A new manufacturing co-operative society wants the 15 per cent rate. What does s.115BAE require, and is there any decided case on it?
Section 115BAE, inserted by the Finance Act 2023 with effect from 1 April 2024, taxes a resident co-operative society at 15 per cent from AY 2024-25 if it was set up and registered on or after 1 April 2023 and commenced manufacturing or production of an article or thing on or before 31 March 2024, and if the other conditions in sub-section (2) are met. I located no judicial decision on the section — no High Court, Tribunal or Supreme Court authority on s.115BAE was found, and this entry states the statute, not case law.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-04-01, reported as Section 115BAE, Income-tax Act 1961; Form 10-IFA prescribed under sub-rule (1) of Rule 21AHA of the Income-tax Rules 1962. It bears on section 115BAE, section 115BAE(1), section 115BAE(2), section 115BAE(3), section 115BAE(4), section 115BAE(5), section 115BAD, section 92BA, section 92F, section 139(1), section 80JJAA of the Income Tax Act 1961, in Co-operative Societies and Assessment & Scrutiny matters.
The eligibility window is extraordinarily narrow and that, rather than any interpretive question, is what will decide most files: the society must have been set up and registered on or after 1 April 2023 and must have commenced manufacture on or before 31 March 2024, so the entire class of eligible societies was formed inside a single year. I found no extension of the 31 March 2024 date and none is printed in the section as the department publishes it. The rate structure is also not a flat 15 per cent. Income that is neither derived from nor incidental to manufacture or production, and for which no specific rate is provided elsewhere in Chapter XII, is taxed at 22 per cent with no deduction or allowance for any expenditure in computing it. Short term capital gains on a capital asset on which no depreciation is allowable are taxed at 22 per cent. And income deemed to arise under the second proviso to sub-section (4) — the more-than-ordinary-profit adjustment where there is a close connection, which mirrors s.115BAB(6) and imports arm's length price under s.92F where a specified domestic transaction under s.92BA is involved — is taxed at 30 per cent. Failure of any sub-section (2) condition invalidates the option for that year and every subsequent year, and by the proviso to sub-section (5) the option once exercised for a previous year cannot be withdrawn for that or any other year.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Sub-section (1) provides that notwithstanding anything in the Act but subject to Chapter XII other than s.115BAD, the income-tax payable on the total income of a resident co-operative society for any previous year relevant to the assessment year beginning on or after 1 April 2024 shall, at the option of the society, be computed at 15 per cent if the conditions in sub-section (2) are satisfied. Its provisos tax at 22 per cent income neither derived from nor incidental to manufacture or production for which no specific rate is separately provided in the Chapter, allowing no deduction or allowance for expenditure in computing it; tax at 30 per cent income deemed to arise under the second proviso to sub-section (4); tax at 22 per cent short term capital gains on transfer of a capital asset on which no depreciation is allowable; and provide that failure to satisfy the sub-section (2) conditions in any previous year makes the option invalid for that assessment year and all subsequent assessment years. Sub-section (2)(a) requires that the society has been set-up and registered on or after 1 April 2023 and has commenced manufacturing or production of an article or thing on or before 31 March 2024, and that the business is not formed by splitting up or reconstruction of an existing business and does not use any machinery or plant previously used for any purpose, with Explanation 1 for imported plant and Explanation 2 for the twenty per cent threshold. Clause (b) requires that the society is not engaged in any business other than manufacture or production of any article or thing and research in relation to, or distribution of, what it makes, with an Explanation including generation of electricity and excluding development of computer software, mining, conversion of marble blocks or similar items into slabs, bottling of gas into cylinder, printing of books or production of cinematograph film, and any other notified business. Clause (c) requires the total income to be computed without the listed deductions and without set off of attributable loss or depreciation, permitting Chapter VI-A deductions only under s.80JJAA. Sub-section (4) contains the more-than-ordinary-profit adjustment where there is a close connection, with a first proviso applying arm's length price under s.92F where a specified domestic transaction under s.92BA is involved and a second proviso deeming the excess to be income. Sub-section (5) requires the option to be exercised in the prescribed manner on or before the due date under s.139(1) for the first of the returns for a previous year relevant to an assessment year commencing on or after 1 April 2024, applies it to subsequent years, and by its proviso bars withdrawal for the same or any other previous year.
