The Delhi Income Tax Appellate Tribunal has clarified that a procedural lapse in filing Form 10-IC cannot override the substantive right of a company to avail the concessional tax rate under Section 115BAA, provided the option is clearly exercised in the return and all eligibility conditions are met. This ruling reinforces the principle that technical non-compliance must not defeat statutory benefits intended by Parliament.
Background & Facts
The Dispute
The appellant, Ganpati Holdings Pvt. Ltd., a domestic company, opted to be taxed under Section 115BAA of the Income Tax Act, 1961 for Assessment Year 2024-25. The company filed its income tax return on 04.09.2024, well before the due date of 31.07.2024, and explicitly declared its intention to avail the concessional tax regime under Section 115BAA in Part A-Gen of the return form. The company reported a book profit of Rs. 37,83,532 but claimed total income as Nil due to brought forward losses. As Section 115JB (Minimum Alternative Tax) does not apply to companies opting for Section 115BAA, no MAT was paid. However, the Centralized Processing Centre (CPC) in Bengaluru, upon processing the return under Section 143(1), disallowed the benefit of Section 115BAA on the ground that Form 10-IC had not been filed by the due date.
Key Facts
- The assessee company filed its return for A.Y. 2024-25 on 04.09.2024, prior to the due date under Section 139(1)
- In the return form, the company clearly opted for taxation under Section 115BAA in Part A-Gen
- The company had a book profit of Rs. 37,83,532 and claimed total income as Nil due to brought forward losses
- The company erroneously believed that Form 10-IC had been filed on 06.10.2022 (acknowledgement number 619257181061022), which was actually for a different entity
- On receipt of the intimation under Section 143(1) dated 07.10.2025, the company discovered the error and filed Form 10-IC on 15.02.2025
- The company filed an application under Section 154 for rectification on 18.02.2025, seeking correction of the CPC’s order
- The CPC rejected the rectification application on 04.03.2025, maintaining the demand of Rs. 5,29,720 (inclusive of MAT @15% + 4% cess)
- The Commissioner of Income Tax (Appeals), Indore, upheld the CPC’s order on 07.10.2025
- The appeal was filed before the ITAT Delhi on 15.12.2025
- The hearing was held on 24.03.2026 and the order was pronounced on 27.05.2026
Procedural History
- 04.09.2024: Income tax return filed for A.Y. 2024-25 with option under Section 115BAA
- 06.10.2022: Incorrect belief formed that Form 10-IC was filed (actually for another entity)
- 07.10.2025: CPC issued intimation under Section 143(1) disallowing Section 115BAA benefit
- 15.02.2025: Form 10-IC filed belatedly
- 04.03.2025: CPC rejected rectification application under Section 154
- 07.10.2025: CIT(A), Indore, confirmed CPC’s order
- 15.12.2025: Appeal filed before ITAT Delhi
- 24.03.2026: Hearing conducted
- 27.05.2026: ITAT Delhi pronounced order
Relief Sought
The appellant sought: (1) setting aside of the CIT(A) order dated 07.10.2025; (2) deletion of the demand of Rs. 5,29,720 raised under Section 115JB; (3) grant of benefit under Section 115BAA; and (4) recomputation of tax liability at the concessional rate.
The Legal Issue
The central question was whether the failure to file Form 10-IC by the due date under Section 139(1) invalidates the substantive right of a company to claim the concessional tax rate under Section 115BAA, when the option is clearly declared in the return and all eligibility conditions are satisfied.
Arguments Presented
For the Appellant
The appellant argued that the filing of Form 10-IC is a procedural requirement, not a substantive condition for availing Section 115BAA. It relied on judicial precedents from the Delhi Tribunal (KN Support Services Pvt. Ltd. v. DCIT, ITA No. 5774/Del/2024), Mumbai Tribunal (Getinge Medical India Pvt. Ltd. v. DCIT, ITA No. 4872/Mum/2024), and Pune Tribunal (Akshay Devendra Biruri v. DCIT), all of which held that procedural lapses in filing Form 10-IC or Form 10-1E should not override substantive rights. The appellant emphasized that the intent to opt for Section 115BAA was clearly manifested in the return, and the delay was bona fide and inadvertent. It further cited the Supreme Court’s ruling in Collector, Land Acquisition v. Mst. Katiji & Others and CBDT Circular No. 17/2024, which advocate a liberal approach to procedural defaults, especially where no prejudice is caused to the Revenue.
For the Respondent
The Revenue relied on the orders of the CPC and CIT(A), arguing that Form 10-IC is a mandatory condition under Rule 12AAB of the Income Tax Rules, and its non-filing by the due date renders the option invalid. It contended that the statutory framework requires strict compliance with procedural timelines and that allowing belated filings would undermine the integrity of the tax administration system.
The Court's Analysis
The Tribunal examined the nature of Form 10-IC and its relationship to Section 115BAA. It noted that while the form is prescribed under Rule 12AAB, the substantive right to the concessional rate arises from the company’s eligibility under Section 115BAA and its clear declaration of intent in the return. The Tribunal observed that the return form itself contains a specific field for opting into Section 115BAA, and the assessee had duly filled it. The Tribunal held that the requirement to file Form 10-IC is directory, not mandatory, and that the Supreme Court’s consistent jurisprudence - as cited in CIT v. G.M. Knitting Industries - holds that timing and form are directory unless expressly made mandatory.
"The making of a claim of deduction is mandatory, but timing is directory. Even if the claim is made during the assessment proceedings, such a claim is to be allowed."
The Tribunal further noted that the CBDT Circular No. 17/2024, though applicable to A.Y. 2020-21 to 2022-23, reflects administrative recognition that procedural delays should not defeat substantive benefits. The Tribunal extended this principle by analogy to A.Y. 2024-25, emphasizing that the Revenue suffered no prejudice - the return was filed on time, the option was declared, and the tax computation was consistent with Section 115BAA. The Tribunal distinguished KN Support Services and Getinge Medical as directly on point, and found no material difference in facts. It concluded that denying the benefit on a technical ground would violate the principle of beneficial interpretation and equity.
The Verdict
The appeal was allowed. The ITAT Delhi set aside the order of the CIT(A) dated 07.10.2025 and directed the Assessing Officer to grant the benefit under Section 115BAA. The tax liability was to be recomputed at the concessional rate of 22% (plus applicable surcharge and cess), and the demand of Rs. 5,29,720 raised under Section 115JB was to be deleted. The order was to be implemented within 45 days of the date of the order.
What This Means For Similar Cases
Procedural Lapses Cannot Override Substantive Rights
- Practitioners can now confidently argue that belated filing of Form 10-IC, if accompanied by clear declaration of intent in the return, does not invalidate the Section 115BAA benefit
- The burden shifts to the Revenue to prove actual prejudice caused by the delay - mere non-compliance with formality is insufficient
- This principle extends to other procedural forms under the Income Tax Act where intent is manifest and eligibility is unchallenged
CBDT Circulars as Guiding Principles
- Even if a CBDT circular is not explicitly applicable to the assessment year, its underlying policy - favoring substance over form - can be invoked to support liberal interpretation
- Taxpayers should retain records of all filings and communications to substantiate bona fide intent in case of disputes
- The ITAT’s reliance on circulars signals a trend toward administrative flexibility in tax compliance matters
Judicial Consistency in Favor of Taxpayers
- The alignment of decisions across Delhi, Mumbai, and Pune Tribunals establishes a strong precedent
- Practitioners should cite KN Support Services and Getinge Medical as binding authority in similar cases
- This judgment reinforces the doctrine that statutory benefits should not be denied on technical grounds absent legislative clarity
