Section 115BAB

Section 115BAB — the law in short

What the courts have decided on section 115BAB, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Royal LED Equipments Pvt. Ltd. v CCIT High CourtHelps taxpayer
  I claimed the 15 per cent rate under s.115BAB in my return but the portal would not accept Form 10-ID before the due date. My s.119(2)(b) application was rejected before Circular No. 17/2024 came out, so the Department says it can do nothing. Where does that leave me?
  The Gujarat High Court set the rejection aside and directed the authorities to accept the Form 10-ID filed on 12 September 2022 as legal and valid. Once the benefit is claimed in the return, the filing of the separate form is merely procedural and should not be denied where the assessee shows sufficient cause; and the very fact that the Board had to issue Circulars 6/2022, 19/2023 and 17/2024 established that assessees had faced a real problem in filing Forms 10-IC and 10-ID in time.
• Khalsae-Vehicles Pvt. Ltd. v DCIT, Circle-3(1)(1) ITATHelps taxpayerNo later treatment found
  I filed Form 10-ID and my first return under s.115BAB after the s.139(1) due date but within the s.139(4) time. The CPC has now denied me the 15 per cent rate in a later year. Is the option gone for good?
  Not on these facts. The Delhi Tribunal held that where the substantive conditions of s.115BAB are undisputedly satisfied, the failure to file Form 10-ID on or before the s.139(1) due date is a procedural lapse and is not a fatal flaw, and allowed the appeal for AY 2023-24. The Form there had been filed in the very first year, along with a first return that was belated but within the s.139(4) window.
• Statutory position — s.115BAB(2) conditions, the Form 10-ID option and the s.115BAB(6) more-than-ordinary-profit adjustment CBDT Circulars & InstructionsCuts both ways
  My client wants the 15 per cent rate for a new manufacturing company. What exactly must it satisfy, and what is the exposure once it is in?
  Section 115BAB requires that the company was set up and registered on or after 1 October 2019 and commenced manufacturing or production of an article or thing on or before 31 March 2024, that it is not formed by splitting up or reconstruction, that it uses no previously used machinery or plant and no building previously used as a hotel or convention centre in respect of which s.80-ID was claimed, that it carries on no business other than manufacture or production and research in relation to, or distribution of, what it makes, and that its total income is computed without the excluded deductions. The option is exercised under s.115BAB(7) in Form 10-ID on or before the s.139(1) due date for the first return, and once exercised it cannot be withdrawn for that or any other previous year.
• Statutory position — s.35AD: the fourteen specified businesses and the commencement date each must satisfy under s.35AD(5), the hundred per cent capital deduction, the 150 per cent window that ran from AY 2013-14 to AY 2017-18, and the day the deduction became optional CBDT Circulars & InstructionsCuts both ways
  My client is setting up a cold storage and wants the section 35AD deduction. Which businesses are actually within the section, from what date does each qualify, is the deduction still a hundred per cent, and can we choose not to claim it?
  Section 35AD allows a deduction of the WHOLE of any capital expenditure incurred wholly and exclusively for a specified business in the previous year in which it is incurred, with a proviso pulling pre-commencement capital expenditure into the year operations commence if it was capitalised in the books on that date. Since the Finance Act, 2020 (Act 12 of 2020) amended sub-section (1) with effect from 1 April 2020, the words are "An assessee shall, if he opts, be allowed a deduction" — the deduction became OPTIONAL from AY 2020-21, which is what makes the section 115BAA and 115BAB concessional regimes workable. There are fourteen specified businesses in section 35AD(8)(c), and each qualifies only if it commences operations on or after the date given for it in section 35AD(5). These are the dates the business must have COMMENCED OPERATIONS on or after; they are not the dates on which each business was added to the list by amendment, and the two do not coincide. The dates are as follows: cross-country natural gas pipeline networks from 1 April 2007; a two-star-or-above hotel, a hospital with at least a hundred beds, and a slum redevelopment or rehabilitation housing project from 1 April 2010; an affordable housing project and a new or newly installed fertiliser plant from 1 April 2011; an inland container depot or container freight station, bee-keeping and honey and beeswax production, and a sugar warehousing facility from 1 April 2012; a slurry pipeline for transporting iron ore and a semi-conductor wafer fabrication unit from 1 April 2014; a new infrastructure facility from 1 April 2017; and everything else falling within the list — cold chain facilities, agricultural produce warehousing and crude or petroleum oil pipelines — from 1 April 2009. A weighted deduction of one and one-half times ran alongside for five businesses under sub-section (1A), inserted by the Finance Act, 2012 with effect from 1 April 2013 and OMITTED by the Finance Act, 2016 (Act 28 of 2016) with effect from 1 April 2018; so 150 per cent is available for AY 2013-14 to AY 2017-18 and a hundred per cent before and after.
• Statutory position — s.92BA: clause (i) was OMITTED with effect from 1 April 2017, so a s.40A(2)(b) payment is no longer a specified domestic transaction — what survives, the twenty crore threshold, and clause (va) added for s.115BAB companies CBDT Circulars & InstructionsCuts both ways
  The TPO has been asked to benchmark our payments to related parties under s.40A(2)(b). Is that still a specified domestic transaction at all?
  No. Clause (i) of s.92BA — "any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A" — was OMITTED by Act No. 7 of 2017 with effect from 1 April 2017, and the omitted words are set out in an amendment footnote, so there is no doubt what went. What survives is: clause (ii), any transaction referred to in s.80A; clause (iii), any transfer of goods or services referred to in s.80-IA(8); clause (iv), any business transacted between the assessee and another person as referred to in s.80-IA(10); clause (v), any transaction referred to in any other section under Chapter VI-A or s.10AA to which s.80-IA(8) or (10) applies; clause (va), any business transacted between the persons referred to in s.115BAB(6), inserted by Act No. 46 of 2019 with effect from 1 April 2020; and clause (vi), any other transaction as may be prescribed. The whole definition applies only "where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of twenty crore rupees" — the word "twenty" having been substituted for "five" by the Finance Act, 2015 with effect from 1 April 2016.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.