ITAT Decision to uphold Higher 22% LTCG u/s 115BAA on Domestic Company raises Eyebrows [Read Order]
The assessee, a domestic company, had exercised the option under Section 115BAA by filing Form 10IC for FY 2019–20 and subsequent years
LTCG
LTCG
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the 22% tax rate on Long-Term Capital Gains (LTCG) for domestic companies that have opted for the concessional tax regime under Section 115BAA of the Income Tax Act, 1961.
The case involved Maharishi Education Corporation Pvt. Ltd., which challenged the order of the Commissioner of Income Tax (Appeals)-1, Nashik, for Assessment Year (AY) 2021–22. The dispute centered on whether LTCG should be taxed at 20% under Section 112 or at 22% in light of the company’s choice to be governed by Section 115BAA.
The assessee, a domestic company, had exercised the option under Section 115BAA by filing Form 10IC for FY 2019–20 and subsequent years. For AY 2021–22, it filed its return declaring total income of ₹14,98,150, comprising a loss of ₹20,263 and LTCG of ₹15,18,414 on sale of land. The assessee paid tax at 20% under Section 112.
However, the return was processed under Section 143(1) of the Income Tax Act, and the Assessing Officer (AO) recomputed tax at 22%-the rate applicable under Section 115BAA, resulting in a demand of ₹59,973.
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The assessee contended that LTCG, being separately governed by Section 112, should attract tax at 20%, irrespective of the concessional corporate regime. The Departmental Representative, on the other hand, argued that once the assessee opts for Section 115BAA, the prescribed 22% rate applies uniformly to the company’s total income, including LTCG.
Judicial Member Shri Vikas Awasthy observed that the assessee had voluntarily opted for the concessional tax regime under Section 115BAA. Consequently, the total income, including LTCG, must be taxed at the specified 22% rate. The Tribunal found no reason to interfere with the order of the CIT(A), affirming that the AO’s computation was in accordance with the statutory provision.
Dismissing the appeal, the Tribunal held that domestic companies availing the concessional regime under Section 115BAA cannot claim the lower 20% rate under Section 112 for LTCG. The order was pronounced on October 24, 2025.
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