2025 (4) TMI 992 - AT - Income Tax

Charging of tax at higher rate - assessee submitted that the assessee had opted for the tax regime u/s 115BAA as per return filed by it therefore it is incorrect on the part of the CPC to compute the tax rate at 30% on account of non filing of Form 10-IC which is only a procedural requirement - HELD THAT - We have also considered various decisions cited before us. It is an admitted fact that due to non furnishing of Form 10-IC the CPC processed the return on 21.05.2024 by computing the tax at normal rate as against the lower rate computed by the assessee as per the provisions of section 115BAA of the Act. We find the various other decisions relied the assessee also supports his case to the proposition that the assessee should be given an opportunity to upload Form 10-IC and the Revenue has to condone such delay and allow the assessee to opt for taxation u/s 115BAA of the Act. Respectfully following the decision in the case of Fastner Commodeal (P.) Ltd. 2025 (1) TMI 769 - CALCUTTA HIGH COURT we restore the issue to the file of the AO with a direction to permit the assessee to file the report in Form 10-IC and consider as to what relief the assessee would be entitled to subject to the condition that the assessee fulfills all other requisite conditions as per law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

Summary

The core legal questions considered in this appeal are:

1. Whether a domestic company opting for the concessional tax regime under section 115BAA of the Income Tax Act, 1961, is mandatorily required to electronically file Form 10-IC on or before the due date of filing the return under section 139(1) to avail the lower tax rates.

2. Whether failure to file Form 10-IC within the prescribed time results in denial of the concessional tax rate and compels taxation at the normal rates.

3. Whether delay in filing Form 10-IC can be condoned by the Appropriate Authority on genuine hardship grounds, allowing the assessee to claim the benefit of lower tax rates retrospectively.

4. The applicability of the Finance Act, 2022 provisions regarding tax rates for domestic companies with turnover below Rs. 400 crores for the relevant assessment year.

5. The legal effect of procedural lapses such as non-filing of Form 10-IC in the context of electronic filing and whether such lapses can be excused in light of practical difficulties faced by the assessee, including during the Covid pandemic.

Issue-wise Detailed Analysis:

Issue 1 & 2: Mandatory Filing of Form 10-IC and Consequences of Non-filing

The relevant statutory framework includes section 115BAA of the Income Tax Act, inserted w.e.f. 01.04.2020, which provides an option for domestic companies to be taxed at concessional rates subject to certain conditions. Subsection (5) of section 115BAA, read with Rule 21AE of the Income Tax Rules, mandates the electronic filing of Form 10-IC on or before the due date of filing the return under section 139(1). This filing is a procedural requirement to exercise the option for concessional tax rates.

The Assessing Officer and the Addl./JCIT(A) held that failure to file Form 10-IC results in denial of the concessional tax rate, compelling the company to be taxed at the normal rate of 30%. The Tribunal initially upheld this view, emphasizing the mandatory nature of the filing and rejecting the assessee's contention that non-filing was a mere procedural lapse without revenue loss.

However, the Tribunal also noted that an option for condonation of delay exists, which the assessee had not availed. The authorities emphasized strict compliance with the statutory provisions and rules, and that subsequent filing of Form 10-IC after the due date cannot be considered for processing the return.

The Tribunal's reasoning was supported by the statutory language and the procedural framework, which clearly prescribe timely filing of Form 10-IC as a precondition for concessional tax rates.

Issue 3: Condonation of Delay in Filing Form 10-IC

The assessee relied on several High Court decisions from Calcutta, Gujarat, Delhi, and Madras, which recognized the possibility of condoning delay in filing Form 10-IC and permitting the assessee to claim the benefit of lower tax rates under section 115BAA despite procedural lapses.

These decisions highlighted that the filing of Form 10-IC is procedural and that genuine difficulties, including technical issues faced during the Covid pandemic, justify condonation of delay. The courts observed that denying the benefit solely on account of delay without considering the merits and hardships would cause undue hardship and defeat the legislative intent of providing a simplified tax regime.

Specifically, the Calcutta High Court in Pr.CIT vs. Fastner Commodeal (P.) Ltd. held that the assessee's conduct in opting for the concessional regime through the return of income demonstrated intent, and the failure to file Form 10-IC timely was an inadvertent procedural error aggravated by Covid-related difficulties. The Court directed restoration of the matter to the Assessing Officer to permit filing of Form 10-IC and consider the relief accordingly.

