Case Law Details
Aprameya Engineering Limited Vs ITO (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad delivered a ruling in the case of Aprameya Engineering Limited vs. Income Tax Officer, addressing the rejection of a lower tax rate under Section 115BAA due to the delayed filing of Form 10-IC. The dispute arose when the Central Processing Centre (CPC) processed the company’s return for Assessment Year 2022-23 and charged tax at the normal rate of 30% instead of the concessional 22%, citing late submission of Form 10-IC. The assessee appealed, arguing that the form’s filing was procedural rather than substantive and that the delay should be condoned.
The CIT(A) dismissed the appeal, ruling that compliance with Section 115BAA(5) is mandatory and that the first appellate authority lacks jurisdiction to condone such delays under Section 119(2)(b). The CIT(A) relied on the Supreme Court’s ruling in Principal CIT vs. Wipro Ltd. (2022), which upheld a strict interpretation of procedural requirements in tax law. However, the assessee contended that the Wipro case was distinguishable as it dealt with Section 10B, an exemption provision, whereas Section 115BAA is a concessional tax regime.
The ITAT examined judicial precedents, including Anjana Foundation (2024), Brinda Rama Krishna (2021), and Niteshkumar Shah (2023), which allowed tax benefits despite procedural lapses. The tribunal also referred to G.M. Knitting Industries (2015), where the Supreme Court held that while filing the required form is mandatory, the timing is directory. The Gujarat High Court ruling in Zenith Processing Mills further reinforced this stance by stating that procedural non-compliance should not lead to the denial of substantive tax benefits.
Considering these precedents and the CBDT’s past extensions for filing such forms, the ITAT ruled that the delay in filing Form 10-IC should not negate the assessee’s right to the lower tax rate under Section 115BAA. The tribunal set aside the CIT(A)’s order, directing the revenue authorities to allow the concessional tax rate, emphasizing that procedural compliance should not override substantive tax benefits.
This appeal by the assessee is directed against the order of the Add/Jt. Commissioner of Income Tax (Appeals) – 5 Mumbai (hereinafter referred as “the CIT(A)”), dated 23-02-2024, which dismissed the assessee’s appeal against the intimation under section 143(1) of the Income Tax Act, 1961 (hereinafter referred as “the Act”), passed by the Central Processing Centre (CPC) for the Assessment Year (AY) 2022-23. The primary issue is the rejection of the assessee’s claim for taxation at a lower rate under section 115BAA of the Act due to the non-filing of Form 10IC within the prescribed time.
Facts of the Case:
2. The assessee-company filed its return of income on 01.12.2022 declaring total income of Rs.10,15,26,720/-. The said return of income was processed u/s 143(1) of the Act, wherein the income returned was accepted u/s 143(1) of the Act. However, the CPC rejected the claim of option exercised by the assessee u/s.115BAA of the Act which resulted into tax being charged on the income at normal rate i.e.30% instead of at the rate of 22% as per provisions of section 115BAA of the Act as both the return and the Form 10-IC were filed belated.
3. Aggrieved by the intimation under section 143(1) of the Act, the assessee filed an appeal before Ld. CIT(A). Before Ld.CIT(A), the assessee submitted that the filing of form is mandatory but directory in nature. The assessee also submitted that the delay in filing Form 10-IC should be condoned in accordance with the provisions of section 119(2)(b) of the Act. Ld. CIT(A), however, dismissed the appeal stating that the beneficial provisions should be “strictly” and “literally” complied with and, therefore, a strict interpretation should be adopted. While doing so, he relied on the judgement of Hon’ble Apex court in the case of Principal Commissioner of Income Tax-III, Bangalore and another Vs. M/s.Wipro Limited (Judgment dated 11.07.2022 in the Civil Appeal No. 1449 OF 2022). While dismissing the plea of assessee to condone the delay in filing of form 10-IC, the Ld.CIT(A) stated that as per section 119(2)(b) of the Act, the first appellate authority does not have the power to condone the delay in filing such forms.
