Gujarat HC: Delayed Filing of 10-IC Form Won’t Affect Reduced Tax Rate if Conditions of Section 115BAA Are Met

Witnessing that the taxpayer has fulfilled the conditions to lessen the tax rate under section 115BAA, the Gujarat High Court cited that the revenue department would required to condone delay in the filing of Form 10-IC instead of rejecting it on technical grounds.

Section 115BAA of the Income Tax Act permits domestic companies to use the provisions of the section and file the tax at a reduced tax rate of 22% including a 10% surcharge and a 4% education cess.

The Division Bench, 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 a lower rate of tax”. (Para 25)

Case Details

The applicant has filed the original return showing a total income of Rs 1,98,03,950. Under the Taxation (Amendment) Ordinance, 2019, section 115BAA was inserted in the Income-tax Act in which the current and the newly made companies were furnished the chance to choose for the concessional tax rate at the base rate of 22% with the caveat that these taxpayer company would forego all deductions available to it as quoted under section 115BAA.

The concessional rate was refused to the applicant as of the oversight of the accountant, as the applicant was applying the cited provision of the act for the first time, the accountant did not furnish the Form 10-IC electronically u/s 115BAA(5) on or before the due date for providing the return as per Rule 21AE.

Therefore the return was processed without providing the advantage of the lower tax rate of 22% and tax obligation under section 115BAA was ascertained at Rs 74,43,791 and the applicant was made the obligation to pay another amount of Rs 20,48,040.

Post failing to upload Form 10-IC electronically numerous times on e-portal the applicant has made an application under section 119(2)(b) before the Chief CIT, which was denied, keeping that the applicant does not place any remark against Column (e) meant for providing an option for taxation u/s 115BAA.

High Court Observations

It was remarked by the Bench that the taxpayer has furnished the return under section 139(1) before the deadline by applying the provisions of Section 115BAA.

The Bench from the perusal of Form 10-IC, discovered that column (e) does not furnish any box for the option to practice via the taxpayer, dispute identical boxes are furnished for the other options which have been chosen via the taxpayer.

Hence the bench denied the contention of the revenue to reject the applicant as the taxpayer was unable to practice the option in the return in Form 10-IC.

Hence the Bench said that in the absence of any box being furnished for practising option via the taxpayer, it is proved that the form for ITR-6 is not effective.

The income calculation shows that the taxpayer has practised the option under section 115BAA, it secures the technical consideration that could not be applied to avert the substantial justice, the bench said.

The bench directed 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 emphasizing the instances where Form 10-IC cannot be filed in the said time and to prevent the real hardship to the domestic companies.

Hence the HC has permitted the petition of the taxpayer and concluded that the taxpayer could not be deprived of the diminished tax rate as cited under section 115BAA for delay in filing of Form 10-IC.

Name of Applicant	V M Procon PVT. LTD Vs. Assistant Director of the Income Tax Act
Case Number	Application No. 9707 of 2024
Date	23.08.2024
Counsel for Petitioner	Shrunjal T. Shah
Counsel for Respondent	Varun K. Patel
Gujarat High Court	Read Order