Form 10-IC Condonation for AY 2020-21 Only Applicable to Company Opted for Lower Tax Rate u/s 115BAA: Delhi HC dismisses Petition [Read Order]

In a recent ruling, the Delhi High Court has reaffirmed that the condonation provided under Central Board of Direct Taxes ( CBDT ) circular for filing of Form 10-IC for Assessment Year ( AY ) 2020-21 is only applicable to companies opted for lower tax rate under Section 115BAAof Income Tax Act, 1961.

The Division bench of Justices Vibhu Bakhru and Tejas Karia ruled that the circular benefits only those companies that had actually opted for the concessional tax regime under Section 115BAA of the Income Tax Act, 1961, in their originally filed return of income.

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The petitioner, Sarla Holdings Pvt. Ltd., had filed its income tax return for AY 2020-21 on 13.02.2021, within the extended deadline due to the COVID-19 pandemic. However, it failed to select the option for taxation under Section 115BAA, as introduced by the Taxation Laws (Amendment) Act, 2019, offering a lower corporate tax rate of 22% to domestic companies, subject to certain conditions.

The petitioner later revised its return and filed Form 10-IC on 26.04.2022, relying on CBDT Circular No. 6/2022, which condoned delay in filing the form in light of pandemic-related hardships.

The petitioner-company contended that the initial omission was inadvertent and arose due to confusion and disruption during the pandemic. It argued that the CBDT circular was issued to address such genuine hardships and that the revised return and belated filing of Form 10-IC should suffice for availing the concessional tax rate.

However, the High Court held that the benefit of the circular is strictly confined to those companies that had filed their return under Section 139(1) and had opted for Section 115BAA in the original return itself.

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The Court stated that petitioner had clearly selected “None of the above” in the ITR column asking whether the assessee opted for Section 115BAA. This express indication ruled out any presumed or constructive exercise of the option under Section 115BAA.

Moreover, the Court pointed out that filing a revised return or Form 10-IC at a later stage does not substitute the statutory requirement under Section 115BAA(5), which mandates exercising the option “in the prescribed manner on or before the due date specified under Section 139(1).”

The CBDT circular, the Court noted, merely condones delay in filing Form 10-IC not the failure to exercise the option itself within the prescribed timeline. Thus, the Court found no merit in the petitioner's argument and dismissed the writ petition, stating that the denial of concessional tax was consistent with statutory provisions and CBDT's conditional relief.

To Read the full text of the Order CLICK HERE

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