Sarla Holdings Private Limited v. Pr Commissioner Of Income Tax Delhi-7 New Delhi & Anr

Signature Not Verified *IN THE HIGH COURT OF DELHI AT NEW DELHI %Judgement delivered on: 28.05.2025 +W.P.(C) 325/2024 & CM APPL. 1485/2024 SARLA HOLDINGS PRIVATE LIMITEDVersus ..... PETITIONER PR COMMISSIONER OF INCOME TAXDELHI-7 NEW DELHI & ANR. ..... RESPONDENTS Advocates who appeared in this case For the Appellant :Ms P L Bansal, Sr Advocate withMr Shivang Bansal, Advocate. For the Respondent :Mr Anant Mann, JSC for Mr. Ruchir Bhatia,SSC and Mr. Abhishek Anand, Advocates CORAM:HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MR. JUSTICE TEJAS KARIA JUDGMENT VIBHU BAKHRU, J. 1.The petitioner has filed the present petition, inter alia, impugning theorder dated 29.11.2023 [impugned order] passed by the PrincipalCommissioner of Income Tax, Delhi – 07 rejecting the petitioner’sapplicationforrevisionoftheassessmentorderdated21.09.2022[impugned assessment order] passed by the Assessment Unit underSection 143(3) read with Section 144B of the Income Tax Act, 1961 [the Act] in respect of Assessment Year 2020-21. 2.The petitioner is essentially aggrieved by the denial of the benefit ofpaying tax at lower rate in terms of Section 115BAA of the Act, which wasintroduced by the virtue of Taxation Laws (Amendment) Act, 2019 witheffect from 01.04.2020. The petitioner had not opted for paying tax at alower rate as it had not indicated so in the affirmative against the requisitebox in its return. The petitioner claimed that the same was an inadvertenterror and accordingly, filed its revised return. However, the respondentshave not accepted the change in option and this led the petitioner to file thepresent petition. PREFATORY FACTS 3.The petitioner had filed its return of income for the AY 2020-21 on13.02.2021 declaring the total income of ₹60,93,780/- after setting off an amount of ₹5,10,04,486/-. The petitioner also reflected its book profits as ₹3,14,41,630/-. The petitioner had, in its return, not opted for taxation under Section 115BAA of the Act which was introduced by the virtue of TaxationLaws (Amendment) Act, 2019 with effect from 01.04.2020. 4.The petitioner claims that at the material time its chartered accountantand finance officer were affected by COVID-19. Notwithstanding the same,they had filed the petitioner’s return despite both suffering “under Corona.”The return was filed on 13.02.2021, within the extended deadline of15.02.2021. The petitioner contends that this was the first assessment yearwhere the benefit of lower taxation under Section 115BAA of the Act couldbe availed. There was some confusion regarding the manner to claim the same and the petitioner failed to select the option for lower taxation underSection 115BAA of the Act. It is stated that soon thereafter, the financeofficer of the petitioner recovered from Covid-19 and verified the return. Hebecame aware that the petitioner had not opted for the option under Section115BAA of the Act, and, therefore, filed a revised return on 26.03.2021 inrespect of relevant assessment year and also surrendered the depreciation onthe goodwill. The petitioner had not filed the Form 10-IC, which wasprescribed for availing the benefit under Section 115BAA of the Act.Several other assessees also did not file the Form 10-IC due to the prevailingconditions at the material time. 5.In view of the confusion regarding the requirement of filing Form 10-IC within the prescribed period and the mitigating circumstances arising onaccount of the outbreak of Covid-19, the Central Board of Direct Taxes issued a Circular No.6/2022 dated 17.03.2022 whereby it wasdirected the Assessing Officers to condone the delay in filing the Form10-IC for AY 2020-21. The said circular notes that it was issued pursuant tothe representation received by the CBDT as a large number of assessees hadfailed to furnish the requisite Form 10-IC within the prescribed period. 5.In view of the confusion regarding the requirement of filing Form 10-IC within the prescribed period and the mitigating circumstances arising onaccount of the outbreak of Covid-19, the Central Board of Direct Taxes issued a Circular No.6/2022 dated 17.03.2022 whereby it wasdirected the Assessing Officers to condone the delay in filing the Form10-IC for AY 2020-21. The said circular notes that it was issued pursuant tothe representation received by the CBDT as a large number of assessees hadfailed to furnish the requisite Form 10-IC within the prescribed period. 