Late Filing of Form 10-IC During Appeal Proceedings Does Not Invalidate Section 115BAA Claim: ITAT Ahmedabad

Overview

A significant ruling has emerged from the Income Tax Appellate Tribunal, Ahmedabad Bench, addressing a common procedural predicament faced by domestic companies seeking the benefit of the concessional tax regime under Section 115BAA of the Income Tax Act, 1961. The Tribunal, in Mahalaxmi Asphalt Private Limited Vs ITO (ITAT Ahmedabad), held that a mere delay in filing Form 10-IC cannot, by itself, serve as a ground to permanently deny an otherwise eligible assessee the benefit of the reduced tax rate under Section 115BAA.

Background and Factual Matrix

Mahalaxmi Asphalt Private Limited, a domestic company, filed its return of income for Assessment Year 2020-21 on 29.12.2020, declaring a total income of Rs. 25,89,450/-. While filing the return, the assessee specifically opted for the special concessional tax regime available under Section 115BAA of the Income Tax Act, 1961. Importantly, the assessee did not merely mention this in passing — the election of the Section 115BAA regime was reflected both in the return of income itself and in the Tax Audit Report submitted in Form 3CD.

The Problem at CPC Level

Despite this clear indication, when the Central Processing Centre (CPC), Bengaluru processed the return, it computed the tax liability at the regular applicable rate rather than the concessional rate prescribed under Section 115BAA. The basis for this deviation was the assessee's non-filing of Form 10-IC as required under Rule 21AE of the Income Tax Rules, 1962. Consequently, the CPC raised a tax demand of Rs. 1,97,000/-, and an intimation under Section 143(1) of the Income Tax Act, 1961 was issued on 14.12.2022.

Key Issue: Whether the failure to electronically file Form 10-IC along with the return of income under Section 139(1) would be fatal to the assessee's claim for the concessional tax rate under Section 115BAA.

Proceedings Before the First Appellate Authority

The assessee challenged the intimation before the Commissioner of Income Tax (Appeals) [CIT(A)]. Before the CIT(A), the assessee submitted that:

• There was no dispute regarding its status as a domestic company.
• It was substantively eligible for the Section 115BAA regime.
• The only infirmity cited by the Revenue was the non-filing of Form 10-IC electronically before the due date under Section 139(1).
• The form could not be uploaded on the ITBA Portal due to a technical error in the system.
• Assessment Year 2020-21 was the first year the assessee was seeking to avail the Section 115BAA benefit.
• The assessee subsequently filed Form 10-IC on 29.01.2022 during the course of the appellate proceedings before the CIT(A).

Despite these submissions, the CIT(A) rejected the assessee's appeal, prompting a further challenge before the Tribunal.

Arguments Advanced Before ITAT

Assessee's Contentions

The Authorised Representative (AR) on behalf of Mahalaxmi Asphalt Private Limited advanced the following principal arguments:

1. No Substantive Ineligibility: There was no dispute on the assessee's eligibility to be taxed under Section 115BAA. The deficiency was purely procedural — the non-filing of Form 10-IC through the electronic portal.

2. Technical Glitch on Portal: The Form 10-IC could not be uploaded on the ITBA Portal due to a system-side technical error, which was outside the assessee's control.