Concessional Tax Rate Under Section 115BAA Not Defeated by Delayed Form 10-IC Filing: ITAT Mumbai Rules in Favour of Assessee

Case Reference

Getinge Medical India Private Limited Vs DCIT (ITAT Mumbai)
Assessment Year: 2020-21
Final Assessment Order Date: 23.07.2024

Overview of the Dispute

The Income Tax Appellate Tribunal, Mumbai Bench, recently delivered a significant ruling addressing a recurring practical challenge faced by domestic companies — whether a short delay in filing Form No. 10-IC under Section 115BAA of the Income Tax Act, 1961 can result in outright denial of the concessional corporate tax rate of 22%, particularly when the assessee had clearly exercised the option in its return of income. The Tribunal's ruling draws a careful and legally sound line between substantive compliance and procedural formality, offering important clarity on the scope of appellate powers in such matters.

Statutory Framework: Understanding Section 115BAA

Section 115BAA, introduced through the Taxation Laws (Amendment) Act, 2019, with effect from Assessment Year 2020-21, provides domestic companies with an optional concessional tax regime. Under this framework, a company may opt to be taxed at a flat rate of 22% (plus applicable surcharge and cess), provided it satisfies the conditions enumerated under sub-section (2).

These conditions require that the total income be computed:

  • Without any deduction under Section 10AA
  • Without additional depreciation under Section 32(1)(iia)
  • Without deductions under Section 35, Section 35AD, Section 35CCC, or Section 35CCD
  • Without most deductions under Chapter VI-A (except Section 80JJAA)
  • Without set-off of losses or unabsorbed depreciation attributable to the above deductions

Sub-section (5) of Section 115BAA is the provision at the centre of this dispute. It reads:

"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."

The "prescribed manner" referred to in sub-section (5) is governed by Rule 21AE of the Income-tax Rules, 1962, which mandates that the option be exercised by electronically filing Form No. 10-IC on or before the due date for filing the return of income under Section 139(1).

The statutory scheme thus involves two distinct elements:

  1. The substantive act — exercising the option to be taxed under Section 115BAA
  2. The procedural mechanism — communicating that option through timely filing of Form No. 10-IC

Background Facts of the Case

The assessee, a domestic company, filed its return of income for Assessment Year 2020-21 on 31.03.2021, explicitly opting for taxation under Section 115BAA and computing its tax liability at the concessional rate accordingly.

Form No. 10-IC was filed on 01.04.2021 — just one day after the return was filed — resulting in a delay of approximately 45 days beyond the extended due date prescribed under Section 139(1) as notified by the CBDT (the CBDT had, via notification dated 31.12.2020, extended the due date to 15.02.2021).

During assessment proceedings under Section 143(3), the Assessing Officer disregarded the assessee's claim and applied the normal corporate tax rate of 30% (plus surcharge of 12% and education cess of 4%). The assessee challenged the draft assessment order before the Dispute Resolution Panel (DRP), which upheld the Assessing Officer's position. The final assessment order was thereafter passed, retaining the normal tax rate. Aggrieved, the assessee preferred an appeal before the ITAT Mumbai.

Grounds of Appeal Before the Tribunal

The assessee raised the following principal grounds, among others:

  1. The Assessing Officer erred in applying a 30% tax rate instead of the concessional rate of 22% under Section 115BAA
  2. The delay in filing Form No. 10-IC was a procedural lapse attributable to the COVID-19 pandemic and not a deliberate omission
  3. The option under Section 115BAA was expressly exercised in the return of income
  4. All information required under Form No. 10-IC was already available in the return and the tax audit report — causing no prejudice to the Revenue
  5. The Assessing Officer made an addition of Rs. 6,10,030/- under Section 41 of the Act without adequate basis
  6. Short grant of TDS credit of Rs. 1,08,275/- against the amount of Rs. 1,25,90,372/- claimed
  7. Erroneous levy of interest under Section 234A, Section 234B, and Section 234C
  8. Initiation of penalty proceedings under Section 270A

Revenue's Contentions

The Departmental Representative raised multiple objections: