We filed the original return under MAT claiming MAT credit, then filed a revised return within the due date opting for s.115BAA. The Assessing Officer says that is a prohibited withdrawal of the option. Is it, and what happens to the MAT credit and our brought-forward losses?
It is not a withdrawal. A revised return under s.139(5) substitutes the original return and assumes the character of a return under s.139(1), so an option exercised for the first time in a revised return filed within the due date is a valid first exercise — there was no earlier exercise capable of being withdrawn. But once the concessional regime is allowed, no MAT credit can be claimed for that year; and s.115BAA(2) bars set-off only of losses attributable to the deductions it specifies, not of ordinary brought-forward business and capital losses.
Decided by the ITAT (Vijay Pal Rao, Vice President and Madhusudan Sawdia, Accountant Member (ITAT Hyderabad 'B' Bench)) on 2025-10-08, reported as ITA No.600/Hyd/2025, Assessment Year 2021-22; heard 16 September 2025, pronounced 8 October 2025. It bears on section 115BAA, section 115BAA(2), section 115JB, section 115JAA, section 139(1), section 139(5), section 10AA, section 32(1)(iia), section 32AD, section 35, section 35CCC, section 35CCD, section 72 of the Income Tax Act 1961, in Assessment & Scrutiny, Appeals and Deductions & Disallowances matters.
Three separate points a practitioner needs, and they cut in different directions. The first is the answer to the commonest CPC and assessment objection — that having first returned income under MAT the company had "opted out" of s.115BAA and could not come back; the Tribunal treats that as legally untenable, relying on the Board's own FAQ on ITR-6, which permits the option to be exercised in a revised return. The second is the price, and it is unforgiving: the MAT credit for that year goes, and the Tribunal directed the Assessing Officer to verify and withdraw it. The third is a real limit on the Department: s.115BAA(2) prohibits set-off of loss and unabsorbed depreciation attributable to s.10AA, s.32(1)(iia), s.32AD, s.35, s.35CCC and s.35CCD, and Circular 29/2019 does not go further; a regular brought-forward business loss or capital loss is unaffected. Note the tension a reader must be told about: the Mumbai Bench in Brahmos Realty, already in the library, treats a MAT credit claim as invalidating the option, whereas this Bench treats the option as good and simply denies the credit.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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For AY 2021-22 the assessee company filed its original return under the normal provisions claiming MAT credit. It filed a revised return on 15 February 2022 opting for the concessional regime under s.115BAA. The Assessing Officer rejected the revised claim, holding that having first filed under MAT, the subsequent exercise of the s.115BAA option through a revised return amounted to a "withdrawal" prohibited by CBDT Circular No.29/2019, and further disallowed set-off of brought-forward business losses of Rs.3,17,89,595 and capital losses of Rs.8,57,73,902 on the footing that s.115BAA(2) read with Circular 29/2019 barred such set-off, assessing income at Rs.11,96,79,556. The CIT(A), NFAC, by order dated 20 February 2025, allowed the appeal, holding that a revised return under s.139(5) substitutes the original return so that exercise of the option through a revised return before the due date is valid, and that the losses disallowed were not covered by the specific restrictions in s.115BAA(2). The Revenue appealed. Before the Tribunal the assessee pointed to the Board's FAQ on ITR-6 on the Department's portal stating that a company may file a revised return opting for s.115BAA even if the original return was filed otherwise, and pointed out that it had claimed no deduction under s.32(1)(iia), s.32AD, s.35, s.35CCC, s.35CCD or Chapter VI-A other than s.80JJAA and s.80M.
The Revenue's appeal was dismissed in terms of the Tribunal's observations. On the first issue, the assessee having filed a revised return within the due date exercising the s.115BAA option for the first time, the revised return substitutes the original return and assumes the character of a return under s.139(1), and the Assessing Officer's view that such filing constitutes a withdrawal of an earlier option is legally untenable. The Tribunal further held that once the concessional tax regime is allowed for AY 2021-22, the assessee is not eligible to claim any MAT credit in that year, and directed the Assessing Officer to verify the MAT credit accordingly. On the second issue, s.115BAA(2) specifically prohibits set-off of losses attributable to certain deductions — s.10AA, s.32(1)(iia), s.32AD, s.35, s.35CCC and s.35CCD, and unabsorbed depreciation relatable thereto — and the CIT(A) having given a factual finding after verifying the revised return and supporting schedules that the assessee's brought-forward business loss and capital loss were not of that nature, the assessee is entitled to set off those losses (paragraphs 9 to 13).
