Telangana High Court Restores Relief To Radiant Digital Solutions, Says Bona Fide Lapse Can't Deny Benefit

The Telangana High Court on 2 July held that a company cannot be denied the benefit of the concessional corporate tax regime under Section 115BAA of the Income Tax Act due to a bona fide delay in filing Form 10-IC, where it has substantially complied with the statutory requirements.

A Division Bench of Justices P. Sam Koshy and Narsing Rao Nandikonda allowed the writ petition filed by Radiant Digital Solutions Pvt. Ltd. and set aside the Income Tax Department's order rejecting the company's application for condonation of delay under Section 119(2)(b) of the Income Tax Act (which empowers authorities to admit claims or applications delayed due to genuine hardship). He held:

“The primary reason the CBDT issued the two Circulars was that during COVID-19, many taxpayers, like the petitioner, across the country faced obstacles and hardships in filing the requisite form 10-IC as the provision of Section 115BAA of the Act was newly introduced immediately before COVID-19.”

The dispute arose after Radiant Digital Solutions filed its income tax return for Assessment Year 2020-21 within the prescribed time and opted for the concessional tax rate under Section 115BAA of the Income Tax Act (which provides for a lower corporate tax rate subject to specified conditions).

Although the company disclosed its option to avail the concessional tax regime in its income tax return and tax audit report, it failed to separately file the prescribed Form 10-IC. Consequently, the Centralised Processing Centre denied the concessional tax benefit, raised a tax demand and withheld the refund otherwise payable to the company.

The company approached the High Court contending that Assessment Year 2020-21 was the first year of implementation of the new tax regime and that it was under a bona fide belief that disclosure of the option in the income tax return and audit report was sufficient compliance. It also submitted that the delay occurred due to an inadvertent procedural lapse during the COVID-19 period.

The Court accepted the company's submissions and held that there was substantial compliance with the statutory requirements as Radiant Digital Solutions had exercised the option in its return, paid tax at the concessional rate and fulfilled other conditions prescribed under Section 115BAA.

The Bench also relied on CBDT Circulars issued in 2023 and 2024, which permit condonation of delay in filing Form 10-IC where genuine hardship is established. It observed that the circulars were issued considering that several taxpayers faced difficulties in filing the form during the initial implementation of the concessional tax regime.

Further, it held that the authorities had adopted an overly technical approach by rejecting the company's request and that genuine hardship under Section 119(2)(b) should be interpreted liberally, particularly in view of the circumstances during the COVID-19 period. The Bench stated:

“The respondents ought to have allowed the application of condonation of delay in light of 'genuine hardship' caused to the petitioner under Section 119(2)(b) of the Act, especially when the petitioner made attempts to rectify its mistake by making representations immediately after discovering the defect in availing the concessional tax rate under Section 115BAA of the Act.”

Accordingly, the High Court set aside the rejection order passed by the Income Tax Department, condoned the delay in filing Form 10-IC and allowed Radiant Digital Solutions to avail the benefit of the concessional corporate tax regime.

For Petitioner: Kailash Nath PSS, Advocate 

For Respondent: B. Sapna Reddy, Senior Standing Counsel