Late Form, Fair Intent: Allahabad High Court Backs Taxpayer In Section 115BAA Case

The Allahabad High Court has said that missing the deadline for Form 10-IC shouldn't automatically prevent a company from getting the lower tax rate under Section 115BAA of the Income-tax Act, 1961, according to a recent media report.

The court announced its ruling in a case involving the Gulati Traders vs the Union of India. The ruling comes as a big win for companies that might mess up a bit on paperwork, while filing their corporate taxes.

Lower Corporate Tax Rate 

Section 115BAA was introduced to give Indian companies a lower corporate tax rate, if they skipped some other tax breaks. To avail of it, one has to file Form 10-IC online, usually by the time they file their main tax return.

In this particular case, Gulati Traders did file their main tax return on time, and they also indicated that they wanted to avail of the lower tax rates. But they forgot to upload Form 10-IC by the deadline, which is when the tax authorities said that Gulati Traders will have to pay a higher tax rate.

Gulati Traders claimed the mistake was accidental, and blamed the glitches on the tax department's website. They also pointed out that they wanted to avail of the lower tax rate, which their income tax return (ITR) already showed. Denying them the benefit, they argued, was a massive overreaction by the tax department to a simple paperwork delay.

Companies With Good Intent Should Be Excused 

While passing the ruling the judges noted that dealing with Indian tax rules can be difficult, with constant changes and online issues. While procedures are important, the court said, they shouldn't override what's fair and just, especially when there's no hint of anyone trying to dodge taxes or lie.

After reading Section 115BAA and the related rules, the court found there was no clear language anywhere that said a late Form 10-IC meant that a taxpayer would not be a part of the scheme. Instead, the court said the form was just a helpful step, not the only thing to prove that one is eligible for the lower tax rate.

When a company's intentions are crystal clear in their main tax return, and the delay is because of real problems, the tax authorities should just be practical about it, the High Court said.

This ruling by the Allahabad High Court is likely to bring relief to a large number of small and medium businesses that constantly struggle to keep up with all the changing rules. The court said that tax officials should cut a little slack for honest mistakes, especially when a company’s overall behavior is straightforward and honest.