring a total income of Rs. 4,26,50,790/- and opted for concessional rate of tax under the provisions of Section 115BAA of the Act. However, inadvertently the assessee omitted to file the requisite Form 10-IC within the permitted time. An intimation order under Section 143(1) of the Act was issued to the assessee, creating a tax demand of Rs. 40,52,170/-, computed @ 30% plus applicable surcharge under Section 115JAA of the Act (as against concessional rate of 22% offered to tax by the assessee).
4. In appeal, before CIT(A) the assessee contended that it had opted for concessional rate of tax under Section 115BAA, but failed to file Form No. 10-IC to officially exercise the option under sub-Section (5) of Section 115BAA. The first argument of the assessee was on the intent of the assessee to avail the concessional tax rate of 22%. The assessee submitted that while the intention to avail concessional rate of tax @22% was Energy Mission Machineries (India) Pvt. Ltd. vs. DCIT Asst.Year –2022-23 - 3– expressed in the Tax Audit Report (Form 3CA), an inadvertent error occurred while filing the Income Tax Return (ITR) for the current year, which did not allow for the option to be correctly exercised due to prior year details being filled erroneously in ITR-6. This mistake deprived the assessee of the intended benefit of Section 115BAA of the Act. The assessee submitted before Ld. CIT(Appeals) that the filing of Form 10-IC is “directory” rather than “mandatory”, and submitted that the Revenue cannot deny the exercise of the option based on the failure to file this form. The assessee cited various judicial precedents to support this assertion, including the Supreme Court’s ruling in the case of CIT vs. G.M. Knitting Industries, which indicated that compliance could be achieved by filing necessary forms before assessment, even if not filed with the initial return. In appeal, the assessee also raised an additional ground seeking a recalculation of tax at 25% rather than 30% based on turnover, as the asseessee’s gross revenue was below Rs. 250 crores, thus eligible for the lower tax rate @ 25%. The assessee cited relevant documentation to substantiate its claim.
5. On reviewing the case of the assessee CIT(A) noted that while the return was filed within the extended due date, the assessee did not indicate opting for Section 115BAA in the ITR, nor was Form 10-IC filed. Consequently, the primary conditions necessary to claim the benefits under Section 115BAA were not satisfied. However, upon examination of the turnover, the Additional CIT(A) held that the correct tax rate applicable should be 25% rather than 30%, given that the assessee's turnover fell below the stipulated threshold. Therefore, the assessing officer was directed to Energy Mission Machineries (India) Pvt. Ltd. vs. DCIT Asst.Year –2022-23 - 4– compute tax at the rate of 25%, and the appeal of the assesseewas partly allowed for statistical purposes.
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). Before us, the contentions of the counsel for the assessee are two-fold: firstly, the counsel argued that the assessee had filed return of income within the due stipulated date, however inadvertently, there was a delay in filing of form 10-IC. It was submitted that the Courts/Tribunals in various decisions have upheld the principle that filing of form 10-IC is a directory and not a mandatory requirement and merely if there is a delay in filing of this form, this cannot disentitle the assessee from claiming the benefit of concessional rate of taxation under section 115 BAA of the Act. Secondly, the counsel for the assessee submitted that this is the second year of claim for the concessional rate of tax by the assessee and this is evident from the income tax return filed by the assessee for the impugned assessment year (A.Y. 2022-23). The counsel for the assessee drew our attention to the return of income filed by the assessee in Form ITR-6, wherein the assessee has specifically mentioned that the first year of claim by the assessee for concessional rate of tax was assessment year 2021-2022. Therefore, the counsel for the assessee submitted that the assessee is not required to submit claim for concessional rate of taxation under section 115BAA of the Act for each subsequent assessment year and such claim is required to be only filed for the first year only, and unless there is any change in circumstances, the assessee would continue to be governed by the concessional rate of taxation under section 115BAA of the Act.
Energy Mission Machineries (India) Pvt. Ltd. vs. DCIT Asst.Year –2022-23 - 5– 7. In response, DR placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order.
We have heard the rival contentions and perused the material on record. It would be useful to reproduce the relevant extracts of section 115BAA of the Act, for ready reference:
35[Tax on income of certain domestic companies.36 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 37[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.
Energy Mission Machineries (India) Pvt. Ltd. vs. DCIT Asst.Year –2022-23 - 6– (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 238 of the Special Economic Zones Act, 2005 (28 of 2005). (5) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner39 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: 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.
Accordingly, from perusal of the statutory provisions as contained in Section 115BAA of the Act, it is specifically provided that once the assessee has opted to be governed by the concession rate of tax as contained in the aforesaid section this provision shall continue to apply to the assessee Energy Mission Machineries (India) Pvt. Ltd. vs. DCIT Asst.Year –2022-23 - 7– for subsequent assessment years as well. Further the second proviso to section 115BAA of the Act states that once this option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year and would continue to remain in force. Therefore, from a bear reading of statutory provisions, it is evident that there is no requirement that the assessee is required to file a separate claim in form 10- IC for each subsequent assessment year to be able to be governed by the concession rate of tax as provided under section 115BAA of the Act. Once this option has been exercised by the assessee in the first year, and the assessee has filed the necessary form 10-IC within the prescribed timelines in the first year of claim of such concessional rate of tax, there is no separate/specific requirement that the assessee is required to file form 10-C for each subsequent year of claim of concessional rate of tax under section 115BAA of the Act. This proposition also finds support from various other judicial precedents as well, which are reproduced below for ready reference.