Not applicable — statutory position. The operative propositions are: (a) eligibility is confined to a co-operative society set up and registered on or after 1 April 2023 that commenced manufacture on or before 31 March 2024; (b) the 15 per cent rate is not uniform, with 22 per cent on non-manufacturing income and on short term capital gains from non-depreciable assets, and 30 per cent on income deemed to arise under the more-than-ordinary-profit adjustment; (c) failure of any condition invalidates the option for that year and every subsequent year; (d) the option is exercised in Form 10-IFA under Rule 21AHA on or before the s.139(1) due date for the first return and is irrevocable; and (e) no judicial authority on the section was located.
Not applicable — statutory position.
the co-operative society has been set-up and registered on or after the 1st day of April, 2023, and has commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024 and,—
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Handle my notice → Ask a CA on WhatsAppSection 115BAE, inserted by the Finance Act 2023 with effect from 1 April 2024, taxes a resident co-operative society at 15 per cent from AY 2024-25 if it was set up and registered on or after 1 April 2023 and commenced manufacturing or production of an article or thing on or before 31 March 2024, and if the other conditions in sub-section (2) are met. I located no judicial decision on the section — no High Court, Tribunal or Supreme Court authority on s.115BAE was found, and this entry states the statute, not case law. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115BAE, section 115BAE(1), section 115BAE(2), section 115BAE(3), section 115BAE(4), section 115BAE(5), section 115BAD, section 92BA, section 92F, section 139(1), section 80JJAA of the Income Tax Act 1961. It is reported as Section 115BAE, Income-tax Act 1961; Form 10-IFA prescribed under sub-rule (1) of Rule 21AHA of the Income-tax Rules 1962. The eligibility window is extraordinarily narrow and that, rather than any interpretive question, is what will decide most files: the society must have been set up and registered on or after 1 April 2023 and must have commenced manufacture on or before 31 March 2024, so the entire class of eligible societies was formed inside a single year. I found no extension of the 31 March 2024 date and none is printed in the section as the department publishes it. The rate structure is also not a flat 15 per cent. Income that is neither derived from nor incidental to manufacture or production, and for which no specific rate is provided elsewhere in Chapter XII, is taxed at 22 per cent with no deduction or allowance for any expenditure in computing it. Short term capital gains on a capital asset on which no depreciation is allowable are taxed at 22 per cent. And income deemed to arise under the second proviso to sub-section (4) — the more-than-ordinary-profit adjustment where there is a close connection, which mirrors s.115BAB(6) and imports arm's length price under s.92F where a specified domestic transaction under s.92BA is involved — is taxed at 30 per cent. Failure of any sub-section (2) condition invalidates the option for that year and every subsequent year, and by the proviso to sub-section (5) the option once exercised for a previous year cannot be withdrawn for that or any other year. If it applies to you, the first step is this: Check the two dates before anything else: registration on or after 1 April 2023 and commencement of manufacture on or before 31 March 2024. A society outside that window cannot use s.115BAE at all and the analysis stops.
