EM Technologies India Pvt. Ltd. v. DCIT [ITA Nos. 4838 & 4839/Del/2024, AY 2021–22]
In a significant ruling, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in the case of EM Technologies India Pvt. Ltd. v. DCIT [ITA Nos. 4838 & 4839/Del/2024, AY 2021–22], held that tax cannot be levied at 30% when the applicable rate under the Finance Act, 2021 was 25% for companies with turnover less than ₹400 crore. The Tribunal ordered the Central Processing Centre (CPC) to correct the tax computation and grant refund along with TDS credit after due verification.
Background: CPC Applies Higher Tax Rate Due to Form 10-IC Omission
The assessee company had opted for a lower tax rate under the new regime introduced by the Finance Act, 2020, but failed to file Form 10-IC, a prerequisite under Rule 21AE. As a result, CPC processed the return u/s 143(1) and taxed the income at 30%.
While the non-filing of Form 10-IC was not disputed, the assessee contended that even without opting into the new regime, the default rate applicable under the Finance Act 2021 for companies with turnover under ₹400 crore was 25%, not 30%.
NFAC and CPC Both Erred in Law
The National Faceless Appeal Centre (NFAC) treated the appeal as infructuous, reasoning that a similar appeal had been disposed earlier. It failed to address the assessee’s argument that each rectification application and assessment were distinct and had to be decided independently.
The assessee’s turnover was only ₹20.32 crores, making them clearly eligible for the 25% slab under the Finance Act 2021, regardless of whether Form 10-IC was filed.
ITAT’s Observation: Finance Act Prevails Over Procedural Miss
The Tribunal Bench comprising Shri M. Balaganesh (AM) and Ms. Madhumita Roy (JM) observed:
“Merely because Form 10-IC was never filed… the Revenue is not justified by levying a higher tax rate of 30% which is beyond the tax rate prescribed in the Finance Act applicable for the year under consideration.”
The ITAT further held:
“Since the assessee’s turnover is less than ₹400 crores… the assessee should be taxed only at 25% and any excess tax levied deserves to be refunded.”
Relief Granted: Refund and TDS Credit
In addition to correcting the tax rate, the Tribunal also directed the AO to:
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Grant TDS credit as per Form 26AS after verification.
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Process the rectification under Section 154 accordingly.
Since relief was granted in ITA No. 4838/Del/2024, the Tribunal dismissed ITA No. 4839/Del/2024 as infructuous.
Key Takeaways
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Taxpayers are entitled to the Finance Act’s prescribed rate regardless of procedural lapses like non-filing of Form 10-IC.
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CPC and NFAC must apply the law correctly, and procedural failures cannot override statutory provisions.
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Rectification applications should be examined on merit individually, even if facts appear similar.
Conclusion
The Delhi ITAT’s ruling in favor of EM Technologies India sends a clear message that procedural errors should not lead to unjust enrichment by the Revenue. The application of incorrect tax rates due to oversight of statutory provisions is both avoidable and appealable—as proven successfully in this case.