No Fresh Form 10IC Needed for Lower Tax Rate in Subsequent Years

Narayani Laxmi Viniyog Pvt. Ltd. Vs ITO (ITAT Kolkata)
In the case of Narayani Laxmi Viniyog Pvt. Ltd. Vs ITO (ITAT Kolkata), the assessee, a private limited company, contested the tax rate applied to its income for the assessment year (AY) 2023-24. The company had filed its return on time and calculated its tax liability at a lower rate of 22%, as provided under Section 115BAA of the Income Tax Act, 1961. However, the Centralized Processing Centre (CPC) assessed the tax at 40%, citing that the company had not opted for the reduced tax rate by filing the requisite Form 10IC. Upon appeal, the Commissioner of Income Tax (Appeals) upheld the CPC’s decision, stating that the necessary form for AY 2023-24 had not been submitted.
The Income Tax Appellate Tribunal (ITAT) overturned the ruling, pointing out that the company had already exercised its option for the lower tax rate in AY 2020-21 by filing Form 10IC, and this option remains valid for subsequent years unless revoked. ITAT concluded that the assessee was entitled to the 22% tax rate for AY 2023-24, as there was no violation of the conditions under Section 115BAA. Thus, the ITAT directed the assessing officer to calculate the tax liability at the reduced rate of 22%. The appeal was decided in favor of Narayani Laxmi Viniyog Pvt. Ltd., allowing the company to benefit from the lower tax regime under Section 115BAA.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal is directed at the instance of assessee against the order of ld. ADDL/JCIT(A)- 11, Mumbai dated 5th March, 2024 passed for assessment year 2023-24, which is arising out of the order passed by CPC u/s 143(1)(a) of the Act dated 14.12.2023.
2. The grounds of appeal raised by the assessee read as under:-
“(1) That the ld. ADDL/JCIT(A) was not justified in confirming the rate of tax charged @ 40% instead of 22% as the assessee has exercised option u/s 1 15BAA(5) of the Income Tax Act, 1961.
(2) Other grounds if any, shall be argued and urged at the time of hearing”.
3. The assessee has requested for adjournment. However, considering the grounds of appeal and perusal of records, I decide to adjudicate the appeal on merit on the basis of available records and submissions of the ld. D.R.
4. The sold grievance of the assessee is that ld. CIT(Appeals) was not justified in confirming the rate of tax charged @ 40% instead of 22%, even when the assessee has exercised the option under section 11 5BAA(5) of the Act.
5. The facts in brief are that the assessee is a Private Limited Company and it furnished its return of income on 12.10.2023, which was well before the due date for A.Y. 2023-24. In the return, the assessee has calculated tax liability @ 22%. However, CPC calculated tax @ 40% and did not give the benefit of lower rate of tax provided under section 11 5BAA of the Act on the ground that the assessee has not opted for falling under this scheme by filing Form 10IC. When the assessee carried the matter to the ld. CIT(Appeals), it was submitted by the assessee that it has filed the
Form 10IC for the first time on 07,02.202 1 for A.Y. 2020-2 1, but no separate form for A.Y. 2023-24 was submitted. The ld. CIT(Appeals) was of the view that since the assessee failed to opt for the provision under section 11 5BAA of the Act for the year under consideration and the concerned column of the form of return of income in ITR is blank, therefore, the assessee did not deserve to get the benefit of the provision of section 11 5BAA of the Act. Aggrieved, the assessee is in appeal before the Tribunal.
6. Before me, the ld. D.R. vehemently argued supporting the order of ld. CIT(Appeals).
7. I have heard the ld. D.R. and perused the relevant material placed before me. The only issue for consideration by the assessee is that whether the assessee is eligible for the benefit of low tax rate of 22% as provided under section 11 5BAA of the Act. Admittedly for the year under consideration, the assessee has not opted for the scheme of section 11 5BAA in its income tax return. Before proceeding further, I would like to go through the section 1 15BAA of the Act, which reads as under:-
“11 5BAA. Tax on income of certain domestic companies.
(1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, other than those mentioned under section 1 15BA and section 1 15BAB, the income-tax payable in respect of the total income of a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall, at the option of such person, be computed at the rate of twenty-two per cent., if the conditions contained in sub-section (2) are satisfied:
Provided that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.
(2) For the purposes of sub-section (1), the total income of the company shall be computed, –
(i) without any deduction under the provisions of section 1 0AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A other than the provisions of section 80JJAA;
(ii) 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 clause (i);
(iii) 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 clause (i); and
(iv) by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.
(3) The loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year:
Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2019 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2020.
(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.
Explanation. – For the purposes of this sub-section, the term “Unit” shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005.
(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 11 5BAB 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”.
8. From perusal of the above provision, which is in regard to tax rate applicable to certain category of domestic companies, I notice that undisputedly the assessee falls in the category of domestic companies for the benefit of section 11 5BAA of the Act as provided under the Act. The assessee has validly filed option on Form 10IC for A.Y. 2020-21 and has been given the benefit of section 11 5BAA of the Act and has been taxed @ 22% only. The only question before me is whether the assessee is required to opt for falling under section 11 5BAA of the Act in each year of its filing the income tax return or not. Sub-section (5) of section 11 5BAA provides that nothing contained in section 11 5BAA of the Act shall apply if the option is exercised by the person in the prescribed manner on or before the due date specified under section 139(1) for furnishing the return of income for any previous year relevant to the assessment year commencing on or after 1st April, 2020 and it is also provided that such option once exercised shall apply to subsequent years. 2nd proviso to section 11 5BAA(5) provides that once the option has been exercised for any previous year, then it cannot be subsequently withdrawn for the same or any other previous year. Now in the instant case, the fact is not disputed at the end of revenue authorities that the assessee opted for section 1 15BAA for the first time for A.Y. 2020-2 1 and Form 10IC filed on 07.02.2021 and further the assessee was allowed the option exercised for lower tax rate for A.Y. 2020-21. Now once the assessee has validly opted for 11 5BAA of the Act for A.Y. 2020-21 and revenue authorities having not found any error in such valid claim and has allowed the option exercised for lower tax rate for A.Y. 2020-21, then in my humble understanding, the assessee was not required to exercise the option for the subsequent assessment year under the provision of section 1 15BAA(5) of the Act, unless the first option is rendered invalid due to violation of any condition contained in sub-clause (ii) or sub-clause (iii) of clause (a) or clause (b) of section 11 5BAB(2) of the Act. Since there is no violation at the end of assessee for A.Y. 2020-21 and the valid option has been exercised under section 11 5BAA for A.Y. 2020-21, the assessee is eligible for lower rate of tax for the subsequent assessment years also subject to the other conditions provided under the Act. I, therefore, set aside the finding of ld. CIT(Appeals) and allow the sole ground of appeal raised by the assessee and direct the ld. ITA No. 973/KOL/2024 (A.Y. 2023-2024) Narayani Laxmi Viniyog Pvt. Ltd. Assessing Officer to calculate the tax liability of the assessee at the rate of 22% provided under section 115BAA of the Act.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 22nd /07/2024.