2025 (1) TMI 1402 - AT - Income Tax

Denial of a reduced tax rate option u/s 115BAA - late submission of Form 10IC by the assessee - HELD THAT - The company has selected the OPTION u/s 115BAA in return of income while calculating the tax as well as specified in clause 8(a) of Form 3CA which is clearly the beneficial one for the company. From tax calculated in the return and from clause 8(a)of Form 3CA the intention and act of the assessee was very clear to opt new tax regime as per section 115BAA. There is no material objective to be achieved by the assessee in not e-filing papers before the due date of return of the same once the intent was very well declared in Form 3CA. We also find that there has been substantial compliance of the requirement under Section 115BAA of the Act as evident from the fact that while filing the returns it was declared/stated by the assessee that the option to discharge the tax was exercised under Section 115BAA of the Act and taxes were in fact paid @ 22% without claiming deductions as contemplated u/s 115BAA of the Act. Authorities below failed to appreciate that if the failure to consider the claim of option to discharge tax under Section 115BAA on the ground of failure on the fact of the petitioner to file Form 10-IC within the period stipulated u/s 115BAA would cause genuine hardship to the assessee. Rejection of the petition u/s 119(2)(b) to permit the petitioner to file Form 10-IC in support of its exercise of option under Section 115BAA of the Act would cause genuine hardship and it is desirable and expedient to permit the petitioner to file Form 10-IC in support of its claim / option under Section 115BAA of the Act and deal with such claim on merits in accordance with law. The CBDT s Circulars extending the due dates for filing such forms in earlier years indicate a recognition of such procedural difficulties. Thus ground of appeal raised by the assessee is restored back to the file of AO with a direction to take on record the Form 10IC and consider the same in consonance with the CBDT Circular and the return of income filed by the assessee and after verifying the same he will adjudicate the issue whether the assessee is entitled for tax rate as per Section 115BAA of the Act in Assessment Year 2020-21 or not. Appeal is allowed for statistical purposes.

Summary

The appeal before the Appellate Tribunal ITAT Mumbai concerns the denial of a reduced tax rate option under Section 115BAA of the Income Tax Act, 1961, due to the late submission of Form 10IC by the assessee. The key issues considered by the Tribunal include the applicability of Section 115BAA, the procedural requirement of filing Form 10IC, and the charging of interest under Sections 234A, 234B, and 234C.

The primary legal question revolves around whether the late submission of Form 10IC should result in the denial of the benefits under Section 115BAA, which offers a reduced tax rate for domestic companies. The Tribunal examined the relevant legal framework, including Section 115BAA and Rule 21AE(1) of the Income Tax Rules, which stipulate that Form 10IC must be filed by the due date for filing the company's return to avail of the reduced tax rate. The Tribunal also considered precedents from various High Courts and coordinate benches of the ITAT that have addressed similar procedural lapses.

The Court's interpretation emphasized the doctrine of substantial compliance, as articulated by the Supreme Court in the case of Dilip Kumar. The Tribunal noted that while the procedural requirement of filing Form 10IC was not met, the substantive intention to opt for the reduced tax rate under Section 115BAA was evident from the tax return and Form 3CA filed by the assessee. The Tribunal acknowledged that the assessee had paid taxes at the 22% rate applicable under Section 115BAA and had clearly indicated its intention to opt for the new tax regime in its filings.

The Tribunal considered the arguments presented by the assessee, which included technical difficulties with the Income Tax Portal and the absence of an option for condonation of delay in filing Form 10IC. The assessee also cited several judicial precedents supporting the view that procedural lapses should not override substantive rights, particularly when there is no loss to the revenue. The Tribunal found these arguments persuasive, especially in light of the CBDT Circular No. 19/2023, which condoned delays in filing Form 10IC for the relevant assessment year under certain conditions.

In its significant holdings, the Tribunal concluded that the procedural lapse of late filing of Form 10IC should not result in the denial of the benefits under Section 115BAA. The Tribunal directed the Assessing Officer to take into account the Form 10IC filed by the assessee and to consider the assessee's eligibility for the reduced tax rate in accordance with the CBDT Circular and the principles of natural justice. The Tribunal emphasized that procedural requirements should not impede the enjoyment of substantive benefits, particularly when the intention and compliance with the substantive provisions are clear.

The Tribunal's decision aligns with the principles of equity and justice, recognizing that procedural lapses should not lead to the denial of substantive rights, especially when there is no dispute regarding the eligibility for the benefits claimed. The appeal was allowed for statistical purposes, with directions to the Assessing Officer to reassess the tax liability in light of the Tribunal's findings and the applicable legal framework.