Tax remanded for verification of 25% concessional corporate rate u/s115BA, Finance Bill 2021, turnover below Rs400cr
ITAT Pune remanded the matter to the AO to verify the assessee-company's claim of eligibility for the concessional corporate tax rate of 25% under s.115BA, read with para (e) of the Finance Bill 2021, on the basis that its turnover in FY 2018-19 was below Rs. 400 crore. The Tribunal directed the AO to examine the audited financial statements and, if the turnover criterion is satisfied, recompute the tax liability by applying the 25% rate instead of 30%. No final determination on tax liability was made.
1. ISSUES PRESENTED AND CONSIDERED
1.1 Whether the assessee, a domestic company, is liable to income-tax at the concessional rate of 25% instead of 30%, subject to verification that its turnover during Financial Year 2018-19 did not exceed Rs. 400 crore.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Applicability of 25% tax rate to a domestic company based on turnover threshold in F.Y. 2018-19
Legal framework
2.1 The Court referred to para (e) of the Finance Bill, 2021, providing that in the case of a domestic company, if the turnover during Financial Year 2018-19 does not exceed Rs. 400 crore, the applicable rate of income-tax shall be 25% of the total income, and in all other cases the rate shall be 30%.
Interpretation and reasoning
2.2 The assessee, being a private limited domestic company, claimed that its turnover for F.Y. 2018-19 was below Rs. 400 crore and that it had accordingly adopted the 25% tax rate in its return of income.
2.3 The Centralized Processing Centre, in the intimation under section 143(1) and in the subsequent rectification order under section 154, applied a 30% tax rate on the ground that the assessee had claimed a concessional rate under section 115BA without furnishing the prescribed form and that turnover details for F.Y. 2018-19 were not on record.
2.4 Before the Tribunal, the assessee did not press the specific claim of concessional rate under section 115BA but confined its grievance to the general rate applicable to domestic companies based on the turnover criterion for F.Y. 2018-19.
2.5 The Court accepted the legal position that, independent of section 115BA, where a domestic company's turnover for F.Y. 2018-19 is less than Rs. 400 crore, the applicable rate under the Finance Act is 25% and not 30%.
2.6 Audited financial statements for F.Y. 2018-19 were produced before the Court, but the Court considered that the factual aspect of turnover required verification by the jurisdictional Assessing Officer.
Conclusions
2.7 The matter was remanded to the jurisdictional Assessing Officer to verify, on the basis of the audited financial statements and other relevant records, whether the assessee's turnover during F.Y. 2018-19 was less than Rs. 400 crore.
2.8 The Court directed that if, upon such verification, the Assessing Officer finds that the assessee's turnover in F.Y. 2018-19 did not exceed Rs. 400 crore, the assessee's income shall be charged to tax at the rate of 25% instead of 30%.
2.9 The Assessing Officer was directed to afford reasonable opportunity of being heard to the assessee. The ground relating to the applicable tax rate was allowed for statistical purposes.