Kworks Technologies Private Limited Vs DCIT (ITAT Delhi)
The concessional corporate tax regime under Section 115BAA of the Income-tax Act, 1961, introduced by the Finance Act, 2019, provides eligible domestic companies the option to be taxed at a reduced rate of 22% (plus applicable surcharge and cess). This option, however, comes with specific conditions—most importantly, the company must exercise its option by filing Form 10-IC electronically under Rule 21AE of the Income-tax Rules, 1962, on or before the due date of return filing under Section 139(1). Once exercised, the option is irrevocable and exempts the company from Minimum Alternate Tax (MAT) provisions under Section 115JB, but also requires it to forgo specified deductions and incentives.
Procedure :
(i) The company opts for this regime by filing Form 10-IC electronically as per Rule 21AE of the Income-tax Rules, 1962.
(ii) The option must be exercised on or before the due date of filing return u/s 139(1).
(iii) Once exercised, the option is irrevocable for subsequent years.
(iv)On opting, the company must forgo specified deductions and incentives, and MAT provisions under Section 115JB do not
apply.
In practice, however, many companies face genuine hardships in filing Form 10-IC within the stipulated timeline, despite their bona fide intention to opt for the concessional regime. This raises an important jurisprudential question: Should a procedural lapse defeat a substantive right conferred by law?
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) recently addressed this issue in the case of Kworks Technologies Pvt. Ltd. vs. DCIT, Circle 1(1), Gurgaon (ITA No. 5773/Del/2024, order dated 29.08.2025).
Facts of the Case
Kworks Technologies Pvt. Ltd., engaged in software development and IT consulting, opted for the new tax regime by filing Form 10-IC on 19.12.2022 and subsequently filed its return of income on 23.12.2022 for AY 2022-23. The extended due date under Section 139(1) was 07.11.2022.
On processing the return under Section 143(1), the CPC denied the benefit of the concessional rate, applying instead the standard corporate tax rate of 30% along with MAT provisions under Section 115JB. The denial was based on the ground that Form 10-IC was filed after the statutory due date.
The CIT(A) upheld the CPC’s action, rejecting the assessee’s plea. On second appeal, the matter reached the ITAT.
Assessee’s Arguments
The assessee contended that the delay was due to exceptional circumstances—specifically, a GST search on its parent entity, which delayed the finalization of accounts. Importantly, it was argued that:
The intention to opt for Section 115BAA was evident from the tax audit report as well as the return of income, where tax was computed and paid at 22%.
Filing of Form 10-IC is procedural in nature; non-compliance should not nullify a substantive right.
Various precedents, including Bajaj Tempo Ltd. v. CIT (SC), Bansal Corelam Pvt. Ltd. v. ITO (ITAT Delhi), Aprameya Engineering Ltd. v. ITO (ITAT Ahmedabad), and Cell Com Teleservices (P.) Ltd. v. Union of India (Allahabad HC), were cited to support the view that procedural lapses should not defeat beneficial provisions.
Revenue’s Position
The Revenue argued for strict compliance, emphasizing that filing Form 10-IC within the due date is a mandatory statutory requirement, and failure to do so justifies denial of concessional taxation.
Tribunal’s Findings
The ITAT noted that the assessee had clearly demonstrated its bona fide intention to opt for Section 115BAA:
Tax was calculated and paid at the concessional rate of 22%.
The option was explicitly reflected in Form 3CA/3CD.
Delay was explained as arising from exceptional circumstances beyond the assessee’s control.
The Tribunal relied on the Doctrine of Substantial Compliance, as explained by the Supreme Court in Dilip Kumar & Co. (2018), which recognizes that if essential conditions are met, procedural lapses should not invalidate compliance.
Further, the ITAT highlighted that adjustments under Section 143(1)(a) are limited in scope, and CPC was not justified in making a substantive adjustment by denying concessional tax treatment.
Accordingly, the Tribunal directed the Assessing Officer to recompute tax at the concessional rate of 22% and ignore MAT applicability.
Broader Judicial Consensus
