Clarification in respect of option exercised under section 115BAA of the income tax Act, 1961 inserted through the taxation laws (Amendment) Ordinance, 2019.

Income tax vide circular no. 29.2019 dated 2nd October, 2019.

Section 115BAA provides that,

  • A domestic company shall at its option to pay tax at a lower rale of 22 percent for any previous year relevant to the Assessment Year beginning on or after 1st April 2020, subject to certain conditions, including that the total income should be computed without claiming any deduction or exemption.
  • The option is required to be exercised by the company before the due date of furnishing return of income: and
  • The option once exercised cannot be subsequently withdrawn and shall apply to all subsequent assessment years.

Assesses having clarifications regarding,

  • Allowability of brought forward loss on account of additional depreciation: and
  • Allowability of brought forward MAT credit.

The Department clarifies it as follows,

  • A domestic company which could exercise option for availing benefit of lower tax rate under section 115BAA shall not be allowed to claim any set-off of any brought forward loss on account of additional depreciation for an Assessment Year for which the option has been exercised for any subsequent assessment year.
  • There is no timeline within which option under section 1I5BAA can be exercised. it may be noted that a domestic company having brought forward losses on account of additional depreciation may, if it so desires exercise the option after set-off of the losses so accumulated.
  • As regards allowability of brought forward MAT credit, it may be noted that as the provisions of section 115JB relating to MAT itself shall not be applicable to the domestic company which exercises option under section 115BAA, it is hereby clarified that the tax credit of MAT paid by the domestic company exercising option under section 115BAA of the Act shall not be available consequent to exercising of such option.
  • There is no timeline within which option under section 1I5BAA can be exercised, it may be noted that a domestic company having credit of MAT may, if it so desires exercise the option after utilizing the said credit against the regular tax payable under the taxation regime existing prior to promulgation of the ordinance.

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