1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court were:
(a) Whether the petitioner was entitled to avail the benefit of paying tax at a lower rate under Section 115BAA of the Income Tax Act, 1961, despite not opting for it in the original return filed within the prescribed due date;
(b) Whether the petitioner's revised return and subsequent filing of Form 10-IC, after the due date, could be accepted to claim the benefit of Section 115BAA, especially in light of the CBDT Circular No. 6/2022 condoning delay in filing Form 10-IC;
(c) Whether the petitioner's failure to exercise the option for lower taxation under Section 115BAA in the prescribed manner and within the prescribed time could be excused due to mitigating circumstances such as the COVID-19 pandemic;
(d) The legal effect and scope of Section 115BAA(5) of the Act requiring the option to be exercised in the prescribed manner on or before the due date for filing the return;
(e) The applicability and interpretation of CBDT Circular No. 6/2022 regarding condonation of delay in filing Form 10-IC and whether it relaxes the requirement of timely exercising the option under Section 115BAA.
2. ISSUE-WISE DETAILED ANALYSIS
Issue (a): Entitlement to lower tax rate under Section 115BAA without opting in the original return
The relevant legal framework is Section 115BAA of the Income Tax Act, introduced effective 1 April 2020, which provides a concessional tax rate of 22% for domestic companies subject to conditions and the exercise of an option in the prescribed manner before the due date for filing the return under Section 139(1). Sub-section (5) explicitly states that the option must be exercised on or before the due date for filing the return and once exercised, applies to subsequent years.
The Court noted that the petitioner filed its original return on 13 February 2021, within the extended due date of 15 February 2021, but expressly indicated "None of above" against the question of opting for taxation under Section 115BAA. This affirmative indication was held to be decisive, as the return form contained a clear column for exercising the option, contrary to the petitioner's claim that no such option box was available.
The Court rejected the petitioner's argument that it had inadvertently failed to opt for Section 115BAA, emphasizing that the option must be exercised affirmatively and cannot be inferred or presumed from other actions such as filing a revised return or surrendering depreciation. The petitioner's computation of depreciation was also found not to comply with the conditions of Section 115BAA(2), further undermining its claim.
The Court concluded that the petitioner had not exercised the option in the prescribed manner and time, and therefore could not claim the benefit of Section 115BAA.
Issue (b): Acceptance of revised return and late filing of Form 10-IC
The petitioner filed a revised return on 26 March 2021 and subsequently filed Form 10-IC on 26 April 2022, seeking to avail the benefit of Section 115BAA. The Central Board of Direct Taxes (CBDT) issued Circular No. 6/2022 on 17 March 2022, condoning delay in filing Form 10-IC for AY 2020-21 due to widespread difficulties caused by COVID-19.
The Court examined the Circular, which explicitly conditions the condonation of delay on three criteria: (i) the return of income must have been filed on or before the due date under Section 139(1); (ii) the assessee must have opted for taxation under Section 115BAA in the filing status of the return; and (iii) Form 10-IC must be filed electronically on or before 30 June 2022.
The Court emphasized that the Circular does not relax the fundamental requirement of exercising the option before the due date of filing the return. It only condones the delay in filing Form 10-IC where the option has already been exercised in the return. Since the petitioner had not opted for Section 115BAA in its original return, it did not satisfy the second condition.
Therefore, the Court held that the petitioner was not entitled to the benefit of the Circular and could not rely on the late filing of Form 10-IC to claim lower taxation.
Issue (c): Effect of COVID-19 as mitigating circumstances
The petitioner argued that the option was not exercised timely due to confusion arising from COVID-19 related disruptions affecting its finance officer and chartered accountant. While the Court acknowledged the difficulties faced by taxpayers during the pandemic, it found that the statutory requirement under Section 115BAA(5) is unambiguous and mandatory.
The Court noted that the CBDT itself recognized such hardships by issuing Circular No. 6/2022 to condone delays in filing Form 10-IC, but did not extend relief to allow exercising the option after the due date. The Court held that the pandemic-related difficulties did not justify overriding the clear statutory mandate.
Issue (d): Interpretation of Section 115BAA(5) regarding the prescribed manner and timing of option exercise
The Court extensively referred to the language of Section 115BAA(5), which requires the option to be exercised "in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income." The Court held this requirement to be mandatory and unambiguous.
The Court rejected the petitioner's contention that the option could be exercised by filing a revised return after the due date, or by filing Form 10-IC late. It held that the option must be exercised affirmatively and timely in the original return.
The Court also referred to the return form filed by the petitioner, which contained a specific column for indicating the option, thereby negating the claim of absence of a mechanism to exercise the option.
Issue (e): Applicability and interpretation of CBDT Circular No. 6/2022
The Circular was issued under Section 119(2)(b) of the Act to condone delay in filing Form 10-IC for AY 2020-21. The Court noted that the Circular explicitly requires that the assessee must have opted for Section 115BAA in the original return to avail condonation of delay.
The Court observed that the Circular does not relax or override the statutory requirement of exercising the option before the due date of filing the return. It only provides relief for late filing of the accompanying Form 10-IC where the option has already been exercised.
Since the petitioner did not opt for Section 115BAA in its original return, it did not qualify for the benefit of the Circular.
3. SIGNIFICANT HOLDINGS
"There is no ambiguity in the language of Sub-section (5) of Section 115BAA of the Act. It clearly provides that the section would not be applicable unless (a) an option is exercised by the person in the prescribed manner; and (b) before the due date specified under Section 139 (1) of the Act for furnishing the return of income."
"The petitioner had expressly indicated that it was not opting for taxation under Section 115BAA of the Act. The contention that there was no specific box (space) in the return to reflect the option, as contended on behalf of the petitioner, is clearly erroneous."
"The CBDT Circular No. 6/2022... makes it explicitly clear that the delay in filing the Form 10-IC could be condoned only in cases where the assessee company had opted for lower taxation under Section 115BAA of the Act ['Part A-GEN' of the Form of Return of Income]."
"The Circular does not relax the condition of assessee exercising its option in the affirmative before the prescribed time for filing the return under Section 139(1) of the Act."
"In view of the above, we find the petitioner's challenge to the impugned assessment order or the impugned order, is unmerited."