On the first issue there was no dispute that the revised return was filed within the due date and that the s.115BAA option was exercised in it for the first time. In the Tribunal's considered view a revised return substitutes the original return and assumes the character of a return under s.139(1); it noted that the CIT(A) had extracted FAQ no.3 of the Board's own clarification, which permits exercise of the s.115BAA option in a revised return, so that the Assessing Officer's interpretation that such a filing constituted a withdrawal of an earlier option was legally untenable — there having been no earlier exercise of the option capable of withdrawal (paragraphs 9 and 10). Having upheld the option, the Tribunal held as a consequence that the assessee could claim no MAT credit for AY 2021-22 and directed verification on that footing (paragraph 10). On the second issue the Tribunal read s.115BAA(2) and found that it prohibits set-off only of losses attributable to the deductions there specified, together with unabsorbed depreciation relatable to them, and that the CIT(A) had given a categorical factual finding, after verifying the revised return and supporting schedules, that the assessee's brought-forward business loss and capital loss were not of that prohibited nature; the set-off was accordingly allowable (paragraph 12).
Further, we also hold that once the concessional tax regime is allowed to the assessee for A.Y. 2021-22, the assessee would not be eligible to claim any MAT credit in the A.Y. 2021-22.
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Handle my notice → Ask a CA on WhatsAppIt is not a withdrawal. A revised return under s.139(5) substitutes the original return and assumes the character of a return under s.139(1), so an option exercised for the first time in a revised return filed within the due date is a valid first exercise — there was no earlier exercise capable of being withdrawn. But once the concessional regime is allowed, no MAT credit can be claimed for that year; and s.115BAA(2) bars set-off only of losses attributable to the deductions it specifies, not of ordinary brought-forward business and capital losses. This was decided by the ITAT (Vijay Pal Rao, Vice President and Madhusudan Sawdia, Accountant Member (ITAT Hyderabad 'B' Bench)) and bears on section 115BAA, section 115BAA(2), section 115JB, section 115JAA, section 139(1), section 139(5), section 10AA, section 32(1)(iia), section 32AD, section 35, section 35CCC, section 35CCD, section 72 of the Income Tax Act 1961. It is reported as ITA No.600/Hyd/2025, Assessment Year 2021-22; heard 16 September 2025, pronounced 8 October 2025. Three separate points a practitioner needs, and they cut in different directions. The first is the answer to the commonest CPC and assessment objection — that having first returned income under MAT the company had "opted out" of s.115BAA and could not come back; the Tribunal treats that as legally untenable, relying on the Board's own FAQ on ITR-6, which permits the option to be exercised in a revised return. The second is the price, and it is unforgiving: the MAT credit for that year goes, and the Tribunal directed the Assessing Officer to verify and withdraw it. The third is a real limit on the Department: s.115BAA(2) prohibits set-off of loss and unabsorbed depreciation attributable to s.10AA, s.32(1)(iia), s.32AD, s.35, s.35CCC and s.35CCD, and Circular 29/2019 does not go further; a regular brought-forward business loss or capital loss is unaffected. Note the tension a reader must be told about: the Mumbai Bench in Brahmos Realty, already in the library, treats a MAT credit claim as invalidating the option, whereas this Bench treats the option as good and simply denies the credit. If it applies to you, the first step is this: Check the date of the revised return against the s.139(1) due date; the whole of the first point depends on the revised return having been filed within it.
