Concessional s.115BAA(1) tax allowed despite delayed Form 10-IC; CBDT circular cannot restrict statutory tax benefit

ITAT held that the domestic company was entitled to the concessional tax regime under s.115BAA(1) despite non-filing of Form 10-IC along with the original ROI for AY 2020-21 due to technical glitches. Relying on Rule 21AE and the CBDT circular dated 17.03.2022 condoning delay in filing Form 10-IC, ITAT held that the circular could not be interpreted to curtail a statutory benefit otherwise available under the Act. It ruled that CBDT instructions cannot override substantive law or restrict relief. The orders of AO and CIT(A) were set aside to this extent, and AO was directed to recompute tax liability under s.115BAA(1).

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ISSUES PRESENTED AND CONSIDERED

1. Whether a domestic company is entitled to compute its tax liability under section 115BAA(1) of the Act where Form No. 10-IC (the prescribed option form under rule 21AE) could not be uploaded with the return of income due to technical glitches but was uploaded subsequently within the period condoned by the Board's circular?

2. Whether the conditions in the CBDT circular dated 17.03.2022 (specifying, inter alia, that the assessee must have indicated opt-in in the "Filing Status" of ITR-6) can be interpreted or applied so as to curtail or deprive a taxpayer of the statutory option under section 115BAA when the statutory mode (Form 10-IC) has been complied with within the extended/condoned period?

ISSUE-WISE DETAILED ANALYSIS - Issue 1: Entitlement to exercise option under section 115BAA where Form 10-IC was uploaded late due to technical glitch

Legal framework: Section 115BAA(1) grants a domestic company an option to have its income tax computed at a concessional rate (22%) subject to conditions in subsection (2), and section 115BAA(5) (as referenced in rule 21AE) requires the option to be exercised in the prescribed manner on or before the due date under section 139(1). Rule 21AE prescribes Form No. 10-IC to be furnished electronically (sub-rules (1)-(3)). The CBDT issued a circular dated 17.03.2022 condoning delay in filing Form 10-IC for AY 2020-21 subject to three conditions (timely filing of ROI, opting in ITR-6 "Filing Status" e, and filing Form 10-IC electronically on or before 30.06.2022 or three months from the end of the circular month, whichever is later).

Precedent treatment: The Tribunal relied on the principles from higher court decisions holding that CBDT circulars have force and can mitigate or relax law where beneficial to the taxpayer, but such circulars cannot be used to curtail or contradict the substantive provisions of the Act (citing Gestetner and Union of India v. Wood Paper Ltd. principles as applied in the judgment).

Interpretation and reasoning: The Tribunal found that the assessee filed the return within the due date (condition (i)) and uploaded Form 10-IC electronically on 02.05.2021, within the condoned period (condition (iii)). Technical inability to upload at the time of filing ROI was established and substantiated by the CBDT circular. Given rule 21AE requires electronic filing of Form 10-IC and the circular expressly condoned delay in filing that form for the first year (AY 2020-21), the Tribunal held that the statutory option was validly exercised when Form 10-IC was later uploaded within the condoned timeframe. The Tribunal emphasised that the assessment record showed no discrepancy in the declared total income; hence the only impediment was procedural (technical failure) to upload Form 10-IC contemporaneously with ROI.

Ratio vs. Obiter: Ratio - where Form 10-IC was uploaded within the period condoned by the Board and other statutory conditions are met, the taxpayer is entitled to exercise the option under section 115BAA for computation of tax despite initial technical failure to upload the form with the ROI. Obiter - general observations on the power of the Board to relax procedural requirements in beneficial cases.

Conclusion: The Tribunal allowed the appeal on this point and directed the assessing officer to compute tax under section 115BAA(1), finding the assessee entitled to the concessional computation because Form 10-IC was filed within the condoned period and the ROI was filed by the statutory due date.

ISSUE-WISE DETAILED ANALYSIS - Issue 2: Effect and limits of the CBDT circular's condition requiring an opt-in entry in ITR-6 ("Filing Status")

Legal framework: The CBDT circular set out three conditions to avail condonation; condition (ii) required the assessee to have opted for taxation under section 115BAA in the ITR-6 filing status field. The Tribunal analysed the interplay between statutory prescription (section 115BAA, rule 21AE requiring Form 10-IC) and the circular's conditions.

Precedent treatment: The Tribunal applied established authority that circulars can clarify, mitigate or relax procedural requirements but cannot curtail substantive rights under statute nor issue instructions inconsistent with the Act; circulars are not intended to extinguish a statutory entitlement.

Interpretation and reasoning: The Tribunal held that the statutory right to opt under section 115BAA is exercisable by furnishing the prescribed Form 10-IC electronically in accordance with rule 21AE. The Board's circular, being issued for administrative facilitation, cannot be interpreted to take away or abridge the statutory right conferred by section 115BAA. Condition (ii) of the circular - requiring a separate opt-in entry in the ITR-6 form - was not allowed to operate so as to nullify the appellant's statutory option where Form 10-IC had been uploaded within the condoned period and the return had been filed within the due date. The Tribunal treated the circular's condition as not overriding the statutory mode of exercise (i.e., filing Form 10-IC electronically within the permissible period), particularly where the circular itself was framed to condone technical difficulties in filing Form 10-IC in that first year.

Ratio vs. Obiter: Ratio - administrative instructions or circulars cannot be interpreted to curtail or defeat a taxpayer's statutory right to exercise an option under section 115BAA when the prescribed statutory/formal mechanism (Form 10-IC filed electronically within the condoned period) has been complied with. Obiter - remarks on the general non-binding character of circulars vis-à-vis substantive statutory rights and the requirement for liberal interpretation of conditions regulating fiscal benefits.

Conclusion: The Tribunal concluded that condition (ii) of the CBDT circular could not be construed to deny the assessee the statutory option under section 115BAA. Because conditions (i) and (iii) of the circular were satisfied and Form 10-IC was ultimately filed electronically within the condoned period, the assessee's option under section 115BAA stood valid and the tax liability must be computed accordingly.

Ancillary holdings and directions

1. Finding of no discrepancy in declared total income by the assessment unit is noted and not disturbed; the dispute is limited to the procedural question of valid exercise of option under section 115BAA.

2. The Tribunal set aside the appellate and assessment orders to the extent of denying the benefit under section 115BAA and restored the matter to the assessing officer for computation of tax in accordance with section 115BAA(1) and for statistical compliance.

3. The appeal was allowed in the terms stated above.

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