ITAT Allows Application of S.115BAB Tax Rate, Citing Prior Order Recognizing Assessee as Manufacturer [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the application of the section 115BAB of Income Tax Act,1961, tax rate for the assessee citing a prior assessment order that recognized the company as a manufacturer.

Sidhe Petrochemicals (P.) Ltd.,appellant-assessee, filed its income tax return for AY 2021-22 on 22.11.2023, declaring a total income of INR 2,38,13,110 and paid tax under section 115BAB. The company had submitted Form 10-ID, opting for the benefit of section 115BAB, which was initially accepted and processed under section 143(1).

However, for the year under appeal, the CPC issued an intimation on 10.01.2024 denying the section 115BAB benefit and applying the normal tax rate of 30%. The assessee appealed to the CIT(A), who ruled that it was not a manufacturer and therefore ineligible for section 115BAB, dismissing the appeal.

The assessee counsel argued that from AY 2020-21 onwards, the company had consistently claimed the tax rate under section 115BAB and filed the required audit reports on time. He maintained that the assessee was a manufacturer and rightly claimed the benefit of the prescribed rate.

The counsel contended that the CIT(A) erred in concluding that the assessee was not a manufacturer. He pointed out that the case had been selected for scrutiny, and the assessment for the year under appeal was completed u/s 143(3), where the AO, in the order dated 11.03.2025, recognized the assessee as a manufacturer and applied the section 115BAB rate.

He referred to the assessment file, showing the computation sheet confirming the tax was calculated under section 115BAB, and submitted that the lower authorities’ orders should be set aside to allow the assessee to pay tax at the prescribed rate.

The Departmental counsel, however, contended that the assessee had failed to prove it was a manufacturer and that the CIT(A) rightly held that the conditions of section 115BAB were not met, urging that the lower authorities’ order be upheld.

The two member bench comprising Anubhav Sharma (Judicial Member) and Manish Agarwal (Accountant Member) examined the contentions and records and noted that the key issue was whether the assessee qualified as a manufacturer to claim the tax rate under section 115BAB. It observed that the Department, in the 143(3) assessment order dated 11.03.2025, had already recognized the assessee as a manufacturer and applied the section 115BAB rate.

Therefore, the CPC had wrongly denied the benefit. The tribunal set aside the orders of the lower authorities and directed the AO to compute tax under section 115BAB. All grounds of the assessee’s appeal were allowed.

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