Filing Of Form 10–IC Is Mandatory Condition To Claim The Benefit Of Reduced Corporate Tax Rate For The Domestic Companies: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that in order to claim the benefit of a reduced corporate tax rate, domestic companies have to mandatorily file Form 10–IC.

The two-member bench of Sandeep Singh Karhail (Judicial Member) and Om Prakash Kant (Accountant Member) has observed that the assessee did not file Form 10–IC before the due date of filing the return of income, which is a mandatory condition for claiming the option available under Section 115BAA of the Income Tax Act.

The assessee/appellant is a domestic company. The assessee filed its return of income, declaring a total income. The Assessing Officer determined the assessee's total income after making certain adjustments. The AO computed the 30% tax liability of the assessee.

The assessee filed an appeal with CIT(A). The assessee challenged the computation of a 30% tax liability instead of the 22% available under Section 115BAA of the Income Tax Act.

However, CIT (A) dismissed the appeal filed by the assessee. The CIT(A) determined that the assessee had failed to meet the mandatory requirement prescribed under section 115 BAA (5) read with Rule 21AE, namely, filing Form 10-IC before the due date of furnishing the return of income.

The assessee contended that due to the intervening COVID period, the assessee could not file Form 10–IC before the due date for filing the return of income. Subsequently, due to the delay, Form 10–IC was not getting submitted on the department's website for reasons beyond the assessee's control. The assessee has approached CBDT for condonation of the delay in filing Form 10–IC in order to claim the beneficial rate of tax provided under Section 115BAA of the Income Tax Act.

Section 115BAA was introduced in the Act by the Taxation Laws (Amendment) Act, 2019, with effect from April 1, 2020, for the purpose of granting domestic companies the benefit of a reduced corporate tax rate. In order to avail of the benefit, companies will have to exercise the option in a 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 the 1st day of April 2020. As per Rule 21AE of the Income Tax Rules, 1962, the option can be exercised by the domestic company in Form 10-IC in the manner prescribed under the Rules.

The tribunal observed that the time permitted for filing Form 10-IC by virtue of Section 3(1)(b) of the Taxation and Other Laws (Relaxations and Amendment of Certain Provisions) Act, 2020, must be treated as 31 March 2021, even though the time permitted for filing the income tax return under Section 3(1), in light of the 3rd proviso to Section 3(1) and read with subsequent notification, was only up to 15 February 2021.

The ITAT upheld that order of the CIT (A) and dismissed the appeal of the assessee.

Case Title: Bholanath Precision Engineering Pvt. Ltd. Versus Commissioner of Income Tax (Appeals)

Citation: ITA No.1997/Mum./2022

Date: 23/11/2022

Counsel For Appellant: Nihar A. Mehta

Counsel For Respondent: Chetan M. Kacha

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