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Hyderabad Tribunal rules benefit of 15% concessional tax available if manufacturing activity commenced before 31 March 2024
In case of Granules CZRO Private Limited [1] (Taxpayer), the issue before the Hyderabad Bench of Income Tax Appellate Tribunal (Tribunal) was whether Taxpayer was entitled to the concessional tax rate (CTR) benefit of 15% under section (S.) 115BAB of the Income Tax Act when the manufacturing activities are commenced on or before 31 March 2024 and not before filing the first return of income (ROI) for the tax year 2022-23.
The Taxpayer was incorporated on 16 January 2023 and it filed its first ROI for tax year 2022-23 [(assessment year (AY) 2023-24] on 21 October 2023, including Form 10-ID, to avail CTR benefit of 15%. However, since no manufacturing activities were commenced during tax year 2022-23, the Taxpayer’s claim was denied by the tax authority. The same was upheld by the first appellate authority.
On further appeal by the tax authority, the Hyderabad Tribunal held that S. 115BAB requires a taxpayer to commence manufacturing or production of an article or thing on or before 31 March 2024. Further, Form 10-ID, which is required to be filed for claiming 15% tax rate benefit, must be filed on or before the due date of filing the first of the return of income, being tax year 2022-23 in the present case. The Tribunal noted that there is a contradiction in the guidelines, as the taxpayer is required to file Form 10-ID while filing first of the return even when manufacturing activity is not commenced and is prohibited from filing Form 10-ID in the subsequent year when it has actually commenced manufacturing. The Tribunal emphasized the need for a harmonious interpretation and reconciliation of such contradiction. Accordingly, the Tribunal held that the tax authority is under an obligation to consider the commencement of manufacturing activity within the statutorily fixed time limit of 31 March 2024. Accordingly, the Hyderabad Tribunal allowed the claim for CTR benefit under S. 115BAB and ruled in favor of the Taxpayer.
[1] TS-815-ITAT-2024