Pune ITAT: Domestic Company Entitled to 25% Tax Rate Despite No ITR Column for FY 2015-16 Turnover

Background and Core Issue

In the case of Trans Engineers India Private Limited Vs DCIT, the Pune Bench of the Income Tax Appellate Tribunal (ITAT) examined whether a domestic company can be denied the concessional 25% tax rate prescribed under the Finance Act, 2018 for A.Y. 2018-19 merely because the income tax return (ITR) form did not contain a dedicated field to report turnover for F.Y. 2015-16.

The assessee, a domestic company, declared income for A.Y. 2018-19 and computed its tax liability at the concessional rate of 25%, relying on the First Schedule to the Finance Act, 2018, which extended the lower corporate tax rate to companies whose turnover or gross receipts for F.Y. 2015-16 did not exceed Rs.50 crore.

However, while processing the return under Section 143(1) of the Income Tax Act 1961, the Centralized Processing Centre (CPC) applied the standard corporate tax rate of 30%, on the basis that the return did not contain any specific disclosure of turnover for F.Y. 2015-16.

The dispute ultimately reached the ITAT, which had to decide whether the absence of an ITR column can nullify a substantive statutory benefit expressly granted by the Finance Act.

Procedural History

  1. The assessee, a Private Limited Company, filed its return of income for A.Y. 2018-19 on 31.10.2018, declaring total income of approximately Rs.22.50 crore.
  2. The CPC processed the return and determined income at around Rs.22.62 crore, but crucially, levied tax at 30% instead of 25%.
  3. The assessee challenged this before the Commissioner of Income Tax (Appeals) [CIT(A)], contending that as its turnover for F.Y. 2015-16 was below Rs.50 crore, it was legally entitled to the concessional 25% rate under the First Schedule to the Finance Act, 2018.
  4. The assessee produced details of turnover for F.Y. 2015-16 during appellate proceedings and maintained that it met the statutory threshold.
  5. The CIT(A) nevertheless upheld the CPC’s computation, reasoning that since the ITR for A.Y. 2018-19 did not contain any specific field or disclosure about turnover for A.Y. 2016-17 (F.Y. 2015-16), and no such information appeared in the return, the CPC could not be faulted for applying the 30% rate.
  6. Aggrieved, the assessee carried the matter to the ITAT, Pune.

Statutory Framework: Finance Act 2018 and Concessional Corporate Tax Rate

Relevant Provision in First Schedule to Finance Act 2018

The case hinged on paragraph (e) of the First Schedule to the Finance Act 2018, which prescribes the applicable rates of income tax for companies for A.Y. 2018-19. In particular, this paragraph provides that:

  • For a domestic company, the rate of tax shall be 25% where the total turnover or gross receipts of the company in F.Y. 2015-16 does not exceed Rs.50 crore.
  • In other cases, the normal rate of 30% applies.

This provision is a substantive statutory concession. It is not conditional upon specific disclosure in any particular format of the ITR, but on the factual turnover/gross receipts for F.Y. 2015-16.

Interaction with Return Forms

The Tribunal noted a practical mismatch:

  • The applicable ITR form for A.Y. 2018-19 did not contain any specific field for reporting turnover/gross receipts for A.Y. 2016-17 (F.Y. 2015-16).
  • At the same time, the Finance Act 2018 required the turnover figure for F.Y. 2015-16 to determine whether the concessional 25% tax rate was available.