4. Aggrieved by the order of Ld.CIT(A), the assessee is in appeal before us with following grounds of appeal:
1. The Ld. CIT(A) has erred in confirming the order u/s.143(1) of the Income Tax Act, 1961 (“the Act”) passed by the Ld. AO by denying the benefit of the lower tax regime to tax at 22% opted by the appellant u/s. 115BAA (5) of the Act. Hence, the incorrect levy of tax rate at 30% on the income needs to be reduced to the lower tax rate as opted by the Appellant. The same be held now.
2. Without prejudice to the above, the Ld.CIT(A) has erred in not allowing to tax income at a rate of 25% even though the appellant satisfies the conditions of being a domestic company having a turnover less than 400 crores. Hence, the same needs to be held now.
3. The order passed by the Ld. CIT(A) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now.
4. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing.
On ground number 1:
5. During the course of haring, the AR submitted the following key points:
a. The provisions of Section 143(1) of the Act are clear in their requirement that prior to passing an intimation order, the Assessing Officer must provide the taxpayer with a reasonable opportunity to present their case and address any concerns or discrepancies. It is incumbent upon the tax authorities to afford taxpayers a fair hearing and a chance to clarify or contest any issues related to their tax assessment. In this specific case, it was not provided with any such opportunity to be heard.
b. The Ld.AR further submitted that the assessee had opted for the concessional tax rate under section 115BAA of the Act in its return of income. In tax audit report in Form 3CA as annexed by Form 3CD u/s 44AB of the Act for the relevant assessment year, in clause 8(a) of part A of form 3CD, auditor also confirmed that the assessee opted for taxation u/s 115BAA of the The tax audit report was filed on 30-09-2022 i.e. before the due date of filing the same.
c. Considering the genuine hardship to the domestic companies in exercising the option u/s 115AA, the CBDT, in exercise of powers conferred u/s 119(2)(b) of the Act had issued circulars extending the due date for filing such forms for earlier assessment years.
d. The non-filing of Form 10IC within the stipulated time is a procedural matter, and the substantive right of the assessee to avail the lower tax rate should not be denied on such technical grounds. While stating so he placed reliance on following judicial pronouncements:
i. Anjana Foundation Vadodara Vs CPC Bangalore (ITA No.695/Ahd/2023 dated 7.2.2024) which deals with filing of form No. 10B.
ii. Brinda Rama Krishna Vs. Income Tax Officer, Ward 5(3)(1), Bangalore (ITA. No. 454/Bang/2021 dated 17-11-2021) which deals with filing of form No.67
iii. Niteshkumar Shah Vs DCIT, Circle-2(1)(1), Ahmedabad (ITA No. 430/Ahd/2022 dated 12-7-2023) which deals with filing of form No.10CCB.
5. On the other hand, the DR relied on the order of Ld.CIT(A).
6. We have considered the rival submissions and perused the material available on Section 115BBA of the Act was introduced for the Purpose of granting benefit of reduced corporate tax rate for the domestic companies. In order to avail the benefit, such companies are required to exercise the option in prescribed manner on or before due date specified under section 139(1) for furnishing the return of income. As per the rule 21AE of the Income Tax Rules, 1962, such option can be exercised by filing Form 10-IC. Sub-section (5) of Section 115BAA of the Act, makes it mandatory to file this form on or before the due date of furnishing the return of income as specified u/s 139(1) of the Act. In present case, the assessee has filed this form belated i.e. on 1-12-2022.
