S.115BAA and Form 10- IC – relaxation to file Form 10-IC recent circular must apply to all years and not only AY 2021-22 in fact it can be said that the filing of Form 10 IC is superficial because ITR form itself provide for exercise of option and that option creates a substantive right.

[DEV KUMAR KOTHARI]

S.115BAA and Form 10- IC – relaxation to file Form 10-IC  recent circular must apply to all years and not only AY 2021-22 in fact it can be said that the filing of Form 10 IC is superficial because ITR form itself provide for exercise of option and that option creates a substantive right.

Earlier article by the author:

Analysis of S.115BAA- tax @ 22% optional for companies OPTION IS SUBJECT TO SO MANY CONDITIONS AND CONTIGENCIES lot of care and considerations are required.

December 12, 2020

Brief note:

On reading of relevant section, rules, form and Circulars of CBDT it is noted that Option to exercise availing special rate of tax is primarily mentioned and exercised in the ITR form itself. This is very clearly understood in Circulars also wherein one of condition mentioned is in the following words:

 Circular No. 6/2022

The assessee company has opted for taxation u/s 115BAA of the Act in (e) of “Filing Status” in “Part A-GEN” of the Form of Return of Income ITR-6 and

Circular No. 19/2023

ii) The assessee company has opted for taxation u/s 115BAA of the Act in item ( e) of "Filing Status" in "Part A-GEN" of the Form of Return of Income ITR-6;  

Therefore, exercise of Option in the ITR-6 form create a substantive right of assessee. A view is possible that unless this option is exercised in ITR-6 form itself. Mere filing of Form 10 IC will not be enough to avail concessional rate of tax. In fact if , this option is not found in ITR-6, concessional rate will not be applied by the software system.

Section 115BAA  and relevant Rules and Form and procedures came into force from assessment year 2020-21.

The first year was AY 2020-21 and second year was 2021-22. Thereafter filing dates for two more years have lapsed.

Admittedly in In the first year there were lot of problems in filing and saving of Form 10 IC. The problems were due to technical snags in the portal of department and due to provisions being new.

However, in second year on wards there were not many problems, as per information and knowledge of author and some of his professional friends and also web search of articles, discussion forums, questions and answers links in some websites. In fact problems were in the first year and many companies could not file Form 10 IC because  time was extended for first year for short period up to 30.06.22 to file the form when the ROI was filed timely and in the ITR option to opt the section was marked.

For second year CBDT has allowed time to file Form 10 IC till 31.01.2024. This is available if ITR was filed within time allowed u.s. 139.1 and option was exercised  in the ITR form at relevant place.

This means that continuing problems have been recognized by  the CBDT. 

However, even for first year , in spite of a short extension allowed did not cover problems period and many assessee  could not file the Form No. 10-IC within extended period or Form was filed but could not be saved on the portal and therefore, intimations are issued charging normal rate of tax without benefit of concessional / special rates and filing of appeal and other proceedings have taken place and  are in progress in many cases.

For the second year there was no extension to file Form No. 10-IC. However, in  second circular the language used is    “ Representations have been received by CBDT stating that Form No. 10-IC could not be filed for A.Y. 2021-22 within the due date or extended due date..”

There was extension to file Form No. 10-IC only for first year  i.e. AY 2020-21 and not for AY 2021-22. This also indicate that filing of form 10 IC for AY 2020-21 is also considered in the second circular.

As per language used in section and two Circulars read with each other, intention of relaxation seems for all years.

Therefore , extension  up to 31.01.24 should be considered for years from AY 2020_21 to AY 2023-24. A Clarification from CBDT is desired.

It can also  be said that the circular dt. 23.10.23 is wrongly worded. Because so far filing of Form 10 IC is concerned, it is required to be filed in year from which option is exercised. Thereafter, option is available without further filing of Form 10 IC for subsequent year.

Section is reproduced with highlights of important and relevant aspects in the context:

Income-tax Act, 1961

¹[Tax on income of certain domestic companies.

115BAA. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 115BA and section 115BAB, 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 the rate of twenty-two per cent., if the conditions contained in sub-section (2) are satisfied:

Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.  

(2) For the purposes of sub-section (1), the total income of the company shall be computed,-

(i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of ²[Chapter VI-A other than the provisions of section 80JJAA or section 80M];

(ii) without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i);

(iii) without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and

(iv) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.

(3) The loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year:

Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2019 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020.

(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.

Explanation.-For the purposes of this sub-section, the term "Unit" shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).