For AY 2021-22 the assessee company filed its original return under the normal provisions claiming MAT credit. It filed a revised return on 15 February 2022 opting for the concessional regime under s.115BAA. The Assessing Officer rejected the revised claim, holding that having first filed under MAT, the subsequent exercise of the s.115BAA option through a revised return amounted to a "withdrawal" prohibited by CBDT Circular No.29/2019, and further disallowed set-off of brought-forward business losses of Rs.3,17,89,595 and capital losses of Rs.8,57,73,902 on the footing that s.115BAA(2) read with Circular 29/2019 barred such set-off, assessing income at Rs.11,96,79,556. The CIT(A), NFAC, by order dated 20 February 2025, allowed the appeal, holding that a revised return under s.139(5) substitutes the original return so that exercise of the option through a revised return before the due date is valid, and that the losses disallowed were not covered by the specific restrictions in s.115BAA(2). The Revenue appealed. Before the Tribunal the assessee pointed to the Board's FAQ on ITR-6 on the Department's portal stating that a company may file a revised return opting for s.115BAA even if the original return was filed otherwise, and pointed out that it had claimed no deduction under s.32(1)(iia), s.32AD, s.35, s.35CCC, s.35CCD or Chapter VI-A other than s.80JJAA and s.80M. The matter was decided on 2025-10-08 by the ITAT (Vijay Pal Rao, Vice President and Madhusudan Sawdia, Accountant Member (ITAT Hyderabad 'B' Bench)). On those facts the ITAT held as follows. The Revenue's appeal was dismissed in terms of the Tribunal's observations. On the first issue, the assessee having filed a revised return within the due date exercising the s.115BAA option for the first time, the revised return substitutes the original return and assumes the character of a return under s.139(1), and the Assessing Officer's view that such filing constitutes a withdrawal of an earlier option is legally untenable. The Tribunal further held that once the concessional tax regime is allowed for AY 2021-22, the assessee is not eligible to claim any MAT credit in that year, and directed the Assessing Officer to verify the MAT credit accordingly. On the second issue, s.115BAA(2) specifically prohibits set-off of losses attributable to certain deductions — s.10AA, s.32(1)(iia), s.32AD, s.35, s.35CCC and s.35CCD, and unabsorbed depreciation relatable thereto — and the CIT(A) having given a factual finding after verifying the revised return and supporting schedules that the assessee's brought-forward business loss and capital loss were not of that nature, the assessee is entitled to set off those losses (paragraphs 9 to 13).
On the first issue there was no dispute that the revised return was filed within the due date and that the s.115BAA option was exercised in it for the first time. In the Tribunal's considered view a revised return substitutes the original return and assumes the character of a return under s.139(1); it noted that the CIT(A) had extracted FAQ no.3 of the Board's own clarification, which permits exercise of the s.115BAA option in a revised return, so that the Assessing Officer's interpretation that such a filing constituted a withdrawal of an earlier option was legally untenable — there having been no earlier exercise of the option capable of withdrawal (paragraphs 9 and 10). Having upheld the option, the Tribunal held as a consequence that the assessee could claim no MAT credit for AY 2021-22 and directed verification on that footing (paragraph 10). On the second issue the Tribunal read s.115BAA(2) and found that it prohibits set-off only of losses attributable to the deductions there specified, together with unabsorbed depreciation relatable to them, and that the CIT(A) had given a categorical factual finding, after verifying the revised return and supporting schedules, that the assessee's brought-forward business loss and capital loss were not of that prohibited nature; the set-off was accordingly allowable (paragraph 12). In the words reproduced by the source cited on this page: "Further, we also hold that once the concessional tax regime is allowed to the assessee for A.Y. 2021-22, the assessee would not be eligible to claim any MAT credit in the A.Y. 2021-22." The decision followed or applied CBDT FAQ no.3 on ITR-6, as extracted in the CIT(A) order — relied on as permitting exercise of the s.115BAA option in a revised return; CBDT Circular No.29/2019 — read as barring set-off only of losses attributable to additional depreciation and the specified deductions, and not regular losses.
It was decided by the ITAT on 2025-10-08 and is reported as ITA No.600/Hyd/2025, Assessment Year 2021-22; heard 16 September 2025, pronounced 8 October 2025. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 115BAA, section 115BAA(2), section 115JB, section 115JAA, section 139(1), section 139(5), section 10AA, section 32(1)(iia), section 32AD, section 35, section 35CCC, section 35CCD, section 72, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Revenue's appeal was dismissed in terms of the Tribunal's observations. On the first issue, the assessee having filed a revised return within the due date exercising the s.115BAA option for the first time, the revised return substitutes the original return and assumes the character of a return under s.139(1), and the Assessing Officer's view that such filing constitutes a withdrawal of an earlier option is legally untenable. The Tribunal further held that once the concessional tax regime is allowed for AY 2021-22, the assessee is not eligible to claim any MAT credit in that year, and directed the Assessing Officer to verify the MAT credit accordingly. On the second issue, s.115BAA(2) specifically prohibits set-off of losses attributable to certain deductions — s.10AA, s.32(1)(iia), s.32AD, s.35, s.35CCC and s.35CCD, and unabsorbed depreciation relatable thereto — and the CIT(A) having given a factual finding after verifying the revised return and supporting schedules that the assessee's brought-forward business loss and capital loss were not of that nature, the assessee is entitled to set off those losses (paragraphs 9 to 13). It arises in Assessment & Scrutiny, Appeals and Deductions & Disallowances matters, on section 115BAA, section 115BAA(2), section 115JB, section 115JAA, section 139(1), section 139(5), section 10AA, section 32(1)(iia), section 32AD, section 35, section 35CCC, section 35CCD, section 72 of the Income Tax Act 1961, and was decided by Vijay Pal Rao, Vice President and Madhusudan Sawdia, Accountant Member (ITAT Hyderabad 'B' Bench). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Produce the CBDT FAQ on ITR-6 permitting the s.115BAA option in a revised return — that is the material the CIT(A) extracted and the Tribunal relied on. Do not claim MAT credit in the year you opt in; expect it to be withdrawn on verification, and quantify the loss of credit before advising the option. Where set-off of brought-forward losses is refused, take the schedules and demonstrate that the losses are not attributable to any of the deductions listed in s.115BAA(2); a bare assertion will not do, since the CIT(A) here gave a factual finding after verifying the revised return and supporting schedules. Flag the conflicting Tribunal line to the client before relying on this decision: Brahmos Realty proceeds on a different footing on the same combination of facts.
