Form 10-IC Once Opted Remains Effective for Future Years: Analysis of Mumbai ITAT Ruling in Neelkanth Realtors Limited Vs ITO

The decision in Neelkanth Realtors Limited Vs ITO (ITAT Mumbai) clarifies a recurring controversy under Section 115BAA—whether a domestic company is required to file Form 10-IC every year to enjoy the concessional corporate tax rate of 22%, or whether a validly exercised option continues automatically in subsequent assessment years.

The Mumbai ITAT has categorically held that once a domestic company has properly exercised the option under Section 115BAA by filing Form 10-IC in the prescribed manner, that option continues to govern all subsequent assessment years. Denial of the 22% rate in a later year, merely because of a procedural or documentation lapse at the processing or appellate stage, is not permissible when the statutory pre-conditions stand fulfilled.

This ruling is particularly significant for domestic companies that have already switched to the 22% regime but face mechanical disallowance by CPC or lower authorities in later years.

Background of the Dispute

Assessee’s Status and Return Filing

  • The assessee, Neelkanth Realtors Limited, is a domestic company.
  • For A.Y. 2024-25, it filed its return of income on 31/12/2024.
  • In the return, the assessee computed its tax liability by adopting the concessional tax rate of 22% as per Section 115BAA of the Income Tax Act 1961.
  • The company had already opted into the Section 115BAA regime by filing Form 10-IC on 28/05/2021, during an earlier assessment year, bearing **acknowledgement No. 360940441280521`.

The assessee’s stand was that, in line with Section 115BAA(5), this option—once validly exercised—continued to apply for subsequent years and there was no need to file Form 10-IC again for A.Y. 2024-25.

CPC Processing and Denial of Concessional Rate

The return of income for A.Y. 2024-25 was processed under Section 143(1) by the Centralized Processing Centre (CPC). During such processing:

  • CPC did not grant the concessional 22% rate under Section 115BAA.
  • Instead, it calculated the tax at the normal corporate tax rate of 30%.
  • The total income was assessed at Rs. 25,44,75,560/-, and the tax was computed accordingly at 30%.

This mechanical denial triggered the dispute, as the assessee had consistently claimed that its earlier valid option under Section 115BAA remained operative.

Appeal Before CIT(A)

The assessee filed an appeal before the Ld. CIT(A) challenging the denial of the 22% rate. However:

  • The Ld. CIT(A) confirmed the CPC’s action.
  • The primary reason cited was non-production of documentary evidence relating to the filing of Form 10-IC at the appellate stage.
  • The appellate authority did not go into the substantive question of whether the option under Section 115BAA had been validly exercised in the earlier year and whether such option continued under Section 115BAA(5).
  • The appeal was effectively dismissed on the technical ground of lack of documents rather than on the merits of eligibility.

Aggrieved, the assessee carried the matter in further appeal before the ITAT Mumbai.

Core Issue Before the ITAT

The Tribunal was required to decide a narrow but crucial legal question:

Whether the assessee-company, having once exercised the option under Section 115BAA by filing Form 10-IC on 28/05/2021, was entitled to be taxed at 22% for **A.Y.