Condonation of delay or waiver for filling of Form 10-IC under new tax regime

The Central Government vide Notification dated 11.12.2019 inserted Section 115BAA after Section 115BA with effect from financial year 01.04.2019. As per the provisions of said section, the domestic companies can exercise the option to pay tax at the concessional rate, i.e. 22 percent + surcharge 10 percent +cess 4 percent subject to the fulfilment of the conditions stipulated in the said Section. By virtue of aforesaid section, the tax rate has been reduced to 25.168 percent from the earlier 27.82 percent.

To simplify tax laws, Taxation Laws Amendment Act 2019, introduced Sec 115 BAA in Income Tax Act 1961, according to which companies were given option to pay tax at lower rates while not claiming certain deductions. As per sec 115 BAA (5), the option once exercised shall apply to subsequent assessment years.

Also Read: CBDT condones delay in filing of Form-10 IC 

Further as per Rule 21 A, the company is required to submit Form 10-IC before filing of income tax return, expressing its intention to opt to pay tax under Simplified Tax Regime for all times to come. Most of the fields in the Form are details of company to create a database for companies opting the Simplified Tax Regime.

The Taxation Laws (Amendment) Act, 2019 has inserted section 115BAA into the Act which provides for tax on income of certain domestic companies with effect from assessment year 2020-21. The said section starts with non-obstante clause i.e., “Notwithstanding anything contained in this Act….”, thus, it overrides all the provisions of the Act. In other words, if there is any provision in the Act which is contrary the provisions of section 115BAA of the Act, then, in that case, the provisions of section 115BAA of the Act would prevail over such provisions and or all the other provisions of the Act. The said section provides that any domestic company may exercise the option to pay the tax under this section at the rate of 22 percent on and from the previous year 2019-20 relevant to the assessment year 2020-21 subject to the conditions specified under sub-sections (2) and (5) of this section. The conditions provided in sub-section (2) are that the domestic company shall compute its income:

1. without any deduction under section 10AA of the Act or under the various allowance  sections  of  Chapter  IV-D of  the Act or under any provisions of Chapter VI-A of the Act other than the provisions of section 80JAA or section 80M;

2. without set off of any loss carried forward or depreciation from any earlier assessment year, if, such loss or depreciation is attributable to any of the deductions referred to in the preceding paragraph;

3. without set off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if, such loss or depreciation is attributable to any of the deductions referred to in paragraph (1) above; and

4. by claiming depreciation under any provisions of section 32, except clause (ii)(a) of sub-section (1) of the section 32, determined in such manner as may be prescribed.

The aforesaid conditions are self-explanatory and are not required to be further elaborated. Any domestic company which complies with the conditions referred to above is entitled compute its income and pay tax thereon at the advantageous tax rate of 22 percent.

In addition to above, there is one more compliance provided under sub-section (5) of section 115BAA of the Act, which reads as under:

“(5) Nothing contained in this section shall apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under sub-section (1) of section 139 for furnishing the returns of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2020 and such option once exercised shall apply to subsequent assessment years:

Provided that in case of a person, where the option exercised by it under section 115BAB has been rendered invalid due to

violation of conditions contained in sub-clause (ii) or sub-clause (iii) of clause (a), or clause (b) of sub-section (2) of said section, such person may exercise option under this section: Provided further that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.”

The aforesaid sub-section (5) of the said section provides that the option specified under sub-section (1) of section 115BAA shall be exercised by domestic company by filling electronically form 10- IC on or before due date specified under sub-section (1) of section 139 for furnishing the return of income.

There is also a row in ITR 6 asking company whether the assessee has opted for taxation u/s 115BAA.

It has been noticed that many companies have either not submitted Form 10-IC or submitted after filing of their ITR. In both cases, there is a non-compliance of provisions of law, which may force company to pay tax as per normal rates, causing lot of hardships.

The following submission in support of the concern has been submitted

• Opting of Section 115BAA(5) in row in ITR6 by company is a complete expression of interest by company that it is opting to pay tax under Simplified Tax Regime. Section 115 BAA(5) binds the company that option once exercised is irrevocable. Submission of form 10-IC could have been avoided.
• In ITR 6, there was no column asking date of submission of Form 10-IC, which could reduce the possibility of such mistakes.  It is to mention that there is a row in ITR 3, ITR4 for AY 2021-22 for assesses opting Simplified Tax Regime for individuals, HUF u/s 115 BAC. If particulars of filing a form are not required to be filed in ITR, it implies that submission of that form is not found relevant by form issuer (i.e. revenue).
• Form 10-IC could have been required to be submitted at the time of filing of return for companies opting for Simplified Tax Regime, by a pop up or additional pages in ITR or should not be allowed to proceed unless details of submission of form are furnished.
• At the outset, the first proviso to section 143(1)(a) of the Act which provides that no adjustment shall be made to the returned income unless intimation is given either in writing or through electronic mode to an assessee whose return is subject to adjustment. In the present case, the Applicant was not provided with any intimation whereby the impugned adjustments were proposed. As a result, the impugned action of computation of income and tax under the old tax regime vide intimation u/s. 143(1) of the Act be treated as contrary to the first proviso to section 143(1) of the Act.
• As  per concept of ease of doing business , submission of number of forms should be minimised and forms should be comprehensive instead of multiple forms.
• Non submission of 10-IC is a technical glitch on part of income tax e-filling portal and procedural mistake on part of company, without any loss to revenue. Your goodself will appreciate that tax demands generated by CPC while processing returns will not  be sustainable in courts, This was the first year of Simplified Tax Regime u/s 115BAA , many professionals may not be aware of filing of 10-IC before filing of ITR 6.
• It was an era of COVID pandemic, most of staff of companies and their tax consultants were working from home, causing mistakes due to communication gaps among team members.
• Above all non-filing of Form is a lapse on part of tax consultants of companies, for which assesses should not suffer.
• Income Tax Portal is not accepting submission of 10-IC for A.Y 20-21, so companies cannot submit it as late filing. As per our understanding many companies would have made such mistake, so our request may be considered sympathetically.
• Honourable Supreme Court vide their order in suo- moto writ petition (c) no. 3/2020 dated 23-03-2020 had ordered that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special laws whether condonable or not shall extended w.e.f 15 March 2020 till further order/s. In order dated 10.01.2022, it is directed that   the   period   from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.

• Honourable High Court of Gujrat at Ahmedabad vide their order in R/Special Civil Application No. 1085 of 2022 had ordered by reserving the liberty for the assessee to file an appropriate application addressed to the Chief Commissioner Income Tax under Section 119 (2) (b) of the Act referred to above with a request to permit him to file the Form 10 IC electronically. If any such application is filed then the Chief Commissioner shall look into it expeditiously and may exercise his discretion in accordance with law more particularly keeping in mind the object behind Section 119(2)(b) of the Act. The Chief Commissioner/ Commissioner shall also consider the hardships that the writ-applicant may have to face in the event if he is not permitted to file the Form 10 IC electronically.

The above submissions had not been made with intention to justify lapse on part of companies rather to emphasize, why it occurred, how it could be avoided, and its impact. Hence, the applicants must be given with an opportunity of being heard on merits or the authorities may allow to do a waiver with the requirement of submission of form 10-IC for assessment year 2020-21 or may allow condonation of delay of Form 10IC. Subsequently, give instructions to CPC not to create demand if opted  to pay tax u/s 115 BAA but form 10-IC not submitted.