How to opt for 115 BAB?

693 views 10 replies

Anuj

CFO

36 Points Joined April 2023

Suppose a new manufacturing company is incorporated in Jan 21 and the setup phase (building construction and machinery installation) goes on till Dec 2023 and the company starts production in Jan 2024 and it wants to avail 115 BAB benefit. Now till this time i.e. till Jan 2024, the company must have already filed three income tax returns (for FY 20-21, FY 21-22 and FY 22-23) of NIL income since it had not started production during this period. Now if the company opts for 115BAB by filling Form 10-ID while filing its fourth ITR i.e. for FY 23-24, then would the company be eligible for availing 115BAB since it opted for 115BAB while filing its first ITR after the start of production when the income starts getting generated.

Or will the company become ineligible for availing 115BAB because it did not choose 115BAB option while filing its first ITR even though it was of NIL income?

In other words, for availing 115BAB, is it mandatory for the companies to choose 115BAB option while filing its very first ITR even though it is of NIL income, or is it okay if the company chooses the 115BAB while filing the very first ITR after the start of production when the actual income starts getting generated? Please clarify.

Replies (10)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210405 Points Joined July 2016

As you have not started production till March 2023, the section is not applicable to the company.

Anuj

CFO

36 Points Joined April 2023

I think you are not informed about the fact that the date for starting production was extended till 31st March 2024 by the govt for Section 115 BAB

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210405 Points Joined July 2016

Even in that case the first ITR (be it NIL) should have been filed u/s. 115BAB of the act.

Anuj

CFO

36 Points Joined April 2023

The option to choose or file the return under Section 115 BAB is by filling Form 10-ID and in this form, there is a field which reads as “Date of commencement of Manufacturing/Production”. (Screenshot of form attached)

So, during the setup stage, when the company will be filing its first return of NIL income, how can one specify/write the Date of commencement of Production in the said form.

So does this mean that return under Section 115 BAB can only be filed once the date of commencement of production is known i.e. while filing the very first return right after the commencement of production?

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210405 Points Joined July 2016

As per the attached form 10ID it is not mandatory, if production not started.

Secondly, read the forth proviso of sec. 115BAB(1) of the act...

"Provided also that where the person fails to satisfy the conditions contained in sub-section (2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply to the person as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years."

Anuj

CFO

36 Points Joined April 2023

What do you mean by this line “As per the attached form 10ID it is not mandatory, if production not started”?

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210405 Points Joined July 2016

You can fill not started yet or leave it blank.

Anuj

CFO

36 Points Joined April 2023

Ok. Have you tried doing that i.e. writing not started yet in that box/field? Does the form get submitted successfully after that or does it show some error?

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210405 Points Joined July 2016

Anyway, that opportunity you have already missed, so no question of talking about that.

Now, I would suggest you to take a chance to file ITR of AY 2024-25 (after start of production) under sec. 115BAB with filling form 10-ID. It may be accepted by system, but as per my experience, it would not be processed under the regime.

Do update your experience at that stage.

Good luck.