Neelkanth Realtors Limited Vs ITO (ITAT Mumbai)
Form 10-IC Once Validly Filed Continues for Subsequent Years: Mumbai ITAT Allows 22% Tax Rate Under Section 115BAA
The assessee-company had validly exercised the option under Section 115BAA by filing Form 10-IC on 28 May 2021. While processing its return for AY 2024-25, however, the CPC denied the concessional tax rate of 22% and computed tax at the normal rate of 30% on total income of ₹25.44 crore.
The CIT(A) upheld the denial because supporting documentary evidence regarding Form 10-IC was not produced before it.
The Mumbai ITAT observed that Section 115BAA(5) expressly provides that an option once validly exercised applies to subsequent assessment years. Therefore, the assessee was not required to file a fresh Form 10-IC every year. The same option had also been accepted by the CPC for AY 2022-23.
The Tribunal held that processing the return at 30% could not extinguish an option already validly exercised and continuing under the statute. A substantive benefit cannot be denied merely due to a procedural lapse when compliance with the statutory conditions is established.
The AO was accordingly directed to apply the concessional tax rate of 22% under Section 115BAA and recompute the tax liability.
List of Cases Discussed / Relied Upon
- Electronfab Engineering Pvt. Ltd. v. CPC/ITO, ITA No. 4828/Mum/2025, order dated 16/03/2026
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Present appeal filed by assessee arises out of the order passed by Learned Commissioner of Income-tax, Appeal/Addl./JCIT(A) – Agra [hereinafter referred to as “Ld.CIT(A)”] dated 24/03/2026, for A.Y. 2024-25, on the following ground/s of appeal:-
“1. Hon’ble CIT(A) has erred in law as well as on facts in confirming denial of concessional rate of tax @22% under section 115BAA of the Income-tax Act, 1961 and assessing the appellant at normal rate despite the appellant having validly exercised option under section 115BAA by filing Form No. 10-IC and being otherwise eligible for taxation under the said section. Appellant craves leave to add, amend or withdraw any ground of appeal.”
2. Brief facts of the case are as under:-
The assessee is a domestic company. For the year under consideration, the assessee filed its return of income on 31/12/2024, declaring its income and computing its tax liability by applying the concessional rate of tax of 22% u/s 115BAA of the Act. The assessee had exercised the option u/s 115BAA of the Act by filing Form No. 10-IC on 28/05/2021, bearing acknowledgement No. 360940441280521. The assessee had exercised the said option in the prescribed manner and the same was continuing in terms of section 115BAA(5) of the Act, which provides that an option once exercised shall apply to subsequent assessment years. While processing the return of income u/s 143(1) of the Act, the CPC did not allow the benefit of the concessional rate of tax u/s 115BAA and computed the tax liability by applying the normal rate of 30%. The total income was determined at Rs. 25,44,75,560/-.
Aggrieved by the aforesaid intimation, the assessee preferred an appeal before the Ld.CIT(A) challenging the denial of the concessional rate of tax u/s 115BAA.
2.1. The Ld. CIT(A), vide impugned order confirmed the denial of the concessional rate of tax. The basis for such confirmation was that documentary evidence in support of the option exercised u/s 115BAA was not placed on record. The Ld. CIT(A) did not adjudicate the underlying merits of the assessee’s claim, namely, whether the option u/s 115BAA had been validly exercised and continued to subsist, and dismissed the appeal on account of non- filing of relevant documents.
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.
4. The Ld. AR submitted that the assessee had validly exercised the option u/s 115BAA of the Act by filing Form No. 10-IC on 28/05/2021 during AY 2020-21. It was submitted that once the option had been validly exercised, the same continued to apply to subsequent assessment years by virtue of section 115BAA(5) of the Act and, therefore, no fresh exercise of option was required for AY 2024-25.