7. The Ld.CIT(A) in his order has relied on the judgement of Hon’ble Apex Court in the case of Principal Commissioner of Income Tax-III, Bangalore and another M/s Wipro Limited (Judgment dated 11.07.2022 in the Civil Appeal No. 1449 OF 2022). The case of Wipro Ltd. (supra) was rendered on a different set of facts, wherein in the original return of income the assessee had claimed benefit under section 10B of the Act and thereafter, a revised return of income was filed by the assessee foregoing the claim of benefit of section 10B of the Act. As an afterthought the assessee filed a declaration as required under section 10B(5) of the Act belatedly after the due date mentioned in section 10B(5) of the Act and claimed carry forward of losses under section 72 of the IT Act, withdrawing its claim for deduction under section 10B of the IT Act. In the present case, the intention to opt for the lower tax rate was unambiguously declared in the tax audit report (Form 3CD) which was filed on 30-9-2022 i.e. before due date specified under section 139(1) of the Act, indicating the assessee’s bona fide belief and commitment to the concessional tax regime. Therefore, there is a marked distinction between the facts of the Wipro Ltd. case (supra) and the instant facts. Further, we observe that Ahmedabad ITAT in the case of Croygas Equipments (P.) Ltd. (supra) had also held that the Principal of Wipro Limited (supra) cannot be uniformly applied to all cases and the aforesaid decision was distinguished by the Ahmedabad Tribunal, with the following observations:
“6.3 Another notable issue for consideration is that recently the Hon`ble Supreme Court was confronted with the claim of benefit u/s 10B in Pr. CIT Wipro Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1. The assessee furnished the original return taking the benefit of section 10B and did not carry forward the loss. Thereafter, a revised return was filed foregoing the claim of deduction u/s 10B. The AO rejected the withdrawal of exemption under section 10B by holding that assessee did not furnish the necessary declaration in writing before due date of filing return of income, which was an essential requirement for not claiming the benefit of section 10B. The Hon`ble High Court decided the issue in favour of the assessee by holding that the requirement of filing the declaration was mandatory but filing it along with the return of income u/s 139(1) was a directory requirement. The matter was brought by the Revenue before the Hon`ble Supreme Court. The assessee, inter alia, relied on the judgment of the Apex Court in G.M. Knitting Industries (P.) Ltd. (supra). Their Lordships held that the requirement of filing the report in support of deduction u/s 10B was not a directory but a mandatory requirement. It further held that both the conditions of – filing the declaration and filing it before the time limit u/s 139(1) -were mandatory and had to be cumulatively satisfied. Rejecting the reliance on G.M. Knitting Industries (P.) Ltd. (supra), the Hon`ble Supreme Court held that that decision was relevant in the context of deduction provisions and not the exemption provisions as given under Chapter III of the Act.
6.3.1. In our view, the aforesaid decision would not apply to assessee`s set of facts and would not preclude/prohibit the assessee from claiming deduction u/s. 10AA of the Act, for the following reasons:
(i) Firstly, in the case of Wipro Limited supra, the issue for consideration before the Hon`ble Supreme Court was that in the original return of income, the assessee had claimed deduction under section 10B of the Act, whereas in the revised return filed under section 139(5) of the Act, assessee did not claim deduction under section 10B of the Act, and instead claimed benefit of carry forward of losses. It was in light of these facts that the Hon`ble Supreme Court held that on a plain reading of section 10B(8) of the Act, it is clear that where assessee claimed benefit under section 10B(8) by furnishing declaration in revised return much after due date prescribed under section 139(1), same was to be denied as requirement of furnishing declaration before AO before due date of filing original return under section 139(1) was a mandatory condition not directory. However, notably, there is no such equivalent/similar provision in section 10AA of the Act, which gives an option to the assessee to file a declaration before the due date of return of income under section 139(1) of the Act, to the effect that the provisions of this section may not be made applicable to him, for the impugned assessment year. Therefore, going by the strict language of section, the relevant statutory provisions on which the decision of Wipro was based, were on a different footing. Further, the issue for consideration in the Wipro case is also distinguishable, since in the assessee`s case, it had claimed benefit of deduction u/s. 10AA in the original return of income (and only Form 56F was omitted to be e-filed alongwith return of income), whereas the issue for consideration in Wipro case supra was that once the assessee had claimed benefit of section 10B in the original return of income, whether such benefit could be foregone/withdrawn by filing declaration u/s 10B(8) of the Act in the revised return of income filed u/s 139 (5) of the Act (and the assessee could, in turn, avail the benefit of carry forward losses in the revised return of income).
