LI Network
Published on: October 28, 2023 at 11:40 IST
The Gujarat High Court has ruled in favor of granting the benefit of concessional tax under Section 115BAA of the Income Tax Act, citing technical issues that prevented the uploading of Form No.10-IC on the Income Tax Business Application (ITBA) portal.
The verdict, delivered by the bench comprising Justice Biren Vaishnav and Justice Mauna M. Bhatt, emphasizes that the taxpayer had submitted Form 10-IC on January 29, 2022. However, due to a technical error, the form could not be uploaded on the ITBA portal. Recognizing that this was not the taxpayer’s fault, the court ruled that they should not be denied the benefit, particularly since this was their first year of availing such tax concessions.
Form 10-IC is a mandatory filing for domestic companies choosing to pay taxes at the concessional rate of 22% under Section 115BAA of the Income Tax Act, 1961.
The taxpayer in question operates in the textile business and had filed their income tax return for the fiscal year 2020-21 on January 15, 2021, declaring a NIL income. While filing the return, they had opted to be taxed as per the provisions of Section 115BAA.
The Central Processing Centre in Bengaluru processed their income tax return on December 20, 2021, and their income was taxed according to Section 115JB of the Act.
The issue arose because the taxpayer had not filed Form No. 10-IC by the due date of the return. Consequently, the Assessing Officer (A.O.) taxed the income as per Section 115JB.
The taxpayer was dissatisfied with this decision and filed an appeal before the Commissioner of Income Tax (CIT – Appeal), who upheld the A.O.’s decision. The CIT (Appeal) argued that electronic filing of Form No. 10-IC before the return due date is a mandatory requirement according to Section 115BAA (5) of the Income Tax Act, in conjunction with Rule 21AE of the Income-Tax Rules, 1962.
The taxpayer then appealed to the Income Tax Appellate Tribunal (ITAT), which ruled in their favor, overturning the CIT (Appeal)’s decision.
The department contended that Section 115BAA was introduced by the Taxation Laws (Amendment) Act, 2019, with effect from April 1, 2020. Under this section, the income tax payable by a domestic company for any fiscal year starting on or after April 1, 2020, can be computed at a rate of twenty-two percent, provided certain conditions are met.
The department’s argument was that the failure to furnish Form 10-IC within the prescribed timeline specified in Section 139(1) of the Act results in the denial of the concessional rate. Therefore, the A.O.’s decision was legal, as confirmed by the CIT (Appeal).
However, the Gujarat High Court noted that the taxpayer had indeed opted for Section 115BAA in their income tax return but couldn’t upload Form No.10-IC due to technical issues on the ITBA portal.
Ultimately, the High Court upheld the ITAT’s decision, recognizing that there were no factual or legal errors in their ruling.
Case Title: Principal Commissioner Of Income Tax 1 Versus KGY Glass Industries (P) Ltd