2024 (6) TMI 538 - AT - Income Tax

Rejection of the assessee's claim for taxation at a lower rate u/s 115BAA due to non-filing of Form 10IC within the prescribed time - Assessee submitted that the delay in filing Form 10-IC should be condoned in accordance with the provisions of section 119(2)(b) - CIT(A) dismissed the appeal stating that the beneficial provisions should be strictly and literally complied with and, therefore, a strict interpretation should be adopted. HELD THAT - In the present case, the intention to opt for the lower tax rate was unambiguously declared in the tax audit report (Form 3CD) which was filed on 30-9-2022 i.e. before due date specified under section 139(1) of the Act, indicating the assessee's bona fide belief and commitment to the concessional tax regime. Therefore, there is a marked distinction between the facts of the Wipro Ltd. case (supra) and the instant facts. As in the case of Zenith Processing Mills 1995 (9) TMI 37 - GUJARAT HIGH COURT held that provision of section 80J(6A) of the Act to extent it requires furnishing of auditor s report in prescribed form along with return, is directory in nature and not mandatory. As held that the assessee can be permitted to produce such a report at later stage when question of disallowance arises during course of assessment proceedings. In the instant case, the Ld.A.O. as well as the Ld.CIT(A) has denied benefit of concessional tax rate u/s 115BAA of the Act on account of an inadvertent error on the part of the assessee in not e-filing Form 10IC before due date prescribed. We are, therefore, of the view that there is sufficient compliance if the Form 10IC has been filed during the course of assessment proceeding, since there is no material objective to be achieved by the assessee in not e-filing the same, once the intent was very well declared in Form 3CD. 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. SC ruling in the case of CIT v. G.M. Knitting Industries (P.) Ltd. 2015 (11) TMI 397 - SC ORDER emphasized that the making of a claim of deduction is mandatory, but timing is directory. Even if the claim is made during the assessment proceedings, such a claim is to be allowed. Delay in filing Form 10-IC, though a procedural requirement, should not invalidate the assessee's substantive right to the benefit of section 115BAA of the Act. CBDT's Circulars extending the due dates for filing such forms in earlier years indicate a recognition of such procedural difficulties. These Circulars indicate a degree of administrative flexibility and a recognition that procedural lapses should not necessarily lead to the denial of substantive benefits. Moreover, denying the benefit based solely on this lapse would be against the principles of equity and justice, especially when there is no dispute regarding the assessee's eligibility for the lower tax rate.

Summary

Issues Involved:
1. Rejection of the assessee's claim for taxation at a lower rate u/s 115BAA due to non-filing of Form 10IC within the prescribed time.
2. Denial of the benefit of a lower tax rate at 25% for a domestic company with a turnover less than 400 crores.
3. Legality of the order passed by the CIT(A).

Summary:

Issue 1: Rejection of the Assessee's Claim for Lower Tax Rate u/s 115BAA
The primary issue was the rejection of the assessee's claim for a lower tax rate u/s 115BAA due to the late filing of Form 10IC. The assessee argued that the filing of the form is mandatory but directory in nature and requested condonation of the delay u/s 119(2)(b). The CIT(A) dismissed the appeal, stating that beneficial provisions should be "strictly" and "literally" complied with, relying on the Supreme Court judgment in Principal Commissioner of Income Tax-III, Bangalore vs. M/s. Wipro Limited. The Tribunal noted that the intention to opt for the lower tax rate was declared in the tax audit report filed before the due date, distinguishing the facts from the Wipro case. The Tribunal also referenced other judicial precedents, emphasizing that procedural lapses should not override substantive benefits. The Tribunal concluded that the delay in filing Form 10IC should not invalidate the assessee's right to the benefit of section 115BAA.

Issue 2: Denial of Lower Tax Rate at 25%
Ground Number 2, which was an alternative ground regarding the denial of the benefit of a lower tax rate at 25% for a domestic company with a turnover less than 400 crores, was not adjudicated as Ground Number 1 was allowed.

Issue 3: Legality of the Order Passed by the CIT(A)
Ground Numbers 3 and 4, which were general in nature and pertained to the legality of the order passed by the CIT(A), were also not adjudicated.

Conclusion:
The Tribunal set aside the order of the CIT(A) and partly allowed the appeal of the assessee, allowing the benefit of the lower tax rate u/s 115BAA despite the procedural lapse in filing Form 10IC. The decision emphasized the principle of beneficial interpretation and the importance of substantive rights over procedural requirements.