2025 (7) TMI 1385 - HC - Income Tax

Benefit of concessional rate of tax of 22% has not been given due to non-filing of Form 10-IC - application before the Office of respondents under the provisions of Section 119(2)(b) - respondent rejected the application u/s 119(2)(b) on the ground that he was not empowered to condone delay in view of the Circular No. 6/22 HELD THAT - Return of income filed by the petitioner in Form ITR-6 that the petitioner had adopted the option for taxation u/s 115BAA of the Act which is further fortified from the intimation issued under Section 143 of the Act computation of income of the petitioner placed on record wherein also the petitioner has computed the tax payable at the rate of 22% instead of 30% as well as the intimation issued by the CPC u/s 143(1) of the Act accepting the return of income. As per the provisions of Sub-section (5) of Section 115BAA of the Act the option is required to be exercised in prescribed manner at the time of filing of return of income under Section 139(1) of the Act. The prescribed manner is provided in Rule 21AE of the Rules for filing of Form 10IC to avail the benefit of provisions under Section 115BAA of the Act. Considering the confusion and technical issues the CBDT has issued the Circular No.6 of 2022 on 17.3.2022 permitting the assessees to file Form 10IC for the Assessment Year 2021 meaning thereby the filing of Form 10-IC is only to confirm that the petitioner has exercised the option while filing the return of income under Section 139(1) of the Act as prescribed in Rule 21AE of the Rules which was relaxed by the CBDT. Significance of filing declaration under Section 10B(8) of the Act considering the provisions of Section 10B(5) of the Act being a check to verify the correctness of the claim of deduction at the time of filing of return so that if an assessee claims an exemption under the Act by virtue of Section 10B of the Act then the correctness of the claim has already been verified under Sub-section (5) of Section 10B and therefore if the claim is withdrawn post the date of filing of return the report of the Accountant filed under Section 10B(5) of the Act would become falsified and would stand to be nullified. However the provisions of Section 115BAA of the Act are in a way granting relief to the assessee-Companies to enable them to pay the reduced rate of tax at rate of 22% on exercise of the option on the various conditions mentioned therein. Respondent No. 1 was required to consider the facts of the case by permitting the petitioner to file a fresh Form 10IC and condoning the delay in filing such Form by molding the prayer made by the petitioner to treat the Form 10IC filed by the petitioner for Assessment Year 2021-2022 to be treated as that of for Assessment Year 2021. The provisions of Section 119(2)(b) of the Act are meant for redressal of the grievance and hardships caused to the petitioner as held in case of R. Seshammal 1998 (9) TMI 56 - MADRAS HIGH COURT Assessee appeal allowed.

Summary

ISSUES:

Whether delay in filing Form 10-IC for exercising the option under Section 115BAA of the Income Tax Act, 1961 can be condoned under Section 119(2)(b) of the Act.Whether the option under Section 115BAA(5) must be exercised strictly on or before the due date specified under Section 139(1) of the Act or whether condonation of delay is permissible.Whether the Circular No. 6/2022 issued by the Central Board of Direct Taxes (CBDT) permitting condonation of delay in filing Form 10-IC till 30.06.2022 or three months from the end of the month of issuance applies to the facts and can be relied upon to condone delay beyond the specified period.Whether the principle laid down by the Supreme Court in the Wipro Limited case regarding mandatory filing of option/declaration under Section 10B(8) of the Act applies pari materia to Section 115BAA(5) and precludes condonation of delay.Whether the power under Section 119(2)(b) of the Act can be exercised to avoid genuine hardship caused by technical or inadvertent non-compliance in filing Form 10-IC.

RULINGS / HOLDINGS:

The Court held that the delay in filing Form 10-IC can be condoned under Section 119(2)(b) of the Act to avoid genuine hardship, especially in light of CBDT Circular No. 6/2022, which exercises the power under Section 119(2)(b) to condone delay subject to certain conditions.The Court emphasized that the option under Section 115BAA(5) is required to be exercised in the prescribed manner on or before the due date specified under Section 139(1), but the CBDT Circular relaxes this strict timeline for Assessment Year 2020-21 by condoning delay till 30.06.2022 or three months from the issuance of the Circular.The Court found the CBDT Circular No. 6/2022 to be a valid exercise of power under Section 119(2)(b) and held that the petitioner was entitled to rely on it for condonation of delay in filing Form 10-IC.The Court distinguished the Supreme Court's ruling in the Wipro Limited case on Section 10B(8) as not applicable pari materia to Section 115BAA(5), noting that the latter provisions grant relief to domestic companies to pay tax at a reduced rate upon exercising option, and the strict mandatory nature of declaration filing under Section 10B(8) does not extend to Section 115BAA(5) in the same manner.The Court held that the power under Section 119(2)(b) is meant for redressal of grievances and to avoid hyper-technical denial of relief, and therefore, the respondent authority ought to have condoned the delay and considered the Form 10-IC filed for Assessment Year 2021-2022 as if filed for Assessment Year 2021.

RATIONALE:

The Court applied the statutory framework of the Income Tax Act, 1961, focusing on Sections 115BAA(1) and (5), Section 139(1), and Section 119(2)(b), along with Rule 21AE of the Income Tax Rules prescribing the manner of exercising the option by filing Form 10-IC.The Court relied on CBDT Circular No. 6/2022 dated 17.03.2022, which condones delay in filing Form 10-IC for AY 2020-21 to avoid genuine hardship, thereby interpreting the power under Section 119(2)(b) liberally to provide equitable relief.The Court distinguished the binding precedent of the Supreme Court in Wipro Limited on Section 10B(8) by analyzing the different statutory purposes and conditions involved in Section 115BAA(5), noting that the latter is designed to grant relief to domestic companies and that strict timelines may be relaxed to prevent injustice.The Court referred to prior authoritative decisions emphasizing that the phrase "genuine hardship" under Section 119(2)(b) should be construed liberally and that the tax authorities should avoid a "pedantic, hyper-technical and narrow approach" when exercising discretionary powers.The Court noted the importance of balancing strict compliance with procedural requirements against the need to prevent undue hardship to taxpayers who have made bona fide mistakes, particularly when the statutory scheme and CBDT Circular provide for such condonation.