(5) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years:

Provided that in case of a person, where the option exercised by it under section 115BAB has been rendered invalid due to violation of conditions contained in sub-clause (ii) or sub-clause (iii) of clause (a), or clause (b) of sub-section (2) of said section, such person may exercise option under this section:

Provided further that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.]***********

NOTES:-

1. Inserted vide Taxation Laws (Amendment) Act, 2019 w.e.f. 01-04-2020

2. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2021 before it was read as

"Chapter VI-A under the heading "C.-Deductions in respect of certain incomes" other than the provisions of section 80JJAA"

Circulars are reproduced with highlight of relevant part:

Circular No. 6/2022  New Delhi, Dated 17^th March 2022

Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form 10- IC for Assessment Year 2020-21- Reg.Section 115BAA of the Income-tax Act, 1961 (the Act) 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 the rate of twenty-two per cent subject to satisfaction of conditions contained in sub-section(2) of the Section.

1.2 As per sub-section (5) of section 115 BAA of the Act read with Rule 21AE of the Income-tax Rules, 1962 (the Rules), the assessee company is required to submit Form 10- IC electronically on or before the due date of filing of return of income u/s 139(1) of the Act and such option once exercised shall apply to subsequent assessment years.

1.3 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 of twenty-two per cent to such person.

2. Representations have been received by the Board stating that Form 10-IC could not be filed along with the return of income for AY 2020-21. which was the first year of filing of this form. It has been requested that the delay in filing of Form 10-IC may be condoned.

3. On consideration of the matter, with a view to avoid genuine hardship to the domestic companies in exercising the option u/s 115BAA of the Act, the Central Board of Direct Taxes, in exercise of the powers conferred under section 119(2)(b) of the Act, hereby directs that:

The delay in filing of Form 10-IC as per Rule 21AE of the Rules for the previous year relevant to A.Y 2020-21 is condoned in cases where the following conditions are satisfied:

i) The return of income for AY 2020-21 has been filed on or before the due date specified under section 139(1) of the Act;

ii) The assessee company has opted for taxation u/s 115BAA of the Act in (e) of “Filing Status” in “Part A-GEN” of the Form of Return of Income ITR-6 and

iii) Form 10-IC is filed electronically on or before 30.06.2022 or 3 months from the end of the month in which this Circular is issued, whichever is later.

Circular No. 19/2023  dt.   23rd October, 2023

Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form No. 10-IC for Assessment Year 2021-22 - Reg. In exercise of the powers conferred under section 119(2)(b) of the Income-tax Act, 1961 ('the Act'), the Central Board of Direct Taxes ('CBDT') by Circular No. 6/2022 of even number dated 17.03.2022 condoned the delay in filing of Form No. 10-IC as per Rule 21AE of the Income-tax Rules, 1962 ('the Rules') for the previous year relevant to A.Y. 2020-21 in cases where the conditions stipulated in the said Circular are satisfied.

2. Representations have been received by CBDT stating that Form No. 10-IC could not be filed for A.Y. 2021-22 within the due date or extended due date, as the case may be. It has been requested that the delay in filing of Form No. 10-IC for A.Y. 2021-22 may be condoned.

3. On consideration of the matter, with a view to avoid genuine hardship to the domestic companies in exercising the option u/s 115BAA of the Act, CBDT in exercise of the powers conferred under section 119(2)(b) of the Act, hereby directs that: -

The delay in filing of Form No. 10-IC as per Rule 21AE of the Rules for previous year relevant to A.Y. 2021-22 is condoned in cases where the following conditions are satisfied:

i) The return of income for relevant assessment year has been filed on or before the due date specified under section 139(1) of the Act;

ii) The assessee company has opted for taxation u/s 115BAA of the Act in item ( e) of "Filing Status" in "Part A-GEN" of the Form of Return of Income ITR-6; and

iii) Form No. 10-IC is filed electronically on or before 31.01.2024 or 3 months from the end of the month in which this Circular is issued, whichever is later.

Conclusion:

Filing of Form 10 IC is a procedure, claim is required to be made in ITR-6  itself. The ITR-6 can be considered as self-contained so far this claim is concerned. If considered  necessary, some more information can be asked in ITR-6 form itself.

Filing of Form 10 IC can be dispensed with for ease of doing business and to avoid litigation.

First year:

Requirement is to file Form 10 IC in first year in which claim is made. This can be AY 2020-21 for existing companies who opted concession in the ITR-6 filed within due date u.s. 139.1.

First year can be any subsequent year for any company who did not opted in AY 2020-21 and want to opt from any other year. This can be  due to change in circumstances for taxation aspects applicable to particular company or newly incorporate companies.