2022 (7) TMI 1219 - AT - Income Tax

Levy of income tax - assessee has opted for the taxation under the concessional scheme of taxation under section 115BAA - manner in which the provisions of Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020, are required to be interpreted and whether dehors the statutory linkage between the time permissible for furnishing of return under section 139(1) and filing the intimation of exercising the option for the concessional regime of taxation under section 115BAA(5) - HELD THAT - When the economic activities worldwide were seriously disrupted on account of the Covid pandemic, if more relaxations were required to be given, in the wisdom of the legislature, in respect of filing documents other than income tax returns, such statutory relaxations could not be declined on the ground that this differentiation is alien to the scheme of the Income Tax Act, 1961. The general scheme of timeframe prescribed under the Income Tax Act 1961 has to make way for the specific relaxation provisions under the Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020. The time permitted for filing of form 10-IC, by virtue of section 3(1)(b) of TOLA, must be treated as 31st March 2021, even as the time permitted for filing of the income tax return under section, in the light of third proviso to Section 3(1) and read with subsequent notification, was only upto 15th February 2021. The plea of the assessee thus is indeed correct. The short question before us relates to the interpretation of provisions with respect to relaxations to mitigate the hardships caused during the Covid pandemic period, by the Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020, and it is our considered view that such relaxation provisions must be interpreted in a liberal and non-pedantic manner, and so as to give full effect to the relaxations permitted by the legislature. Viewed thus also, the proposition canvassed by the assessee is a reasonably possible view of the matter, and it merits acceptance. In view of all these discussions, and bearing in mind the entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to accept the exercise of the option by the assessee for the concessional taxation regime under section 115 BAA. The assessee must therefore get the relief, as admissible, on the application of the scheme of taxation under section 115BAA.

Summary

Issues Involved:
1. Levy of income tax at 30% instead of 22% under the concessional tax regime of section 115BAA.
2. Interpretation of the provisions of the Taxation and Other Laws (Relaxations and Amendments of Certain Provisions) Act 2020 (TOLA) concerning the filing of Form 10-IC.
3. The linkage between the time permissible for furnishing a return under section 139(1) and filing the intimation of exercising the option for the concessional regime of taxation under section 115BAA(5).

Detailed Analysis:

1. Levy of Income Tax at 30% Instead of 22%:
The core grievance of the assessee was that the CIT(A) upheld the levy of income tax at 30%, whereas the assessee had opted for the concessional tax regime under section 115BAA, which prescribes a tax rate of 22%. The assessee argued that they had exercised the option for the concessional tax regime by filing Form 10-IC on 31st March 2021, along with a belated income tax return. However, the CIT(A) rejected this claim on the grounds that the option was not exercised within the time prescribed under section 139(1), which is a prerequisite for availing the concessional tax regime under section 115BAA.

2. Interpretation of TOLA Provisions:
The assessee's counsel contended that under section 3(1)(b) of TOLA, the time limit for filing Form 10-IC for the assessment year 2020-21 was extended to 31st March 2021. This extension superseded the statutory linkage between the time permissible for furnishing the return under section 139(1) and filing the intimation for the concessional regime of taxation under section 115BAA(5). The counsel argued that the exceptions carved out in the third proviso to section 3(1) of TOLA pertained only to the income tax returns filed under section 139, and not to other filings such as Form 10-IC.

3. Linkage Between Section 139(1) and Section 115BAA(5):
The revenue's representative argued that section 115BAA(5) explicitly requires the option to be exercised within the time permitted for filing the income tax return under section 139(1). Since the extended time limit for filing the return under section 139(1) was only up to 15th February 2021, the filing of Form 10-IC on 31st March 2021 was not within the permissible time frame. Therefore, the assessee could not claim the concessional tax rate of 22%.

Tribunal's Findings:
The tribunal found merit in the assessee's argument. It noted that the scheme of section 115BAA requires the option for the concessional tax rate to be exercised within the time permissible for filing the income tax return under section 139(1). However, this scheme was modified by the relaxation provisions under TOLA, which extended the time limit for various statutory filings, including the filing of Form 10-IC, to 31st March 2021. The tribunal emphasized that the relaxation provisions under TOLA must be interpreted liberally to mitigate the hardships caused during the Covid pandemic period. Consequently, the tribunal held that the assessee had properly exercised the option for the concessional tax regime under section 115BAA by filing Form 10-IC on 31st March 2021.

Conclusion:
The tribunal directed the Assessing Officer to accept the assessee's exercise of the option for the concessional taxation regime under section 115BAA and to levy tax at the rate of 22%. The tribunal did not find it necessary to address other legal issues raised by the assessee, as the primary issue was resolved in the assessee's favor.

Result:
The appeal was allowed in favor of the assessee, with the direction to apply the concessional tax rate of 22% as per section 115BAA. The judgment was pronounced on 26th July 2022.