Confirmation of filing of Form 10IC confirms eligibility for tax rate under Section 115BAA

Chola Business Services Ltd. vs. ITO (ITAT Chennai)

In case Chola Business Services Ltd. vs. Income Tax Officer (ITO)The Income Tax Appellate Tribunal (ITAT), Chennai, has passed an order in favor of the taxpayer, Chola Business Services, on the preferential rate of tax under Section 115BAA of the Income Tax Act, 1961 for the Assessment Year (AY) 2021-2022. The company filed its return of income declaring total income of ₹55,49,770 and claiming refund of ₹4,25,390. However, the Central Processing Center (CPC), Bengaluru has issued a notification under Sec. 143 section 1 of the Act, calculating the tax at the rate of 30% and not the 22% discount rate chosen by the assessing entity. The company filed Form 10IC on December 15, 2020, fulfilling the conditions for availing the concessionary rate.

Despite this, CPC charged tax at the regular rate of 30% and the Commissioner of Income Tax (Appeals) upheld this decision, stating that the company had not opted for a preferential tax rate. However, ITAT found that the CPC announcement itself confirmed the company’s choice of preferential rate. The Court noted that the submission of Form 10IC and its endorsement by the CPC confirmed that the company was eligible for the concessional tax rate under section 115BAA. Accordingly, the ITAT quashed the order of the CIT(A) and directed the assessing officer to calculate the tax at the concessional rate as initially claimed by the company. Therefore, the appeal was allowed.

FULL TEXT OF ITAT CHENNAI ORDER

The above appeal filed by the assessee for Assessment Year (AY) 2021-22 is pursuant to the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A)-2, Gurugram (hereinafter referred to as ‘CIT(A)’) dated 23.02. .2024 video preview u/s. 143 section 1 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) issued by the CPC, Bengaluru dated 20/10/2022.

2. The only valid ground for appeal by the assessee is the acknowledgment of the notification issued by the CPC, Bengaluru, wherein the CPC has not allowed preferential rate of tax even though the assessee has opted for the preferential rate u/s. 115BAA of the Act and submitted the required form on time.

3. The assessee company was incorporated on December 9, 2004 and was engaged in the business of providing human resources services to various enterprises. The assessee filed his return of income for the year 2021-22 electronically on 02/03/2022 declaring a total income of Rs. 55,49,770/- and demanding refund of Rs.4,25,390/-. Subsequently, CPC, Bengaluru passed u/s. 143 section 1 of the Act charged tax at the rate of 30% instead of 22% charged by the taxpayer. The assessee claimed to have filed Form 10IC on December 15, 2020, opting for preferential tax rate u/s. 115BAA of the Act. The CPC, Bengaluru, in its notice, also mentioned that the taxpayer had opted for preferential tax rate u/s 115BAA under the Act even though the CPC had calculated the tax at 30%. Ld. CIT(A), observing in paragraph 5.2 that the assessee had filed Form 10IC on time and had also filed his return of income. 139 of the Act, stated that the taxpayer had not decided to be taxed u/s. 115BAA of the Act.

4th Ld. The Authorized Representative (AR) of the assessee argued that the advance notification itself shows that the assessee has opted for the preferred rate of tax u/s 115BAA of the Act mentioned in Sr. No. 1 notice.

5. Ld. In turn, the Department Representative (DR) relied on the orders of lower authorities.

6. We listened to the competition’s submissions and reviewed the available materials. The assessee filed Form 10IC on December 15, 2020, opting for preferential tax rate u/s. 115BAA of the Act. Notification u/s 143(1) for AY 2021-22 also specifically mentions in Sr. No. 1 that the assessee has opted for preferential rate of tax u/s 115BAA under the Act. Therefore, Ld. The CIT(A) had no justification to hold that the taxpayer had not opted for preferential tax rate u/s 115BAA. We, therefore, set aside the order of the Ld. CIT(A) and instruct the AO to calculate the tax at the preferential rate chosen by the assessee.

7. In the result, the assessee’s appeal is allowed.

Order issued on 25^vol October 2024.