These precedents were pivotal in persuading the Tribunal to reconsider the strict denial of relief and to restore the matter for fresh adjudication with directions to condone delay if justified.

Issue 4: Applicability of Lower Tax Rate for Companies with Turnover Below Rs. 400 Crores

The assessee argued that as per the Finance Act, 2022, companies with turnover below Rs. 400 crores for AY 2020-21 are eligible for a concessional tax rate of 25% (excluding surcharge and cess), which should apply in this case.

This contention was noted but not finally adjudicated by the Tribunal, as the primary issue was the procedural compliance regarding Form 10-IC. The Tribunal allowed the assessee to raise this ground before the Assessing Officer upon restoration of the case.

Issue 5: Procedural Lapses and Electronic Filing Context

The Tribunal acknowledged the evolution of the electronic filing regime and the challenges posed therein. It noted that earlier case laws cited by the assessee were rendered in a different context, prior to the widespread adoption of electronic filing, and thus had limited applicability.

However, the Tribunal also recognized that procedural lapses, especially those arising from technical difficulties during the Covid pandemic, merit sympathetic consideration and possible condonation, aligning with the principle that procedural requirements should not override substantive rights where genuine hardship exists.

Application of Law to Facts and Treatment of Competing Arguments

The Assessing Officer and Addl./JCIT(A) strictly applied the statutory provisions, emphasizing mandatory compliance and rejecting the assessee's claim for concessional rates due to non-filing of Form 10-IC. They rejected the argument that non-filing was a mere procedural lapse without revenue impact.

The assessee, supported by various High Court decisions, argued for a liberal approach allowing condonation of delay and acceptance of Form 10-IC filing post due date, especially in light of Covid-related difficulties and the intention to opt for the concessional regime expressed in the return.

The Tribunal, after hearing both sides and considering precedents, found merit in the assessee's arguments and the principle of equity and fairness. It restored the matter to the Assessing Officer with directions to permit filing of Form 10-IC and decide on relief, thereby balancing the strict legal requirements with practical realities.

Significant Holdings:

"Section 115BAA of the Income Tax Act, 1961 was inserted by the Taxation Laws (Amendment) Act, 2019 w.e.f. 01-04-2020. As per the Section, the income tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020 shall, at the option of such person be computed at lower tax rate subject to satisfaction of conditions contained in sub-section(2) of the Section."

"Failure to furnish such option in the prescribed form on or before the due date specified u/s 139(1) of the Act results in denial of concessional rate of tax to such person."

"An option of condonation of delay in filing Form 10-IC may be exercised, if a domestic Company e-filed Form 10-IC late by the Appropriate Authority of Income Tax keeping in view the genuine hardship."

"The peculiar facts and circumstances would show that the error was an inadvertent procedural error and the conduct of the assessee will clearly show that they had opted for taxation under Section 115BAA of the Act."

"The matter stands restored back to the file of the Assessing Officer to permit the assessee to file the report in Form 10IC and the Assessing Officer shall consider as to what relief the assessee would be entitled to subject to the conditions that the assessee fulfils all other requisite conditions as per law."

The core principles established include:

- The option to be taxed under section 115BAA is conditional upon filing Form 10-IC electronically on or before the due date of filing the return under section 139(1).

- Non-filing of Form 10-IC results in denial of concessional tax rates and application of normal tax rates.

- The delay in filing Form 10-IC can be condoned by the Appropriate Authority in cases of genuine hardship, including technical difficulties, thereby allowing the assessee to avail the concessional tax regime.

- Procedural lapses should be viewed in the context of the assessee's intent and conduct, especially when the return clearly indicates opting for the concessional regime.

- The Assessing Officer is empowered to consider condonation of delay and grant relief upon restoration of the matter.

Final determinations on each issue are:

1. The filing of Form 10-IC is mandatory to avail concessional tax rates under section 115BAA.

2. Failure to file Form 10-IC on time results in taxation at normal rates.

3. Delay in filing Form 10-IC can be condoned by the Appropriate Authority on genuine hardship grounds.

4. The matter is restored to the Assessing Officer with directions to permit filing of Form 10-IC and decide relief accordingly.

5. The assessee's claim for concessional tax rates as per Finance Act, 2022 for companies with turnover below Rs. 400 crores is left open for consideration by the Assessing Officer.