4.1. It was further submitted that the assessee had duly disclosed in its return of income for AY 2024-25 that the option u/s 115BAA stood exercised and had also furnished the relevant particulars of Form No. 10-IC. The said Form No. 10-IC dated 28/05/2021 continued to remain on record and had neither been withdrawn nor held to be invalid by any competent authority.
4.2. The Ld. AR further submitted that, while processing the return for AY 2022-23, the CPC itself had accepted the assessee’s option u/s 115BAA and had granted the benefit of the concessional rate of tax of 22%. According to the Ld. AR, the acceptance of the very same option by the Department in the immediately preceding assessment year, on identical facts, further established that the option continued to subsist.
4.3. It was, therefore, contended that there was no justification for denying the benefit of section 115BAA for the year under consideration, particularly when there was no material to demonstrate that the option exercised by the assessee had ceased to operate or had been invalidated.
4.4. The Ld. AR also relied upon the decision of the coordinate Bench in Electronfab Engineering Pvt. Ltd. v. CPC/ITO, ITA No. 4828/Mum/2025, order dated 16/03/2026, for the proposition that a procedural lapse cannot defeat a substantive claim where the statutory conditions have otherwise been complied with.
4.5. The Ld. DR supported the impugned order and opposed the relief sought by the assessee.
We have perused the submissions advanced by both sides in light of the record placed before us.
5. The short controversy before us is whether the assessee was entitled to be assessed at the concessional rate of 22% u/s 115BAA for AY 2024-25.
5.1. On perusal of the material placed on record, we find that the assessee had exercised the option u/s 115BAA by filing Form No. 10-IC on 28/05/2021. The assessee has placed on record the acknowledgement particulars of the said Form No. 10-IC. The option so exercised was not a fresh option claimed for the year under consideration but was an option which, according to the assessee, continued to operate in terms of section 115BAA(5) of the Act.
5.2. Section 115BAA(5) specifically provides that an option once exercised in the prescribed manner shall apply to subsequent assessment years. Thus, where the option has been validly exercised and continues to remain in force, the statutory provision itself contemplates its application to subsequent assessment years. The assessee placed on record material showing that the very same option was accepted while processing its return for AY 2022-23 and the benefit of the concessional rate u/s 115BAA was granted.
5.3. We further find that the assessee had disclosed the exercise of the option u/s 115BAA in its return of income for AY 2024-25 and had furnished the relevant particulars of Form No. 10-IC. Therefore, the fact that the CPC, while processing the return u/s 143(1), computed tax at the normal rate of 30% instead of the concessional rate of 22% cannot, by itself, result in extinguishing an option which had already been validly exercised and which, in terms of section 115BAA(5), continued to apply to subsequent assessment years.
5.4. We also note that the Ld.CIT(A), confirmed the denial essentially on the ground that documentary evidence supporting the option was not placed before the first appellate authority. However, the material now placed before us demonstrates that Form No. 10-IC dated 28/05/2021 had in fact been filed by the assessee and that the option exercised thereunder had been accepted by the Department in the earlier assessment year.
5.5. In these circumstances, the substantive entitlement of the assessee cannot be denied merely on account of the manner in which the claim came to be considered at the first appellate stage, particularly when the statutory requirement of exercise of option u/s 115BAA stands demonstrated from the record. We also find merit in the reliance placed by the Ld. AR on the decision of the coordinate Bench in Electronfab Engineering Pvt. Ltd. v. CPC/ITO (supra), wherein the Tribunal considered the principle that a procedural lapse cannot defeat a substantive claim where the statutory conditions have otherwise been complied with.
5.6. Considering the totality of the facts and circumstances and the statutory scheme of section 115BAA, we hold that the assessee was entitled to the benefit of the concessional rate of tax of 22% u/s 115BAA for AY 2024-25. The denial of the said benefit is, therefore, not sustainable. Accordingly, the Ld.AO is directed to allow the benefit of the concessional rate of tax of 22% u/s 115BAA and recompute the tax liability of the assessee in accordance with law.
Accordingly, the sole ground raised by the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21/08/2026.
