Case Law Details
Sarla Holdings Private Limited Vs PCIT (Supreme Court of India)
The Supreme Court dismissed the Special Leave Petition arising from the Delhi High Court’s decision upholding the rejection of a company’s request to revise its assessment for AY 2020-21 in order to claim the concessional corporate tax rate under Section 115BAA of the Income Tax Act, 1961. With the dismissal, the High Court’s findings remain conclusive.
Read High Court Judgment in this case: Delay in filing Form 10-IC not condoned as option of lower taxation u/s. 115BAA not selected in return
Before the High Court, the petitioner challenged the Principal Commissioner of Income Tax’s order dated 29 November 2023, which rejected the revision application filed against the assessment order passed under Section 143(3) read with 144B. The core dispute centred on the company’s failure to validly opt for the lower 22% tax rate under Section 115BAA—an option that must be exercised in a prescribed manner and within the statutory due date.
Factual Background
The petitioner filed its original return for AY 2020-21 on 13 February 2021, within the extended deadline of 15 February 2021 due to COVID-19 disruptions. In this return, the petitioner did not select the option for taxation under Section 115BAA. Against the specific query asking whether the assessee had opted for Section 115BA, 115BAA, or 115BAB, the petitioner expressly marked “none of above.”
Later, the company argued that its Chartered Accountant and finance officer were affected by COVID-19 when the return was filed and that the failure to opt for the concessional rate was inadvertent, aggravated by confusion over the newly introduced provision. After recovery, the finance officer filed a revised return on 26 March 2021 and eventually submitted Form 10-IC on 26 April 2022, relying on CBDT Circular No. 6/2022, which allowed delayed filing of Form 10-IC for AY 2020-21.
The petitioner argued before the authorities that both the revised return and the belated Form 10-IC should be accepted, particularly given pandemic-related difficulties and CBDT’s relaxation.
Consideration of Section 115BAA and Statutory Requirements
The High Court examined Section 115BAA in detail, especially subsection (5), which clearly mandates two conditions:
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The option for concessional tax must be exercised in the prescribed manner, and
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It must be exercised on or before the due date under Section 139(1).
The Court held that these conditions are explicit and mandatory. If the option is not exercised before the due date, the concession cannot be availed.
The Court found as a matter of record that the petitioner filed its return within the due date but did not opt for the concessional rate. The contention that the return form lacked the appropriate field was rejected as factually incorrect, since the form specifically included a field for selecting Section 115BAA, which the petitioner marked in the negative.
Since the statute requires an affirmative exercise of the option before the due date of filing the return, neither a revised return nor subsequent filings could cure this omission.
CBDT Circular No. 6/2022
The petitioner placed heavy reliance on CBDT Circular No. 6/2022, issued to condone delays in filing Form 10-IC for AY 2020-21, arguing that it allowed the petitioner to file the form belatedly. However, the High Court clarified that the Circular condoned only delay in filing Form 10-IC, not the delay or failure in exercising the option in the return.
Clause (ii) of paragraph 3 of the Circular specifically states that condonation applies only to assessees who had opted for Section 115BAA in the return itself. Since the petitioner had not opted for the concessional rate in the original return, it did not satisfy this essential condition.
The Court emphasised that CBDT did not relax or override the statutory requirement under Section 115BAA(5). Therefore, the Circular could not assist the petitioner.
Conclusion of the High Court
The High Court concluded that:
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The petitioner did not opt for Section 115BAA in its return filed within the due date.
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The statutory requirement under Section 115BAA(5) is mandatory and was not met.
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The CBDT Circular cannot be invoked because the petitioner did not fulfil the condition of having opted for Section 115BAA in the original return.
Thus, the petition challenging the assessment order and the PCIT’s revision order was dismissed.
Supreme Court’s Order
The Supreme Court heard the petitioner but declined to interfere with the High Court’s judgment. The Special Leave Petition was dismissed, thereby affirming the High Court’s decision.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Heard the learned senior counsel appearing for the petitioner.
We are not inclined to interfere with the impugned judgment and order passed by the High Court.
The Special Leave Petition is dismissed and the accompanying interlocutory application(s), if any, stands disposed of.
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