Section 115BAA overrides all rate provisions, potentially disregarding special tax treatments under sections like 111A, 112, and 115BB: Delhi ITAT
Now, recent Delhi ITAT decision on section 115BAA and 22% Tax on Capital Gains prompts discussion.
The Delhi ITAT’s decision in Maharishi Education Corporation P. Ltd. v. ITO [2025] 179 taxmann.com 698 (Del.) has sparked discussion on the interpretation of S. 115BAA and its impact on capital gains tax.
Delhi ITAT held that S. 115BAA overrides all rate provisions, potentially disregarding special tax treatments under sections like 111A, 112, and 115BB whereas Hyderabad and Ahmedabad ITATs held that S. 115BAA is a concessional computation regime, not altering rates for specific income streams like capital gains.
The Delhi ITAT’s interpretation in Maharishi Education Corporation based on the “notwithstanding” clause of S. 115BAA—may compromise the structural integrity of the Income-tax Act. By viewing Section 115BAA as a comprehensive override of all rate provisions, it effectively disregards the detailed framework of varying tax treatments established in sections such as 111A, 112, and 115BB.
Hyderabad ITAT (in Tech Mahindra Ltd. v. ACIT (ITA No. 1234/Hyd/2023, order dated 15/1/2025) and Ahmedabad ITAT (in ACIT v. ABC Infra Pvt. Ltd. (ITA No. 456/Ahd/2025, order dated 12/09/2025) have clarified that S. 115BAA is a concessional computation regime, not a provision for changing rates. They uphold special rate sections using the principle generalia specialibus non derogant, supported by CBDT guidance and Form 10-IC instructions. This interpretation upholds legislative intent, minimizes litigation, and aligns global standards on concessional and rate-specific tax regimes. Until Parliament amends Ss 111A, 112, or 112A to include them under S. 115BAA, these provisions will continue to govern capital gains for companies that choose the concessional regime. Taxpayers should apply the 22% rate to business income and maintain the special rates for capital gains, winnings, and other designated streams. Clear disclosures in return notes, Form 10-IC, and audit reports help ensure transparency and minimise potential disputes. The interpretive approach taken by the Hyderabad and Ahmedabad ITATs emphasises statutory compliance and administrative practicality.
The copy of the order is as under:
