2024 (11) TMI 1492 - AT - Income Tax

Taxpayer allowed to opt into Section 115BAA despite late Form 10IC filed after section 139(1) due date

Bansal Corelam Pvt. Ltd Versus ITO, Ward-32 (3), New Delhi

ITAT DELHI - AT allowed the taxpayer's claim to opt into the new tax regime under section 115BAA despite Form 10IC being filed after the due date under ... Denial of claim made to opt new tax regime under section 115BAA - Form 10 IC was not filed on or before the due date of filing the return of income under section 139(1) of the Act and computed the income of the assessee under normal provisions of the Act - HELD THAT:- In the instant case, Form 10 IC was filed by the assessee beyond the due date prescribed u/s 139(1) of the Act, but was filed before the date of filing the return under section 139(4). The intention of the assessee to disclose the income under the new tax regime under section 115BAA of the Act was disclosed in the tax audit report of the assessee. In our considered opinion, the filing of Form 10 IC though mandated in the Act need to be construed as directory in nature. This view of ours is further fortified by case of Aprameya Engineering Ltd [2024 (6) TMI 538 - ITAT AHMEDABAD] We direct the AO to recompute the income under the new tax regime in terms of section 115BAA.Grounds raised by the assessee are allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the statutory requirement to file Form 10-IC on or before the due date under section 139(1) for opting into the concessional corporate tax regime under section 115BAA is mandatory (condition precedent) or directory (procedural) where Form 10-IC is filed belatedly but before completion of assessment and the taxpayer has manifested intention to opt for the new regime in contemporaneous audit records. 2. Whether a procedural lapse in e-filing Form 10-IC by the due date can alone justify denial of substantive benefit under section 115BAA when eligibility for the concessional rate is otherwise undisputed and the form is filed during assessment proceedings. 3. The extent to which higher-court rulings regarding mandatory timing for declarations in exemption/deduction statutes apply to the option under section 115BAA, and how such precedents should be distinguished or applied. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legal framework governing exercise of option under section 115BAA and timing of Form 10-IC Legal framework: Section 115BAA grants a concessional corporate tax rate to eligible domestic companies subject to an option to be exercised in the prescribed manner. Rule 21AE and sub-section provisions prescribe filing of Form 10-IC 'on or before the due date' under section 139(1) as the prescribed mode/timing for exercising the option. Precedent treatment: Administrative and judicial authorities have considered whether timing requirements for similar statutory declarations/forms are mandatory or directory. Certain higher-court authority held timing mandatory in the context of an exemption provision where conditions were to be strictly complied with; other authorities concerning deduction/incentive provisions have treated timing as directory where the substantive claim was made in the original return and supporting material was produced during assessment. Interpretation and reasoning: The Tribunal construed the filing requirement for Form 10-IC as procedural/directory rather than a condition precedent that would extinguish the substantive right to opt under section 115BAA. The reasoning emphasizes (a) the taxpayer's clear and contemporaneous manifestation of intent to opt for the new regime in the tax audit report (Form 3CD) filed before the section 139(1) due date, (b) no dispute as to eligibility for the concessional rate, and (c) filing of Form 10-IC during assessment before completion of the assessment order. The Tribunal applied the principle that procedural requirements should not defeat substantive benefits created by statute, especially where the provision confers an incentive and there is no prejudice to revenue. Ratio vs. Obiter: Ratio - where (i) the taxpayer has declared intention to opt for the concessional regime in contemporaneous audit records before the due date, and (ii) Form 10-IC is filed during assessment proceedings (albeit after the due date for filing the return), the filing requirement of Form 10-IC is directory and the assessee's substantive right under section 115BAA should not be denied solely for delayed filing of the form. Obiter - general remarks on administrative circulars and policy considerations supporting lenity. Conclusion: The Tribunal directed recomputation under section 115BAA; it held the delayed filing of Form 10-IC (filed before completion of assessment and after the return due date) did not bar the assessee from availing the concessional rate given the declared intention and lack of dispute on eligibility. Issue 2 - Whether procedural lapse in e-filing Form 10-IC can alone justify denial of benefit when eligibility is undisputed and form is filed during assessment Legal framework: Statutory option mechanisms often interpose both substantive eligibility elements and procedural formalities (mode/timing of declaration). The relevant rule prescribes e-filing of the prescribed form by the return due date; assessment proceedings provide opportunity to verify