Sub-section (1) provides that notwithstanding anything in the Act but subject to Chapter XII other than s.115BAD, the income-tax payable on the total income of a resident co-operative society for any previous year relevant to the assessment year beginning on or after 1 April 2024 shall, at the option of the society, be computed at 15 per cent if the conditions in sub-section (2) are satisfied. Its provisos tax at 22 per cent income neither derived from nor incidental to manufacture or production for which no specific rate is separately provided in the Chapter, allowing no deduction or allowance for expenditure in computing it; tax at 30 per cent income deemed to arise under the second proviso to sub-section (4); tax at 22 per cent short term capital gains on transfer of a capital asset on which no depreciation is allowable; and provide that failure to satisfy the sub-section (2) conditions in any previous year makes the option invalid for that assessment year and all subsequent assessment years. Sub-section (2)(a) requires that the society has been set-up and registered on or after 1 April 2023 and has commenced manufacturing or production of an article or thing on or before 31 March 2024, and that the business is not formed by splitting up or reconstruction of an existing business and does not use any machinery or plant previously used for any purpose, with Explanation 1 for imported plant and Explanation 2 for the twenty per cent threshold. Clause (b) requires that the society is not engaged in any business other than manufacture or production of any article or thing and research in relation to, or distribution of, what it makes, with an Explanation including generation of electricity and excluding development of computer software, mining, conversion of marble blocks or similar items into slabs, bottling of gas into cylinder, printing of books or production of cinematograph film, and any other notified business. Clause (c) requires the total income to be computed without the listed deductions and without set off of attributable loss or depreciation, permitting Chapter VI-A deductions only under s.80JJAA. Sub-section (4) contains the more-than-ordinary-profit adjustment where there is a close connection, with a first proviso applying arm's length price under s.92F where a specified domestic transaction under s.92BA is involved and a second proviso deeming the excess to be income. Sub-section (5) requires the option to be exercised in the prescribed manner on or before the due date under s.139(1) for the first of the returns for a previous year relevant to an assessment year commencing on or after 1 April 2024, applies it to subsequent years, and by its proviso bars withdrawal for the same or any other previous year. The matter was decided on 2024-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not applicable — statutory position. The operative propositions are: (a) eligibility is confined to a co-operative society set up and registered on or after 1 April 2023 that commenced manufacture on or before 31 March 2024; (b) the 15 per cent rate is not uniform, with 22 per cent on non-manufacturing income and on short term capital gains from non-depreciable assets, and 30 per cent on income deemed to arise under the more-than-ordinary-profit adjustment; (c) failure of any condition invalidates the option for that year and every subsequent year; (d) the option is exercised in Form 10-IFA under Rule 21AHA on or before the s.139(1) due date for the first return and is irrevocable; and (e) no judicial authority on the section was located.
Not applicable — statutory position. In the words reproduced by the source cited on this page: "the co-operative society has been set-up and registered on or after the 1st day of April, 2023, and has commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024 and,—"
It was decided by the CBDT Circulars & Instructions on 2024-04-01 and is reported as Section 115BAE, Income-tax Act 1961; Form 10-IFA prescribed under sub-rule (1) of Rule 21AHA of the Income-tax Rules 1962. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115BAE, section 115BAE(1), section 115BAE(2), section 115BAE(3), section 115BAE(4), section 115BAE(5), section 115BAD, section 92BA, section 92F, section 139(1), section 80JJAA, 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 cuts both ways and is cited by both sides. Not applicable — statutory position. The operative propositions are: (a) eligibility is confined to a co-operative society set up and registered on or after 1 April 2023 that commenced manufacture on or before 31 March 2024; (b) the 15 per cent rate is not uniform, with 22 per cent on non-manufacturing income and on short term capital gains from non-depreciable assets, and 30 per cent on income deemed to arise under the more-than-ordinary-profit adjustment; (c) failure of any condition invalidates the option for that year and every subsequent year; (d) the option is exercised in Form 10-IFA under Rule 21AHA on or before the s.139(1) due date for the first return and is irrevocable; and (e) no judicial authority on the section was located. It arises in Co-operative Societies and Assessment & Scrutiny matters, on section 115BAE, section 115BAE(1), section 115BAE(2), section 115BAE(3), section 115BAE(4), section 115BAE(5), section 115BAD, section 92BA, section 92F, section 139(1), section 80JJAA of the Income Tax Act 1961, and was decided by Not applicable — statutory text. 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. Segregate the society's income streams in the computation, because non-manufacturing income that is neither derived from nor incidental to manufacture attracts 22 per cent with no expenditure allowed against it, and short term capital gains on non-depreciable assets attract 22 per cent. Check the excluded activities in the Explanation to clause (b) of sub-section (2) — generation of electricity counts as manufacture, but software development, mining, conversion of marble blocks into slabs, bottling of gas into cylinders and printing of books or production of cinematograph film do not. Compare against s.115BAD at 22 per cent, which has no manufacture or date conditions, before committing; the s.115BAE option is irrevocable once exercised. Do not represent to a client that there is authority on this section. There is none that I could find, and any argument will be run on the text and on decisions under the cognate s.115BAB.
