Delay in Filing Form 10IC Condoned; Concessional Tax Rate under Section 115BAA Allowed for AY 2021-22

The HC allowed the assessee's appeal, directing the respondent to condone the delay in filing Form 10IC and to treat the belated Form 10IC for AY 2021-22 as valid for AY 2021. The court held that the option for concessional tax rate under Section 115BAA must be exercised at the time of filing the return via Form 10IC as per Rule 21AE, but due to technical issues, CBDT Circular No. 6/22 permitted late filing. The respondent erred in rejecting the application under Section 119(2)(b) by citing lack of power to condone delay. The court emphasized that Section 119(2)(b) aims to provide relief for hardships and directed reconsideration allowing the petitioner to avail the 22% tax rate benefit.

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ISSUES:

Whether delay in filing Form 10-IC for exercising the option under Section 115BAA of the Income Tax Act, 1961 can be condoned under Section 119(2)(b) of the Act.Whether the option under Section 115BAA(5) must be exercised strictly on or before the due date specified under Section 139(1) of the Act or whether condonation of delay is permissible.Whether the Circular No. 6/2022 issued by the Central Board of Direct Taxes (CBDT) permitting condonation of delay in filing Form 10-IC till 30.06.2022 or three months from the end of the month of issuance applies to the facts and can be relied upon to condone delay beyond the specified period.Whether the principle laid down by the Supreme Court in the Wipro Limited case regarding mandatory filing of option/declaration under Section 10B(8) of the Act applies pari materia to Section 115BAA(5) and precludes condonation of delay.Whether the power under Section 119(2)(b) of the Act can be exercised to avoid genuine hardship caused by technical or inadvertent non-compliance in filing Form 10-IC.

RULINGS / HOLDINGS:

The Court held that the delay in filing Form 10-IC can be condoned under Section 119(2)(b) of the Act to avoid genuine hardship, especially in light of CBDT Circular No. 6/2022, which exercises the power under Section 119(2)(b) to condone delay subject to certain conditions.The Court emphasized that the option under Section 115BAA(5) is required to be exercised in the prescribed manner on or before the due date specified under Section 139(1), but the CBDT Circular relaxes this strict timeline for Assessment Year 2020-21 by condoning delay till 30.06.2022 or three months from the issuance of the Circular.The Court found the CBDT Circular No. 6/2022 to be a valid exercise of power under Section 119(2)(b) and held that the petitioner was entitled to rely on it for condonation of delay in filing Form 10-IC.The Court distinguished the Supreme Court's ruling in the Wipro Limited case on Section 10B(8) as not applicable pari materia to Section 115BAA(5), noting that the latter provisions grant relief to domestic companies to pay tax at a reduced rate upon exercising option, and the strict mandatory nature of declaration filing under Section 10B(8) does not extend to Section 115BAA(5) in the same manner.The Court held that the power under Section 119(2)(b) is meant for redressal of grievances and to avoid hyper-technical denial of relief, and therefore, the respondent authority ought to have condoned the delay and considered the Form 10-IC filed for Assessment Year 2021-2022 as if filed for Assessment Year 2021.

RATIONALE:

The Court applied the statutory framework of the Income Tax Act, 1961, focusing on Sections 115BAA(1) and (5), Section 139(1), and Section 119(2)(b), along with Rule 21AE of the Income Tax Rules prescribing the manner of exercising the option by filing Form 10-IC.The Court relied on CBDT Circular No. 6/2022 dated 17.03.2022, which condones delay in filing Form 10-IC for AY 2020-21 to avoid genuine hardship, thereby interpreting the power under Section 119(2)(b) liberally to provide equitable relief.The Court distinguished the binding precedent of the Supreme Court in Wipro Limited on Section 10B(8) by analyzing the different statutory purposes and conditions involved in Section 115BAA(5), noting that the latter is designed to grant relief to domestic companies and that strict timelines may be relaxed to prevent injustice.The Court referred to prior authoritative decisions emphasizing that the phrase "genuine hardship" under Section 119(2)(b) should be construed liberally and that the tax authorities should avoid a "pedantic, hyper-technical and narrow approach" when exercising discretionary powers.The Court noted the importance of balancing strict compliance with procedural requirements against the need to prevent undue hardship to taxpayers who have made bona fide mistakes, particularly when the statutory scheme and CBDT Circular provide for such condonation.

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