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2024 (8) TMI 1519 - AT - Income TaxDisallowing the rate of tax as per Sec 115BAA of 22 percent on grounds of non- filing of form 10 ICC - HELD THAT - Assessee is fulfilling all the conditions except filing of Form No. 10IC. Considering the principle of beneficial interpretation the procedural requirements should not override substantive benefits. The Courts have taken a lenient view on procedural lapses when substantive benefits are involved. Supreme Court rulings always emphasized that the making of a claim of deduction is mandatory but timing/format is directory. The assessee duly claimed the benefit in its return of income filed in Form No. ITR-6 and return was filed well within the time prescribed u/s. 139(1) of the Act. As observed that the assessee has not filed Form No. 10IC for claiming concessional rate of tax but on the other hand CPC Bengaluru also has not followed the procedure prescribed by the law. It is reasonably assumed that the if the CPC Bengaluru would have followed the procedure i.e. giving the assessee a reasonable opportunity of hearing the assessee would have filed the Form No. 10IC before the CPC Bengaluru and this technical requirement would have been completed. Jurisdictional AO is directed to give a fresh opportunity to the assessee ignoring this adjustment made by the CPC Bengaluru and the assessee is directed to file the form no. 10IC electronically/before the Jurisdictional AO to comply with the rules. Once the assessee filed the Form No. 10IC the Jurisdictional AO is directed to revise the tax computation of the assessee in compliance with the provisions of section 115BAA of the Act - Ground Nos. 1 2 raised by the assessee are allowed for statistical purposes.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are: 1. Whether the assessee was entitled to the concessional tax rate of 22% under Section 115BAA of the Income Tax Act, 1961, despite failing to file Form No. 10IC. 2. Whether the tax rate applied should be 25% instead of 30% due to the assessee's turnover being less than Rs. 400 crores, even in the absence of Form No. 10IC. 3. Whether the share of profit from the firm, which is exempt under Section 10(2A), should be deducted from the book profit while calculating MAT under the explanation to Section 115JB. ISSUE-WISE DETAILED ANALYSIS 1. Concessional Tax Rate under Section 115BAA Relevant legal framework and precedents: Section 115BAA of the Income Tax Act provides a concessional tax rate of 22% for domestic companies, subject to certain conditions, including the filing of Form No. 10IC. The rule mandates electronic submission of this form to avail the concessional rate. Court's interpretation and reasoning: The Court noted that the assessee had fulfilled all conditions for the concessional rate except for the filing of Form No. 10IC. The Court emphasized the principle of beneficial interpretation, suggesting that procedural requirements should not override substantive benefits. Supreme Court precedents indicate that while claiming deductions is mandatory, the timing and format are directory. Key evidence and findings: The assessee filed its return on time and claimed the concessional rate in its return, indicating an intention to comply with Section 115BAA. Application of law to facts: The Court found that the procedural lapse of not filing Form No. 10IC should not negate the substantive right to the concessional tax rate, especially since the assessee had claimed it in the return. Treatment of competing arguments: The Court recognized that the CPC, Bengaluru failed to provide the assessee an opportunity to rectify the procedural lapse, which could have been easily addressed. Conclusions: The Court directed the Jurisdictional AO to provide a fresh opportunity for the assessee to file Form No. 10IC and instructed the AO to revise the tax computation accordingly. 2. Application of 25% Tax Rate Relevant legal framework and precedents: The normal tax rate for companies with a turnover less than Rs. 400 crores is 25%, as per the provisions applicable during the relevant assessment year. Court's interpretation and reasoning: The Court noted that the failure to file Form No. 10IC should not automatically lead to the application of the higher 30% tax rate, given the turnover threshold. Key evidence and findings: The assessee's turnover was below Rs. 400 crores, qualifying it for the 25% rate. Application of law to facts: The Court found that the 25% rate was applicable, considering the turnover, and the procedural lapse should not result in a higher tax burden. Treatment of competing arguments: The Court acknowledged the procedural oversight but emphasized the substantive right to the lower tax rate. Conclusions: The Court allowed the application of the 25% tax rate, subject to the filing of Form No. 10IC. 3. Deduction of Share of Profit from Firm Relevant legal framework and precedents: Section 10(2A) exempts the share of profit from a firm from taxation, which should be considered when calculating MAT under Section 115JB. Court's interpretation and reasoning: The Court noted that since the assessee opted for the concessional rate under Section 115BAA, only normal income is relevant, rendering the MAT provisions inapplicable. Key evidence and findings: The assessee's share of profit from the firm was exempt under Section 10(2A). Application of law to facts: The Court found that the issue became moot once the concessional rate was applied, as MAT provisions were not relevant. Treatment of competing arguments: The Court did not address the merits of this ground, as it was rendered infructuous. Conclusions: The ground was dismissed as infructuous, with no findings on its merits. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "Considering the principle of beneficial interpretation, the procedural requirements should not override substantive benefits." Core principles established: Procedural lapses should not negate substantive tax benefits when the intention to comply is evident, and taxpayers should be given an opportunity to rectify such lapses. Final determinations on each issue: The appeal was partly allowed for statistical purposes, with directions to the Jurisdictional AO to allow the filing of Form No. 10IC and apply the concessional tax rate. The issue regarding the deduction of the share of profit from the firm was dismissed as infructuous.
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