Mere Delay In Filing Form 10-IC Is Not Detrimental To Reduced Rate Of Tax If Taxpayer Satisfies Conditions Of Sec 115BAA: Gujarat HC

Section 115BAA of the Income Tax Act allows domestic companies to utilise the provisions of the section and pay tax at a lower tax rate of 22% plus a 10% surcharge and a 4% education cess.

The Division Bench comprising Justice Bhargav D. Karia and Justice Niral R. Mehta “the petitioner has exercised option merely because in absence of any provision for exercising the option in Column (e) as per the Circular No. 19/2023, the petitioner cannot be deprived of lower rate of tax”. (Para 25)

Facts of the case

The petitioner/ assessee had filed original return declaring total income of Rs.1,98,03,950/-. In the meanwhile, by Taxation (Amendment) Ordinance, 2019, section 115BAA was inserted in the Income tax Act wherein, existing as well as newly formed companies were given liberty to opt for concessional rate of tax at the base rate of 22% with caveat that such assessee company shall forego all deductions available to it as stated u/s 115BAA. This concessional rate was however denied to the petitioner due to oversight of the accountant, as the petitioner was applying the said provision of the Act for the first time, the accountant did not file Form 10-IC electronically u/s 115BAA(5) on or before the due date for furnishing the return as per Rule 21AE. Hence, the return was processed without giving the benefit of lower rate of tax of 22% and tax liability u/s 115BAA was ascertained at Rs. 74,43,791/- and the petitioner was made liable to pay additional amount of Rs.20,48,040/-.

The petitioner, after failing to upload Form 10-IC electronically at multiple times on e-portal, made an application u/s 119(2)(b) before the Chief CIT, which was rejected, holding that the petitioner did not put any remark against Column (e) meant for giving option for taxation u/s 115BAA.

Observations of the High Court

The Bench noted that the Assessee filed the return u/s 139(1) before the due date by applying the provisions of Section 115BAA.

Further, from perusal of the Form 10-IC, the Bench found that Column (e) does not provide any box for the option to be exercised by the Assessee, even though similar boxes are provided for other options which has been selected by the Assessee.

The Bench therefore rejected the Revenue's contention for rejecting the application as Assessee has failed to exercise the option in the return in Form 10-IC.

The Bench expressed that in the absence of any box being provided for exercising option by the Assessee, it is evident that form for ITR-6 is faulty.

The computation of income exhibits that the Assessee has exercised the option u/s 115BAA and therefore holds technical consideration cannot be applied to prevent the substantial justice, added the Bench.

The Bench referred to CBDT issued Circular No.19/2023 for AY 2021-22 consequent to Circular No.6/2022 for AY 2020-21, which was issued in pursuance to representation highlighting instances where Form 10-IC could not be filed within the stipulated time and for avoiding genuine hardship to domestic companies.

The High Court therefore allowed Assessee's petition and concluded that Assessee cannot be deprived of lower rate of tax as prescribed u/s 115BAA for delay in filing of Form 10-IC.

Counsel for Petitioner/ Assessee: Advocate Shrunjal T. Shah

Counsel for Respondent/ Revenue: Advocate Varun K. Patel

Case Title: V M Procon Pvt Ltd Vs Assistant Director Of Income Tax

LL Citation: 2024 LiveLaw (Guj) 128

Case Number: R/Special Civil Application No. 9707 of 2024

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