Claiming Benefits under Section 115BAA: Procedural Compliance and Substantive Rights

Citation

Aprameya Engineering Limited v. Income Tax Officer

Income Tax Appellate Tribunal (ITAT), Ahmedabad "A" Bench

ITA No. 456/Ahd/2024

Judgment dated June 11, 2024

Bench: Judicial Member Shri Siddhartha Nautiyal and Accountant Member Shri Makarand V. Mahadeokar

Issue Involved

The central issue in this case was whether a delay in filing Form 10IC invalidates the taxpayer’s right to claim the reduced tax rate benefit under Section 115BAA of the Income Tax Act, 1961.

Significance of the Issue

This issue is crucial because it addresses the balance between following procedural requirements and protecting substantive rights in tax law. Understanding how deadlines for filing specific forms affect eligibility for tax benefits ensures fairness and equity in tax administration.

Facts of the Case

Aprameya Engineering Limited filed its income tax return for the Assessment Year 2022-23 on December 1, 2022, reporting a total income of Rs. 10.15 crores. The company also submitted Form 10IC to opt for the concessional tax rate under Section 115BAA, which offers a reduced corporate tax rate of 22% for domestic companies. However, both the return and the form were filed after the due date prescribed under Section 139(1) of the Income Tax Act.

The Centralized Processing Centre (CPC) rejected the claim for the reduced tax rate, applying the standard corporate tax rate of 30% instead. The company appealed this decision, arguing that the delay in filing Form 10IC was merely procedural and should not negate their right to the reduced tax rate.

Conclusion

The ITAT ruled in favor of the company, stating that the delay in filing Form 10IC was procedural and did not invalidate the substantive right to claim the benefit under Section 115BAA.

Reasoning Behind the Decision

1. Procedural vs. Substantive Compliance: The tribunal highlighted that procedural requirements should not overshadow substantive rights. Filing Form 10IC is procedural, and a delay should not prevent the taxpayer from receiving the reduced tax rate benefit.

2. Distinguishing Precedents: The ITAT differentiated this case from the Supreme Court judgment in Wipro Limited, noting that the facts differed significantly. In Wipro, strict adherence to procedural timelines was crucial due to different circumstances.

3. Sufficient Compliance During Assessment: The tribunal observed that compliance was adequate since Form 10IC was filed during the assessment proceedings. The company’s intent to opt for the concessional rate was clear from Form 3CD, indicating no intent to gain an undue advantage by filing late.

4. Beneficial Interpretation Principle: The ITAT applied the principle of beneficial interpretation, which favors taxpayers when procedural lapses do not affect substantive rights or cause revenue loss. They cited the Supreme Court judgment in G.M. Knitting Industries, which held that the timing of claims is directory rather than mandatory.

5. Administrative Flexibility: The tribunal recognized that CBDT's circulars had extended due dates for filing forms in earlier years, showing an administrative understanding of procedural difficulties and the need for flexibility.

6. Principles of Equity and Justice: Denying the benefit based solely on procedural lapses was deemed contrary to the principles of equity and justice, especially when the eligibility for the reduced tax rate was undisputed.

Implications of the Ruling

This ruling clarifies that procedural delays should not automatically result in the denial of substantive benefits under tax laws. It reinforces the idea that tax authorities should focus on substantive compliance rather than rigidly adhering to procedural timelines. This decision is significant for taxpayers seeking tax benefits and for tax administrators striving for fair practice.

In summary, the ITAT's decision in the case of Aprameya Engineering Limited highlights the importance of distinguishing between procedural and substantive compliance, promoting a fair and just approach in tax administration.