Surat Smart City Development Limited Vs PCIT (Gujarat High Court)
The petition before the Gujarat High Court challenged an order dated 6 October 2023 passed by the Principal Commissioner of Income Tax under Section 119(2)(b) of the Income Tax Act, 1961. The authority had rejected the petitioner company’s request to condone delay in filing Form 10-IC for opting into the concessional corporate tax regime under Section 115BAA.
The petitioner, a public limited company, filed its return of income for Assessment Year (AY) 2020–21 on 31 December 2020, declaring income of ₹11.38 crore. While filing the return in ITR-6, it selected the option for taxation under Section 115BAA and computed tax at the reduced rate of 22%. However, due to technical issues on the income tax portal, it did not file Form 10-IC, which is prescribed under Rule 21AE for exercising the option formally. The return was initially processed under Section 143(1), and a refund was issued.
Subsequently, the Central Processing Centre (CPC) passed a rectification order under Section 154, denying the concessional rate because Form 10-IC had not been filed and raised a tax demand exceeding ₹1.21 crore. The petitioner lodged grievances on the portal, but they were closed without resolution. Amid this confusion, and under mistaken advice, the petitioner filed Form 10-IC along with the return for AY 2021–22, although the law required the option to be exercised only once, for the first relevant year.
Later, the Central Board of Direct Taxes (CBDT) issued Circular No. 6 of 2022 under Section 119(2)(b), condoning delay in filing Form 10-IC for AY 2020–21 if certain conditions were met, including filing the form electronically by a specified extended date. The petitioner met all conditions except timely filing under the circular, as it had already filed Form 10-IC for the subsequent year. It therefore applied to the Principal Commissioner to treat the form filed for AY 2021–22 as applicable to AY 2020–21. This request was rejected on the ground that Form 10-IC had never been filed in the prescribed manner for AY 2020–21 and that no “genuine hardship” was established.
Before the High Court, the petitioner argued that it had clearly exercised the option for the concessional regime in its return and tax computation, and the failure to file Form 10-IC was due to technical and procedural confusion during the first year of the provision’s implementation. It relied on earlier High Court decisions emphasizing a liberal interpretation of “genuine hardship” under Section 119(2)(b).
The Revenue argued that filing Form 10-IC within the due date under Section 139(1) was mandatory and relied on the Supreme Court’s ruling in Wipro Limited, where delayed exercise of a statutory option was not permitted.
The High Court examined Section 115BAA(5), which requires the option to be exercised in the prescribed manner by filing Form 10-IC before the due date of return. It noted that the petitioner had undeniably opted for the concessional regime in its original return and computed tax accordingly. The Court observed that the CPC’s rectification and subsequent confusion led the petitioner to file the form for the wrong year.
The Court distinguished the Supreme Court’s ruling in Wipro Limited, noting that the context there involved withdrawal of a claim linked to mandatory audit certification, whereas Section 115BAA provides a beneficial concessional regime. It also referred to earlier precedents holding that the power under Section 119(2)(b) should be exercised to alleviate genuine hardship in a liberal and equitable manner.
The Court found that the CBDT itself had recognized widespread difficulty in filing Form 10-IC for the first year and had issued a circular to condone delay. In this background, the authority ought to have adopted a pragmatic approach. The Court held that instead of rejecting the application on technical grounds, the authority should have allowed the petitioner to regularize the position by filing Form 10-IC for AY 2020–21 and seeking condonation.
Accordingly, the petition was allowed. The Court permitted the petitioner to obtain and file Form 10-IC for AY 2020–21 and directed that, upon such filing, a fresh application for condonation of delay be considered by the authority in light of the Court’s observations within twelve weeks. No order as to costs was made.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