Validity check could not be completed. Validity check could not be completed. The department's section page carries the Year stamp '2024 (No. 1)', so I cannot certify from it that the section has not been amended since; no other version page exists on the department's site and no extension of the 31 March 2024 commencement date was located, but that is a nil search return rather than a positive verification. No case law on the section was found. The label is 'unverified' rather than 'good law' precisely because the currency of the text could not be confirmed against a current-year departmental page. 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 section text was read on the department's page incometaxindia.gov.in/w/section-115bae-1, which carries the Year stamp '2024 (No. 1)'. That is not a current-year stamp, and I therefore cannot exclude a later amendment from that page alone; but it is the only version of s.115BAE the department publishes, a targeted search of the domain returned no other section-115bae page, and a general search located no extension of the 31 March 2024 commencement date. The department's tax-rate chart for co-operative societies describes the s.115BAE option as available for AY 2024-25 and 2025-26 and taxes income from manufacturing activities at a flat 15 per cent subject to conditions, without setting out the conditions. The departmental tutorial 'Special Regimes for Taxation [As amended by Finance Act, 2025]' at incometaxindia.gov.in/Tutorials/74.Special-Regimes-for-Taxation.pdf returned a 404 on this pass and would be the first thing a later pass should retry, since it would settle whether the commencement date has been extended. NO CASE LAW ENTRY IS MADE HERE BECAUSE NONE WAS FOUND: an indiankanoon search for '115BAE' with 'co-operative society' and 'manufacturing' returned only bare Act and Finance Act pages and one unrelated Gujarat High Court judgment. That is a nil return on one search formulation and is not proof of absence. The date in the decided_on field, 1 April 2024, is the date from which s.115BAE takes effect and is NOT a decision date. On verification two further indiankanoon search formulations were run and both were nil as to any decision on the section: a bare '115BAE' search returned sixteen results, all of which are Finance Act, Income Tax Act 2025 or bare-Act pages or judgments in which the section appears only in passing (Pr. CIT v DCM Shriram Ltd, CIT Gandhinagar v Gujarat State Energy Generation Ltd, Central Govt. Employees Consumer Coop. v ITO, Sanghi Industries, Brahmos Realty and ACIT v Mytrah Vayu); and a search for '"Form 10-IFA" OR "21AHA"' returned no matching results at all. The absence of authority is therefore now supported by three independent formulations rather than one, though it is still a nil return and not proof of absence. 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.
Not applicable — statutory position. The operative propositions are: (a) eligibility is confined to a co-operative society set up and registered on or after 1 April 2023 that commenced manufacture on or before 31 March 2024; (b) the 15 per cent rate is not uniform, with 22 per cent on non-manufacturing income and on short term capital gains from non-depreciable assets, and 30 per cent on income deemed to arise under the more-than-ordinary-profit adjustment; (c) failure of any condition invalidates the option for that year and every subsequent year; (d) the option is exercised in Form 10-IFA under Rule 21AHA on or before the s.139(1) due date for the first return and is irrevocable; and (e) no judicial authority on the section was located.
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