(ii) Secondly, the Hon`ble Supreme Court in the case of Wipro Limited held that section 10B of the Act is an “exemption provision” and hence, assessee claiming such exemption has to be “strictly” comply with the exemption provisions. However, notably, the Hon`ble Supreme Court in the case of CIT Yokogawa India Ltd 391 ITR 274 (Supreme Court), held that section 10A of the Act is a “deduction provision” and not an “exemption provision”. Therefore, apparently there seems to be a difference of opinion to whether section 10A/B provisions qualify as “Exemption” or Deduction” provisions. Therefore, since it is well-settled principle of law that deduction provisions, which have been introduced in the Statute to provide incentive to the assessee, should be construed “liberally”, in our considered view, once it is not disputed that the instant set of facts, the assessee claimed the benefit of provisions under section 10AA in the return of income (which in our view is a mandatory/directory requirement), the benefit of section 10AA cannot be denied only on the ground that the assessee could not file Form 56F along with the return of income (being a procedural requirement), especially when Form 56F has been filed by the assessee at the assessment stage when such claim was being considered by the Assessing Officer.
(iii) Besides the above, in the case of G. M. Knitting Industries (P.) Ltd. case supra, the Hon`ble Supreme Court further held that even though necessary certificate in Form 10CCB along with return of income had not been filed but same was filed before final order of assessment was made, assessee was entitled to claim deduction under section 80-IB of the Act as well. Therefore, in light of the decision of Yokogawa supra (which is held that section 10A of the Act is a “deduction provision” not an “exemption provision”) and the decision of G. M. Knitting Industries case supra, which have been rendered on a similar facts as that of the assessee i.e. claim of deduction was made in the original return of income itself, in our view, the ratio laid down in the Wipro Ltd case would not disentitle assessee to claim benefit of section 10AA of the Act, since it has been rendered on a different set of facts. Therefore in our considered view, once such claim has been made in the original return of income and assessee has also furnished Form 56F during the course of assessment proceedings itself, before the assessment was finalized. The assessee should not be denied the benefit of s. 10AA of the Act. It is a well settled principle of law that if there is any ambiguity regarding interpretation of a Statutory provision, an interpretation favourable to the assessee may be taken, especially when we are dealing with Statutory provisions aimed at giving some incentive to the ”
8.1 The Hon’ble Gujarat High Court in the case of Zenith Processing Mills v CIT reported in 219 ITR 721 (Guj.) held that provision of section 80J(6A) of the Act to extent it requires furnishing of auditor`s report in prescribed form along with return, is directory in nature and not Further, it was held that the assessee can be permitted to produce such a report at later stage when question of disallowance arises during course of assessment proceedings. In the instant case, the Ld.A.O. as well as the Ld.CIT(A) has denied benefit of concessional tax rate u/s 115BAA of the Act on account of an inadvertent error on the part of the assessee in not e-filing Form 10 IC before due date prescribed. We are, therefore, of the view that there is sufficient compliance if the Form 10 IC has been filed during the course of assessment proceeding, since there is no material objective to be achieved by the assessee in not e-filing the same, once the intent was very well declared in Form 3CD.
8.2. Considering the principle of beneficial interpretation, the procedural requirements should not override substantive The Courts have taken a lenient view on procedural lapses when substantive benefits are involved. SC ruling in the case of CIT v. G.M. Knitting Industries (P.) Ltd. reported in (2015) 376 ITR 456 emphasized that the making of a claim of deduction is mandatory, but timing is directory. Even if the claim is made during the assessment proceedings, such a claim is to be allowed.
8.3. After considering the submissions, the judicial precedents cited and the specific facts of the case, we are of the opinion the delay in filing Form 10-IC, though a procedural requirement, should not invalidate the assessee’s substantive right to the benefit of section 115BAA of the
8.4. The CBDT’s Circulars extending the due dates for filing such forms in earlier years indicate a recognition of such procedural difficulties. These Circulars indicate a degree of administrative flexibility and a recognition that procedural lapses should not necessarily lead to the denial of substantive Moreover, denying the benefit based solely on this lapse would be against the principles of equity and justice, especially when there is no dispute regarding the assessee’s eligibility for the lower tax rate.
8.5. In light of the above, the Ground Number 1 is allowed. Ground Number 2 is an alternative ground and, therefore, not adjudicated. Ground Numbers 3 and 4 are general in nature, which are also not adjudicated.
9. In the result, the order of the CIT(A) is set aside, and the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 11th June, 2024 at Ahmedabad.
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