Once Exercised, Section 115BAB Option Applies to Subsequent Years: ITAT Allows 15% Concessional Tax Rate [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has held that once a manufacturing company validly exercises the option for concessional taxation under Section 115BAB of the Income Tax Act, 1961 in the first eligible year, the benefit cannot be denied in subsequent years merely because the return of income is filed late.

The appeal was filed by Satara Engineering Projects and Equipments Private Limited against the intimation order issued under Section 143(1) for the assessment year 2024-25. The Centralised Processing Centre applied a tax rate of 22% under Section 115BAA instead of the concessional 15% under Section 115BAB. The assessee contended that it had already exercised the option under Section 115BAB in the immediately preceding assessment year. Once exercised, the option continues to apply to subsequent years as per Section 115BAB(7).

On the other hand, the Departmental Representative supported the order of CIT(A).

The Tribunal noted that for the assessment year 2023-24, the assessee had filed Form 10-ID within the due date under Section 139(1), and the claim for the 15% concessional rate had been accepted. The Bench observed that the law does not require the option to be exercised every year. Further, it does not mandate that subsequent returns must be filed within the due date to continue availing the concessional regime either.

The Bench also held that the CPC exceeded the scope of permissible adjustments under Section 143(1) by applying a higher tax rate without granting an opportunity of hearing. Reliance was placed on a coordinate bench ruling in GFCL EV Products Ltd. v. ACIT, which held that denial of the concessional rate in a subsequent year, after valid exercise of option in the first year, is unsustainable in law.

Setting aside the order of the appellate authority, the Tribunal directed the Assessing Officer to compute the tax liability of the assessee at the concessional rate of 15% under Section 115BAB for the assessment year 2024-25. As a result, the appeal filed by the assessee was allowed.

The order was pronounced by a bench comprising Vinay Bhamore (Judicial Member) and Manish Borad (Accountant Member) on 06th January, 2026.

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