Filing of Form 10-IFA vide Rule 21AHA by new manufacturing cooperatives to avail benefit of concessional rate of Income Tax

[Vivek Jalan]

The Taxation Laws (Amendment) Act, 2019, inter-alia, inserted section 115BAB in the Act which provides that new manufacturing domestic companies set up on or after 01.10.2019, which commence manufacturing or production by 31.03.2023 and do not avail of any specified incentive or deductions, may opt to pay tax at a concessional rate of 15%. The time for commencing manufacturing or production had been extended to 31.03.2024 by the Finance Act, 2022. However, the same provision had not been provided for new manufacturing co-operative societies. Representations were made for providing a level playing field between new manufacturing co-operative societies and new manufacturing companies by providing for the concessional tax regime of 15% to new manufacturing co-operative societies as well. In view of the same, a new section 115BAE was introduced in which concessional tax regime was provided for the new manufacturing cooperative societies as well. The conditions are materially similar to the conditions applicable

to new manufacturing companies, and they are as under:-

i. Rate of tax would be 15% if the total income of the new manufacturing cooperative society is computed, -

a) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 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) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of section 80JJAA; b) 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 ii(a) above; and c) by claiming the depreciation, if any, under section 32, other than clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed;

ii) the loss and depreciation referred above shall be deemed to have been given full effect to and no further deduction for such loss shall be allowed for any subsequent year.

iii. the concessional rate shall not apply unless 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 first of the returns of income for any previous year relevant to the assessment year commencing on or after 1st day of April, 2024 and such option once exercised shall apply to subsequent assessment years;

iv. the option so exercised cannot be withdrawn;

v. On any income, Not from or incidental to manufacturing or production and in respect of which no specific rate of tax has been provided separately under this Chapter 22% tax shall apply and no deduction or allowance in respect of any expenditure or allowance shall be made;

vi. where owing to the close connection between the assessee and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such business, the profits as may be reasonably deemed to have been derived therefrom and such income shall be charged at the tax rate of30%;

vii. in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in clause.

viii. of section 92F. The amount, being profits in excess of the amount of the profits determined by the Assessing Officer, shall be deemed to be the income of the assessee. The income-tax payable in respect of the income, in such case shall be computed at the rate of thirty per cent;

ix. short term capital gains derived from transfer of a capital asset on which no depreciation is allowable under the Act shall be computed at the rate of 22%;

x. where the assessee fails to satisfy the specified conditions under the section 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 to the assessee as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.

Further any machinery or plant which was used outside India by any other person shall not be regarded as machinery or plant previously used for any purpose, on fulfilment of certain specified conditions. Where any machinery or plant or any part thereof previously used for any purpose is put to use by the assessee and the total value of such machinery or plant or part thereof does not exceed 20% of the total value of the machinery or plant used by the assessee, then, the concessional rate shall apply on fulfilment of the specified conditions. 

It is provided that the assessee shall not be engaged in any business other than the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it. Further, the business of manufacture or production of any article or thing shall include the business of generation of electricity, but not include certain specified businesses.

A new clause (vb) in the section 92BA was introduced to include the transaction between the Cooperative society and the other person with close connection within the purview of ‘specified domestic transaction’.

As per Section 115BAE (5) the eligible co-operative society has to exercise the option to choose new tax scheme in the prescribed manner and now such manner has been prescribed for which a new Rule 21AHA vide Income-tax (Twenty-Third Amendment) Rules, 2023 has been inserted. The new Rule 21AHA provides that a resident cooperative society can exercise the option under section 115BAE (5) by furnishing Form No. 10-IFA. The form shall be furnished electronically either under digital signature or electronic verification code. The Principal Director General of Income tax (Systems) or the Director General of Income-tax (Systems) shall specify the procedure for filing Form no. 10-IFA.

The Form is a simple one, wherein the conditions specified in Section 115BAE have to affirmed to be complied with by the assessee.