Still good law. The citation graph shows nothing, but the Mumbai Bench has applied this order. In Electronfab Engineering Pvt. Ltd. v. ITO (16 March 2026) the Bench set out para 7 of this order, cited as (2025) 179 taxmann.com 217 (Hyd. Trib.), and relied on it with Aprameya Engineering for the proposition that a procedural lapse does not defeat a substantive claim where the intention to take the benefit is clear and the statutory conditions are met - that is, the limb of this order that accepts a s.115BAA option exercised for the first time in a revised return filed within time. The separate holding that MAT credit lapses on exercising the option has not itself been taken up. Nothing overruling or doubting the order was found and no s.260A appeal was traced. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The electronic text is incomplete in two places that matter. At paragraph 2 the words "The Revenue has raised the following grounds of appeal :" are followed by nothing — the grounds have dropped out of the report. At paragraphs 9 and 11 the Tribunal says it has gone through paragraphs 6.2.4 to 6.2.9 and 6.3 to 6.3.9 of the CIT(A)'s order "which is to the following effect" and the extracts are likewise absent, leaving only page markers; so the CIT(A)'s reasoning, including the text of the CBDT FAQ no.3 on ITR-6 the Tribunal relies on at paragraph 10, could not be read. The Tribunal's own findings at paragraphs 9, 10, 12 and 13 are complete and are what is summarised here. The direction at paragraph 10 is expressed twice and somewhat awkwardly — the operative direction is to verify the MAT credit, which the assessee is not eligible for in AY 2021-22. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Revenue's appeal was dismissed in terms of the Tribunal's observations. On the first issue, the assessee having filed a revised return within the due date exercising the s.115BAA option for the first time, the revised return substitutes the original return and assumes the character of a return under s.139(1), and the Assessing Officer's view that such filing constitutes a withdrawal of an earlier option is legally untenable. The Tribunal further held that once the concessional tax regime is allowed for AY 2021-22, the assessee is not eligible to claim any MAT credit in that year, and directed the Assessing Officer to verify the MAT credit accordingly. On the second issue, s.115BAA(2) specifically prohibits set-off of losses attributable to certain deductions — s.10AA, s.32(1)(iia), s.32AD, s.35, s.35CCC and s.35CCD, and unabsorbed depreciation relatable thereto — and the CIT(A) having given a factual finding after verifying the revised return and supporting schedules that the assessee's brought-forward business loss and capital loss were not of that nature, the assessee is entitled to set off those losses (paragraphs 9 to 13).
TaxSphere, “ACIT v Lahari Holiday Homes (P) Ltd — the s.115BAA option can be exercised in a revised return, and the MAT credit then goes”, https://taxnotice.vittsphere.com/caselaw/case/lahari-holiday-homes-115baa-revised-return-mat-credit-lapses/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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My client company has a large MAT credit and wants the 22 per cent rate under s.115BAA. Does the credit survive the switch?
CPC has processed our return under s.143(1), rejected the s.115BAA option because Form 10-IC was late, and raised a demand by computing book profit under s.115JB. Can it do both?
My staff filed Form 10-IC by mistake, then I filed the return under the normal provisions and set off my brought-forward MAT credit. CPC has taxed me under s.115BAA and wiped the credit out. Section 115BAA says the option cannot be withdrawn. Am I stuck?
A company client has been told it can claim a fifteen per cent investment allowance on new plant. Which years does section 32AC actually cover, what is the investment threshold, and what happens if the plant is sold?