In the case of Narayani Laxmi Viniyog (P.) Ltd. 166 taxmann.com 373 (Kolkata - Trib.), the ITAT held that where assessee-company had validly opted for provisions of section 115BAA for assessment year 2020- 21 and revenue authorities having not found any error in such valid claim had allowed option exercised for lower tax rate for assessment year 2020- 21, assessee was not required to exercise option for subsequent assessment year under provision of section 115BAA(5) unless first option was 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. The ITAT made the following observations while passing the order:
From perusal of the provision of section 115BAA, which is in regard to tax rate applicable to certain category of domestic companies, it is noticed that undisputedly the assessee falls in the category of domestic companies for the benefit of section 115BAA as provided under the Act. The assessee has validly filed option on Form 10IC for assessment year 2020-21 and has been given the benefit of section 115BAA and has been taxed at the rate of 22 per cent only. The only question is whether the assessee is required to opt for falling under section 115BAA 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 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 1-4- 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 assessment year 2020-21 and Form 10IC filed on 7-2-2021 and further the assessee was allowed the option exercised for lower tax rate for assessment year 2020-21. Now once the assessee has validly opted for 115BAA for assessment year 2020-21 and revenue authorities having not found any error in such valid claim and has allowed the option exercised for lower tax rate for assessment year 2020-21, then it is understood that the assessee was not required to exercise the option for the subsequent assessment year under the provision of section 115BAA(5), 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). Since there is no violation at the end of assessee for assessment year 2020-21 and the valid option has been exercised under section 115BAA for assessment year 2020-21, the assessee is eligible for lower rate of tax for the subsequent assessment years also subject to the other conditions provided under the Act. Therefore, the finding of the Commissioner (Appeals) is set aside and the sole ground of appeal raised by the assessee is allowed and the Assessing Officer is directed to calculate the tax liability of the assessee at the rate of 22 per cent provided under section 115BAA
11. In the case of Concentrix Daksh Services India (ITA Number 2552/Del/2023), the Delhi ITAT made the following observations:
Having considered rival submissions, we find, as per section 115BAA of the Act, which begins with a non-obstante clause, from the assessment year 2020-21 a domestic company can opt for concessional rate of tax at the rate of 22% subject to fulfillment of certain conditions. In terms with the aforesaid provision, the assessee exercised its option under section 115BAA by furnishing Form 10IC on 10th February, 2021 and the benefit of section 115BAA was granted to the assessee for the assessment year 2020-21. In the impugned assessment year, the CPC and the first appellate authority have denied the benefit under section 115BAA simply for the Energy Mission Machineries (India) Pvt. Ltd. vs. DCIT Asst.Year –2022-23 - 9– reason that the assessee has not filed fresh Form 10IC, exercising its option for concessional rate of tax for the impugned assessment year.
This, in our view, is totally irrational and militates against the statutory provisions. The second proviso to section 115BAA(5) makes it abundantly clear that once option for 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. In fact, the department has issued a FAQ (copy placed at page 137 of the paper-book) 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. Even, in the instructions issued by the Departmental for filing Form ITR 6, it has been specifically mentioned that Form 10IC is required to be filed only in the first year wherein concessional rate of taxes was opted for the first time by an assessee.
Thus, not only the statutory provisions, but the clarifications issued by the Department from time to time clearly states that the assessee seeking benefit under concessional rate of tax under section 115BAA has to exercise its option in Form 10IC only once in the initial assessment year, wherein, he intends to avail the benefit, and thereafter, there is no need for exercising the option again. That being the statutory mandate, in our view, the Departmental Authorities have gone completely wrong in denyingthe benefit of concessional rate of tax under section 115BAA to the assessee on the misconceived notion that the assessee again has to file Form No. 10IC for the impugned assessment year.
Accordingly, looking into the facts of the assessee’s case, wherein there is no dispute to the proposition that the assessee had validly claimed the concessional rate of tax under Section 115BAA of the Act, for the first time in assessment year 2021-22, in our view there is no requirement under the relevant statutory provisions for the assessee to make fresh claim for each subsequent assessment year by way of filing of Form 10-IC with respect to each subsequent year of claim. Once the assessee has validly opted for 115BAA for assessment year 2020-21 and Revenue Authorities having not found any error in such valid claim and has allowed the option exercised for lower tax rate for assessment year 2020-21, then the assessee is not required to exercise the option for the subsequent assessment year under the provision of Section 115BAA(5), 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).
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 09/10/2024