6.The petitioner filed the Form 10-IC on 26.04.2022 to avail the benefitof the CBDT Circular No.6/2022. Thereafter, the AO sent the draftassessment order determining the petitioner’s income at ₹3,14,41,630/- under Section 115JB of the Act. The petitioner objected to the draftassessment order on the ground that it had availed the option under Section115BAA of the Act by filing its revised return and it had also furnished theForm 10-IC within the period as extended by the CBTD’s Circular No.6/2022 dated 17.03.2022. However, the petitioner’s objection was notaccepted and the AU passed the impugned assessment order under Section143(3) read with Section 144B of the Act, determining the petitioner’sincome for the AY 2020-21 at ₹3,14,41,630/- under Section 115JB of the Act. The AU also issued the demand notice under Section 156 of the Actraising the demand of ₹62,17,050/- and initiated the penalty proceedings under Section 270A of the Act. 7.The petitioner filed the revision petition before the PCIT, which wasrejected by the impugned order. REASONS AND CONCLUSIONS 8.Ms Bansal, the learned senior counsel appearing for the petitionercontended that there was no column for selecting the option to avail thebenefit of Section 115BAA of the Act in the return and therefore, thepetitioner cannot be faulted for its return not reflecting this option. She alsosubmitted that the error was occasioned due to confusion at the material timeand coupled with the fact that the petitioner was facing severe difficulties inregard to the statutory compliances, on account of the disruptions caused bythe outbreak of Covid-19. She submitted that in the aforesaid context, theCBDT had decided to extend the time period for the assessees who had notcomplied with the requirements of availing the benefit of Section 115BAAof the Act in the prescribed manner. Accordingly, the CBDT had issued theCircular granting the assessees time to file the same. And, the petitioner hadfiled the requisite form – Form 10-IC within the extended time to avail thebenefit as granted by the CBDT. 9.At the outset, it would be relevant to refer to Section 115BAA of the Act. The same is set out below:- “115BAA. Tax on income of certain domesticcompanies. (1) Notwithstanding anything contained in this Act butsubject to the provisions of this Chapter, other thanthose mentioned under section 115BA and section115BAB, the income-tax payable in respect of the totalincome of a person, being a domestic company, forany previous year relevant to the assessment yearbeginning on or after the 1st day of April, 2020, shall,at the option of such person, be computed at the rate oftwenty-two per cent., if the conditions contained insub-section (2) are satisfied: Provided that where the person fails to satisfythe conditions contained in sub-section (2) in anyprevious year, the option shall become invalid inrespect of the assessment year relevant to that previousyear and subsequent assessment years and otherprovisions of the Act shall apply, as if the option hadnot been exercised for the assessment year relevant tothat previous year and subsequent assessment years. (2) For the purposes of sub-section (1), the totalincome of the company shall be computed, - Provided that where the person fails to satisfythe conditions contained in sub-section (2) in anyprevious year, the option shall become invalid inrespect of the assessment year relevant to that previousyear and subsequent assessment years and otherprovisions of the Act shall apply, as if the option hadnot been exercised for the assessment year relevant tothat previous year and subsequent assessment years. (2) For the purposes of sub-section (1), the totalincome of the company shall be computed, - (i) without any deduction under the provisions ofsection 10AA or clause (iia) of sub-section (1) ofsection 32 or section 32AD or section 33AB or section33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) orsub-section (2AB) of section 35 or section 35AD orsection 35CCC or section 35CCD or under anyprovisions of Chapter VI-A under the heading “C”.Deductions in respect of certain incomes" other thanthe provisions of section 80JJAA; (ii) without set off of any loss carried forward ordepreciation from any earlier assessment year, if suchloss or depreciation is attributable to any of thedeductions referred to in clause (i); (iii) without set off of any loss or allowance forunabsorbed depreciation deemed so under section 72A,if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and (iv) by claiming the depreciation, if any, under anyprovision of section 32, except clause (iia) of sub-section (1) of the said section, determined in suchmanner as may be prescribed. (3) The loss and depreciation referred to in clause (ii)and clause (iii) of sub-section (2) shall be deemed tohave been given full effect to and no further deductionfor such loss or depreciation shall be allowed for anysubsequent year: Provided that where there is a depreciationallowance in respect of a block of asset which has notbeen given full effect to prior to the assessment yearbeginning on the 1st day of April, 2020, correspondingadjustment shall be made to the written down value ofsuch block of assets as on the 1st day of April, 2019 inthe prescribed manner, if the option under sub-section(5) is exercised for a previous year relevant to theassessment year beginning on the 1st day of April,2020. (4)In case of a person, having a Unit in theInternational Financial Services Centre, as referred toin sub-section (1A) of section 80LA, which hasexercised option under sub-section (5), the conditionscontained in sub-section (2) shall be modified to theextent that the deduction under section 80LA shall beavailable to such Unit subject to fulfilment of theconditions contained in the said section. Explanation. - For the purposes of this sub-section, the term “Unit” shall have the same meaningas assigned to it in clause (zc) of section 2 of theSpecial Economic Zones Act, 2005. (5) Nothing contained in this section shall apply unlessthe option is exercised by the person in the prescribedmanner on or before the due date specified under sub-section (1) of section 139 for furnishing the returns ofincomeforanypreviousyearrelevanttotheassessment year commencing on or after the 1st day ofApril, 2020 and such option once exercised shall apply to subsequent assessment years: Provided that in case of a person, where theoption exercised by it under section 115BAB has beenrenderedinvalidduetoviolationofconditionscontained in sub-clause (ii) or sub-clause (iii) of clause(a), or clause (b) of sub-section (2) of said section,such person may exercise option under this section:Provided further that once the option has beenexercisedforanypreviousyear,itcannotbesubsequently withdrawn for the same or any otherprevious year.” 10.There is no ambiguity in the language of Sub-section (5) of Section115BAA of the Act. It clearly provides that the section would not beapplicable unless (a) an option is exercised by the person in the prescribedmanner; and (b) before the due date specified under Section 139(1) of theAct for furnishing the return of income. to subsequent assessment years: Provided that in case of a person, where theoption exercised by it under section 115BAB has beenrenderedinvalidduetoviolationofconditionscontained in sub-clause (ii) or sub-clause (iii) of clause(a), or clause (b) of sub-section (2) of said section,such person may exercise option under this section:Provided further that once the option has beenexercisedforanypreviousyear,itcannotbesubsequently withdrawn for the same or any otherprevious year.” 10.There is no ambiguity in the language of Sub-section (5) of Section115BAA of the Act. It clearly provides that the section would not beapplicable unless (a) an option is exercised by the person in the prescribedmanner; and (b) before the due date specified under Section 139(1) of theAct for furnishing the return of income. 11.In the present case, the petitioner had not exercised its option beforethe due date for filing the return of income in respect of AY 2020-21.Admittedly, the time for filing the return under Section 139(1) of the Actwas extended till 15.02.2021 on account of outbreak of Covid-19. Thepetitioner had filed its return on 13.02.2021, which was within the time asprescribed, however, the petitioner had expressly indicated that it was notopting for taxation under Section 115BAA of the Act. The relevant extractof the return filed by the petitioner, setting out the ‘filing status’ isreproduced below:- W.P.(C) No.325/2024 Signature Not Verified Defective/Modified,thenenterReceipt No.If filed, in response to a notice u/s 139(9)/142(1)/148/153A/153Cororderundersection119(2)(b),enteruniquenumber/Document Identification Number (DIN) and date of suchnotice/Order, or if filed u/s 92CD enter date of advance pricingagreementUniquenumber/DocumentIdentification number (DIN)Date of such Notice or Order orif filed u/s 92CD enter date ofadvance pricing agreementResidential StatusRES- ResidentWhether the assesse has optedNone of above.fortaxationundersection115BA/115BAA/115BAB?(applicableonDomesticCompany)Whether total turnover/ grossNo.”receipts in the previous year2017-18exceeds400crorerupees?(Yes/No)(applicableforDomestic Company) 12.It is clear from the above that against the entry whether the petitionerhas opted for taxation under Section 115BA/115BAA/115BAB, thepetitioner had responded “none of above”. The contention that there was nospecific box (space) in the return to reflect the option, as contended onbehalf of the petitioner, is clearly erroneous. 13.The contention that the petitioner had in fact opted for the lowertaxation under Section 115BAA of the Act, but inadvertently not indicatedits option, is also unpersuasive. It is not in dispute that the petitioner’s computation of depreciation was not strictly in accordance with the terms ofSub-section (2) of Section 115BAA of the Act. However, in our view, thesame would be of a little relevance considering the petitioner had expresslyindicated that it was not opting for taxation under Section 115BAA of theAct. 