claims and admit supporting documents. Precedent treatment: Authorities addressing analogous situations have accepted production of mandated forms or certificates during assessment proceedings when the substantive claim was made in the original return, particularly where the provision grants an incentive/deduction rather than an exemption. Conversely, when the statutory language and scheme treat a pre-return declaration as an essential condition (especially in exemption provisions), courts have held timing mandatory. Interpretation and reasoning: The Tribunal distinguished those precedents that enforced timing as mandatory by noting differences in statutory character and facts - specifically that the instant option was accompanied by an unequivocal earlier declaration in the tax audit report (evidence of bona fide intention) and the supporting form was filed before assessment completion. The Tribunal applied the well-settled principle favoring beneficial/lenient interpretation of incentive/deduction provisions and observed that denying the benefit solely on account of a procedural lapse would not advance any substantive objective of the statute and would be inequitable. Ratio vs. Obiter: Ratio - a procedural lapse in e-filing the prescribed form by the return due date does not, by itself, justify denial of a substantive tax incentive under section 115BAA where the taxpayer's intention was declared contemporaneously, the form is subsequently filed during assessment, and eligibility is undisputed. Obiter - policy observations about administrative flexibility and CBDT circulars. Conclusion: Procedural non-compliance in e-filing Form 10-IC did not justify denial of the concessional tax regime in the present facts; the assessment officer was directed to recompute income under section 115BAA. Issue 3 - Application and distinction of higher-court rulings on mandatory timing in exemption/deduction contexts Legal framework: Judicial decisions interpreting timing requirements in other sections (exemption vs deduction regimes) offer guidance but must be applied by reference to statutory language, scheme, and factual matrix. Precedent treatment: Higher-court authority holding timing mandatory involved an exemption provision where strict compliance was required. Other decisions treating supporting documentation timing as directory involved deduction or incentive provisions and where the substantive claim was made in the original return and corroborated during assessment. Interpretation and reasoning: The Tribunal analyzed and distinguished the higher-court ruling that deemed timing mandatory on two principal grounds: (a) difference in statutory character - exemption provisions attract stricter treatment than deduction/incentive provisions; and (b) factual distinction - in the mandatory-timing case the taxpayer sought to withdraw an originally claimed exemption or sought to change position via a revised return, whereas in the instant facts the taxpayer had claimed the concessional regime in the original return (and audit report) and only omitted e-filing the prescribed form, which was subsequently furnished during assessment. The Tribunal also relied on precedents permitting filing of prescribed forms during assessment where the substantive claim was made earlier, and on the settled interpretive canon favoring beneficiaries of fiscal incentives when ambiguity exists. Ratio vs. Obiter: Ratio - precedents enforcing timing strictly in exemption contexts are distinguishable and need not be uniformly applied to options under section 115BAA where the claim was made in the original return and supporting form is filed during assessment. Obiter - comparative observations about classification of provisions as 'exemption' or 'deduction' and attendant interpretive approaches. Conclusion: The controlling approach is fact-sensitive; higher-court rulings enforcing strict timing in an exemption context do not automatically govern claims under section 115BAA in materially different circumstances. The Tribunal therefore allowed the option where supporting form was filed during assessment and intent was evidenced earlier. Additional considerations relied upon by the Court 1. Principle of beneficial construction: Statutory provisions conferring incentives/deductions should be construed liberally in favor of the taxpayer where ambiguity exists and procedural lapses do not defeat substantive entitlement. 2. Administrative practice: Circulars issued by tax administration extending filing dates for related forms indicate administrative recognition of procedural difficulties and support a flexible approach in allowing substantive claims when forms are filed during assessment. 3. No prejudice to revenue: Where eligibility and quantum are not disputed and the prescribed form is furnished before assessment completion, strict forfeiture for a procedural filing delay serves no discernible revenue protection purpose. Conclusion (cross-reference to Issues 1-3): Applying the above principles and distinguishing authorities that treated timing as mandatory in dissimilar contexts, the Tribunal held that delayed filing of Form 10-IC (filed during assessment) did not preclude exercising the option under section 115BAA and directed recomputation accordingly; this holding constitutes the dispositive ratio in the present facts.