My company ticked s.115BAA in the return but Form 10-IC went in late, the CPC has taxed it at the normal rate, the rectification has been refused and the appeal time is long gone - what is actually left?
The client is a closely held private limited company machining auto components, assessed at a circle in Coimbatore. For AY 2023-24 the return was filed on 30 October 2023, one day inside the due date. Part A-GEN of the ITR-6 carries Yes against the option under s.115BAA and the tax was computed at 25.168 per cent on a total income of Rs 4,62,00,000. Form 10-IC was not filed with the return; the consultant filed it on 16 February 2024, 108 days after the due date. Two other things went into the same return. Schedule MATC carried brought-forward MAT credit of Rs 18,00,000 and set off Rs 11,20,000 of it against the year's liability. Schedule DPM included additional depreciation of Rs 7,80,000 under s.32(1)(iia) on plant installed in November 2022. An intimation under s.143(1) dated 18 December 2024 refused the concessional rate for want of a Form 10-IC filed within the s.139(1) time, recomputed the tax at 34.944 per cent, allowed the MAT credit set-off and raised a demand of Rs 41,60,000 with interest. No notice of any proposed adjustment was issued before it. Nobody appealed. A rectification application filed on 20 January 2025 was refused by an order of 4 August 2026 running to four lines. The company holds both acknowledgements, the tax audit report and a board minute of 12 October 2023 resolving to opt.
Print the Part A-GEN page of the filed ITR-6 and the Form 10-IC acknowledgement side by side and date both. Everything downstream turns on one fact: whether the option was exercised in the return itself. Where it was, the Form is the declaration that follows the exercise and the whole argument is about condoning its delay. Where it was not, the Supreme Court has closed the door and no circular reopens it. Then diary 31 March 2027, three years from the end of AY 2023-24, because on the Board's own terms that is the outer date for the only live remedy.
Section 115BAA(5) requires the option to be exercised in the prescribed manner on or before the due date under s.139(1). The Supreme Court entry in this library is the hard end of that rule: a company that did not opt in the return itself gets nothing, because the 2022 circular condones only a late Form 10-IC where the option was in fact exercised in the return, and a company that marked none of the above in the ITR-6 is outside it. Read the other way round, that decision is this company's foundation. The tick in Part A-GEN and a tax computation at 25.168 per cent are the exercise. A Mumbai Bench has said so in terms: where the option was clearly exercised in the return and the tax computed accordingly, the substantive requirement of s.115BAA(5) is satisfied, the later filing of the Form is procedural, and the time limit for the Form is directory.
The Board's relief is year-specific and it does not reach AY 2023-24. Its 2022 circular condoned Form 10-IC delays for AY 2020-21, and the Bombay High Court quashed a rejection under it where the company had selected the section in the return, had saved a draft Form on the portal before the cut-off and could not submit it because the financial year was not offered. Its October 2023 circular did the same for AY 2021-22, and the same Court held that it imposes no fourth condition - neither that the return had already been processed and a demand raised, nor the shortfall point. For AY 2022-23 and later there is no blanket circular, and the Gujarat High Court has still directed acceptance of a Form filed 53 days late where the company was otherwise eligible and refusal produced a liability of over fifty lakh at the normal rate. The Allahabad High Court has directed a Commissioner to condone, accept the Form and recompute. Disproportion between a procedural slip and the tax it costs is the argument that has been working.
Two lines of orders treat the Form as directory once the substantive option is in the return. A Mumbai Bench gave the concessional rate itself, condoning the delay in the Form rather than sending the company to the Commissioner. Another Bench held that a Form 10-IC filed with a corrected return in answer to a s.139(9) defect notice sufficiently demonstrated the intention to opt, and that the lapse in the original return was not fatal. The parallel section carries the same treatment: a Delhi Bench held that where the substantive conditions of s.115BAB are satisfied, failure to file Form 10-ID by the s.139(1) due date is a procedural lapse and not a fatal flaw, and the Gujarat High Court directed acceptance of a Form 10-ID filed months late because once the benefit is claimed in the return the separate form is merely procedural. The Bombay High Court has also held that filing the return itself within the s.139(1) time is not a condition precedent, because sub-section (5) fixes that time for the declaration and not for the return.
The Bombay High Court has held that the first proviso to s.143(1)(a) is mandatory, so no intimation making an adjustment to the return can be passed unless the proposed adjustment is first intimated to the assessee and he is given a chance to respond, and it rejected the department's argument that the reply could not have changed anything. That entry is marked good law. On this file nothing was put to the company before 18 December 2024, and a reply would have carried the Form 10-IC acknowledgement of 16 February 2024 and the board minute - so the answer that no prejudice was caused is not available.
The option can fail even where it cannot be withdrawn, and this return contains two ways of failing it. A Tribunal has held exactly that: the option cannot be withdrawn, but because s.115JAA(8) bars MAT credit to a company that has exercised it, a company which claims MAT credit in its return has not satisfied the conditions in s.115BAA(2). The Board said the same in October 2019 - because s.115JB itself ceases to apply to a company exercising the option, the credit of MAT paid is not available consequent on exercising it. The additional depreciation is the same problem from the other end. Sub-section (2) computes total income without the deductions it lists, additional depreciation under s.32(1)(iia) and the s.10AA deduction among them, and the Part C deductions in Chapter VI-A go with them except s.80JJAA and s.80M, which the library's pages on those two sections confirm survive. A start-up holiday does not. Surrender the credit and the additional depreciation by a revised computation filed with the application, so the Commissioner is not handed the answer.
Companies opt into s.115BAA for the exclusion, not for the rate alone. Sub-section (5A) of s.115JB says in terms that the section shall not apply to a person who has exercised the option under s.115BAA or s.115BAB, and a Tribunal has applied it to a CPC processing exactly like this one: once the option is held good the MAT provisions cease to apply and the liability must be computed under s.115BAA without invoking s.115JB. The Board's 2019 circular starts from the same premise when it explains why the credit goes. The library's page on the two concessional regimes states the whole bargain in a line - 22 per cent with surcharge and cess, an effective 25.17 per cent, against the incentive deductions and MAT - and that is the paragraph to put in front of the Commissioner, because it shows the company gave up something real for what is now being refused on a form.
The option runs for the year it is exercised and for every subsequent year, and the library's concept page records that it is irrevocable. The Tribunal entry on MAT credit draws the distinction that decides the later years: the option cannot be withdrawn, but it can fail for want of the conditions in sub-section (2). Withdrawal is a thing the company does and cannot; failure is a thing the return does to itself, year by year. That matters here because the two defects in the AY 2023-24 return - the MAT credit set-off and the additional depreciation - are of a kind that can recur, and because the company has continued to file at the concessional rate for two more years without any fresh Form.
Where the return itself carried the option and the Form went in within three years of the end of the assessment year, condonation is granted more often than not, but slowly - a first rejection by the Commissioner and a writ against it is the ordinary path, not the exception. Where the application is made after the three-year point the outcome depends on which High Court, and the library holds a decision each way. The appellate route is the faster of the two on paper and the less reliable in practice: a Bench that condones the delay itself is still a Bench nobody is bound by, and the department appeals. The commonest bad outcome is not refusal on the merits but a file that simply runs out of time - a rectification refused in four lines, no appeal filed against it, and the outer date passing while the company waits for the Commissioner.
