Section 115BAA — Tax on Income of Certain Domestic Companies

Section 115BAA of the Income-tax Act, 1961, provides an option for domestic companies to pay tax at a concessional rate of 22% (plus applicable surcharge and cess) on their total income. This section was introduced to promote economic growth by reducing the corporate tax burden and encouraging investment. To avail of this reduced rate, companies must forego certain deductions and exemptions, such as those under Section 10AA, additional depreciation, and deductions under Chapter VI-A (except for Section 80JJAA). The option to be taxed under this section must be exercised on or before the due date of filing the return of income for the relevant assessment year. Once exercised, the option cannot be withdrawn. The significance of Section 115BAA lies in its potential to enhance the competitiveness of Indian companies by aligning the corporate tax rates closer to global standards.

Common Litigation Flashpoints

1. Eligibility criteria for opting Section 115BAA
2. Interpretation of 'total income' under Section 115BAA
3. Conditions for foregoing deductions and exemptions
4. Procedural compliance for exercising the option

Judgments on Section 115BAA — Tax on Income of Certain Domestic Companies

• Delhi Duty Free Service [P] Ltd Vs. The Dy. CI.T. — ITAT, 2025
  CSR expenses can qualify for deduction under Section 80G if they meet the necessary criteria outlined in the Income Tax Act.
• Income Tax Officer (Exemption) vs Wrestling Federation of India — ITAT,
  The proviso to Section 2(15) does not apply if the receipts are incidental to the fulfillment of the charitable objectives and not used as business receipts.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Radhasoami Satsang, Saomi Bagh, Agra vs Commissioner of Income Tax — SC,
  A fundamental aspect permeating through different assessment years, if sustained by not being challenged, should not be changed in a subsequent year without material change.
• Anand Education Society vs Asstt. Director of Income Tax(E) — ITAT,
  The AO must substantiate claims of excessive payments to relatives with evidence of unreasonableness compared to market standards.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.