14.The reliance placed by the petitioner on the CBDT CircularNo.6/2022 is also misplaced. The CBDT had extended the time for filing theForm 10-IC, but the CBDT had not relaxed the condition of assesseeexercising its option in the affirmative before the prescribed time for filingthe return under Section 139(1) of the Act. The Circular No.6/2022 issuedby the CBTD is set out below:- “Circular No.6/2022F.No.173/32/2022-IT A-1Government of IndiaMinistry of FinanceDepartment of RevenueCentral Board of Direct Taxes New Delhi, the 17th March, 2022 Sub : Condonation of delay under section 119(2)(b)of the Income Tax Act, 1961 in filing of Form 10-ICfor assessment year 2020-21 – Reg 14.The reliance placed by the petitioner on the CBDT CircularNo.6/2022 is also misplaced. The CBDT had extended the time for filing theForm 10-IC, but the CBDT had not relaxed the condition of assesseeexercising its option in the affirmative before the prescribed time for filingthe return under Section 139(1) of the Act. The Circular No.6/2022 issuedby the CBTD is set out below:- “Circular No.6/2022F.No.173/32/2022-IT A-1Government of IndiaMinistry of FinanceDepartment of RevenueCentral Board of Direct Taxes New Delhi, the 17th March, 2022 Sub : Condonation of delay under section 119(2)(b)of the Income Tax Act, 1961 in filing of Form 10-ICfor assessment year 2020-21 – Reg Section 115BAA of the Income Tax Act, 1961(theAct)wasinsertedbytheTaxationLaws(Amendment) Act, 2019 w.e.f. 01.04.2020. As per theSection, the income tax payable in respect of the totalincome of a person, being a domestic company, forany previous year relevant to the assessment yearbeginning on or after the 1st day of April, 2020, shall,at the option of such person be computed at the rate oftwenty-twopercentsubjecttosatisfactionofconditions contained in subsection (2) of the section. 1.2 As per sub-section (5) of section 115BAA of theact read with Rule 21AF of the Income Tax Rules,1962 (the Rules), the assessee company is required tosubmit Form 10-IC electronically on or before the duedate of filing of return of income u/s 139(1) of the Actandsuchoptiononceexercisedshallapplytosubsequent assessment years. 1.3 Failure to furnish such option in the prescribedform on or before the due date specified u/s 139(1) ofthe Act results in denial of concessional rate of tax oftwenty rate of tax of twenty-two per cent to suchperson. 2. Representations have been received by the Boardstating that Form 10-IC could not be filed along withthe return of income for AY 2020-21, which was thefirst year of filing of this form. It has been requestedthat the delay in filing of Form 10-IC may becondoned. 3. On consideration of the matter, with a view to avoidgenuinehardshiptothedomesticcompaniesinexercising the option u/s 115BAA of the Act, theCentral Board of Direct Taxes, in exercise of thepowers conferred under section 119(2)(b) of the Act,hereby directs that:- The delay in filing of Form 10-IC as per Rule 21AE ofthe Rules for the previous year relevant to AY 2020-21is condoned in cases where the following conditionsare satisfied: i) The return of income for AY 2020-21 hasbeen filed on or before the due date specifiedunder section 139(1) of the Act. ii) The assessee company has opted for taxationu/s 115BAA of the Act in (e) of “Filing Status”in “Part A-GEN” of the Form of Return ofIncome ITR-6 and iii) Form 10-IC is filed electronically on orbefore 30.06.2022 or 3 months from the end ofthe month in which this Circular is issued,whichever is later. Sd/-Sourabh Jain)Under Secretary (ITA-1)” 15.Paragraph no.2 of the above Circular indicates that the same wasissued pursuant to the representations received by the CBDT to the effectthat the delay in filing the Form 10-IC, which was required to accompanywith the returns, be condoned. The CBDT had considered the hardship facedby the domestic companies and decided to condone the delay in cases wherecertain conditions as specified in paragraph 3 of the circular were satisfied.Clause (ii) of paragraph no.3 of the Circular makes it explicitly clear that thedelay in filing the Form 10-IC could be condoned only in cases where theassessee company had opted for lower taxation under Section 115BAA ofthe Act [ “Part A-GEN” of the Form of Return of Income]. 16.In the present case, the petitioner does not satisfy this condition as ithad not opted for availing the lower taxation under Section 115BAA of theAct in its return. 17.In view of the above, we find the petitioner’s challenge to theimpugned assessment order or the impugned order, is unmerited.Thepetition is, accordingly, dismissed. The pending application is also disposedof. VIBHU BAKHRU, J MAY 28, 2025M TEJAS KARIA, J