No express bar to opt other tax rate when tax rate u/s 115BAA was opted

No express bar to opt other tax rate when tax rate u/s 115BAA was opted – ITAT

In a recent judgment, ITAT Mumbai has held that there is no express bar on the assessee to opt for tax rate under other provision when it had opted tax rate u/s 115BAA of the Act which was denied due to delay in filing Form 10-IC within prescribed due date.

ABCAUS Case Law Citation:
4223 (2024) (08) abcaus.in ITAT

On the facts and circumstances of the case and in law, the learned National Faceless Appeal Centre (NFAC) in not allowing the concessional rate u/s 115BAA of the Income Tax Act, 1961 (the Act).

The appellant assessee was a private limited company, which was engaged in the business of trading of goods and provision of services. The assessee filed its return of income computing net tax payable at the rate of 25.168% (22% basic tax + 10% compulsory surcharge + 4% health and education cess) being the concessional rate u/s 115BAA of the Act.

The return was processed u/s 143(1) of the Act and the Assessing Officer (AO) / CPC vide intimation raised a demand after adjusting refund claimed by the assessee after duly increasing the net tax liability by applying income tax rate of 30% + 7% surcharge and 4% health and education cess after disallowing the concessional rate u/s 115BAA of the Act.

The assessee then filed a rectification application u/s. 154 of the Act where the AO again raised the demand without giving any relief to the assessee.

The first appellate authoritydismissed the appeal filed by the assessee on the ground that the delay in filing Form 10-IC cannot be condoned and also rejected the alternate claim of the assessee in implementing the tax rate of 25%, thereby upholding the order of the CPC/A.O.

Before the Tribunal, the assessee contended that the assessee was eligible for concessional rate as per section 115BAA of the Act and that the assessee had filed Form 10-IC belatedly which was due to the reason that the assessee was unaware of the new provision and the same could not be uploaded in the portal post the due date.

It was further stated that Form 10-IC was filed before the first appellate authority and the same was not considered by the CIT(A). The assessee also made an alternate submission that even if 22% beneficial concessional tax rate was not applicable to the assessee for non filing of Form 10-IC, the assessee was entitled to tax rate of 25% since the total turnover or gross receipt does not exceed Rs. 400 crores. The assessee relied on the decision of the co-ordinate bench of the Tribunal at Kolkata.

On the other hand, the Income Tax Department contended that filing of Form 10-IC is the mandatory requirement and the delay in filing the same cannot be condoned. It was further stated that the assessee had not opted for 25% rate of tax as per section 115BA of the Act and hence, the same had been rightly rejected by the CIT(A).

The Tribunal observed that the CIT(A) had rejected the claim of the assessee for the reason that since the assessee had exercised option u/s.115BAA of the Act and as the same stood rejected by the lower authorities for non filing of Form 10IC within the specified due date, the tax would be determined @ 30% automatically. On the other hand the assessee claimed in the alternate plea that in case where 115BAA was not applicable, then the assessee will be entitled to tax rate of 25%, on the basis of the Finance Act, 2020.

The Tribunal observed that as per Paragraph “E” of the Finance Act 2020 giving rates of income tax in case of a company, the assessee being a domestic company whose turnover or gross receipt during the previous year did not exceed Rs. 400 crores the assessee would fall under the tax liability of 25% as per the Finance Act, 2020.

The Tribunal observed that a perusal of the provisions of the Act, it can be observed that there was no express bar on the assessee to opt for tax rate on other provision when the assessee has opted the same u/s. 115BAA of the Act when the same was rendered invalid due to violation of the conditions specified in the section. The provision merely states that the assessee should withdraw the option exercised by it, if in case it decides to opt under the other provisions of the Act. The Tribunal drew its support from the judgment of the ITAT Kolkata.

Accordingly, the Tribunal held that the assessee was eligible to be taxed @ 25%, subject to the other conditions specified in the provisions of the Act. The AO was directed to tax the assessee @ 25% instead of 30% and to recompute the tax liability accordingly. 

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