Technical Glitch on ITR Portal Cannot Be Grounds to Deny Section 115BAA Concessional Tax Rate: ITAT Chennai

Case Overview

Background and Factual Matrix

In a significant ruling touching upon the intersection of technology, procedural compliance, and substantive tax rights, the Income Tax Appellate Tribunal (ITAT), Chennai, adjudicated upon the appeal filed by Mysim Therapeutics Pvt. Ltd. for Assessment Year 2022-23. The core question before the Tribunal was whether an assessee could be denied the benefit of the concessional corporate tax regime under Section 115BAA of the Income-tax Act, 1961, solely on account of a technical glitch that prevented timely filing of Form 10-IC on the Income-tax portal.

The assessee, a private limited company, had filed its return of income on 19.11.2022, while the due date prescribed under Section 139(1) of the Income-tax Act, 1961 was 07.11.2022. Correspondingly, Form 10-IC — the mandatory electronic form for exercising the option to be taxed under Section 115BAA — was also filed after the prescribed deadline. Acting on this sequence of events, the Centralised Processing Centre (CPC), Bengaluru, denied the assessee's claim for taxation under the concessional regime.

What is Section 115BAA?

Section 115BAA of the Income-tax Act, 1961 provides domestic companies the option to be taxed at a concessional rate of 22% (plus applicable surcharge and cess), subject to fulfilment of certain conditions, including the mandatory filing of Form 10-IC on or before the due date of filing of the return of income under Section 139(1). This option, once exercised, is generally irrevocable and must be exercised in the prescribed manner.

Procedural History

Stage 1: CPC Denial and Rectification Application

After the CPC denied the claim under Section 115BAA, the assessee moved a rectification application under Section 154 of the Income-tax Act, 1961 on 20.04.2024. Through this application, the assessee brought to the attention of the authorities that income tax had been levied at 30% during the processing of the return, whereas the applicable rate for domestic companies with a turnover of less than ₹400 crores — as was the case here — ought to have been 25% (or the concessional 22% under Section 115BAA).

The Deputy Director of Income-tax, CPC, Bengaluru, passed a rectification order under Section 154 on 20.04.2024, but this application was rejected without granting the claimed relief.

Stage 2: First Appellate Authority

Aggrieved by the rejection of the rectification application, the assessee preferred an appeal before the Additional/Joint Commissioner of Income-tax (Appeals)-2, Hyderabad [NFAC/2021-22/10378224]. However, the first appellate authority, vide order dated 23.01.2026, confirmed the action of the Assessing Officer and upheld the denial of the benefit under Section 115BAA.

Stage 3: ITAT Chennai

Dissatisfied with the outcome before the first appellate authority, the assessee approached the ITAT Chennai, which ultimately ruled in favour of the assessee.

The Assessee's Contentions

Before the Tribunal, the learned Counsel for the assessee advanced the following submissions:

1. Genuine Attempt on the Due Date: The assessee had made a bona fide attempt to file Form 10-IC on 07.11.2022 itself — the due date for filing the return under Section 139(1) — with the specific intent of availing the lower tax rate available under Section 115BAA of the Income-tax Act, 1961.

2. Technical Glitch Prevented Filing: Due to a technical glitch — whether attributable to the Income-tax portal or the assessee's own computer system — the Form could not be successfully submitted on 07.11.2022, notwithstanding the genuine effort made.

3. Portal Evidence Corroborates the Attempt: Crucially, the Income-tax portal itself recorded 07.11.2022 as the date on which Form 10-IC was created and saved, which served as contemporaneous documentary evidence of the assessee's attempt to file within the due date.

4. First Year of Business: This was the first year of business operations for the assessee, and it was, understandably, still navigating the interpretation and procedural requirements of Section 115BAA.