Introduction
The Hon’ble Income Tax Appellate Tribunal (“ITAT”) of Delhi has ruled that where a domestic company opts for the concessional tax rate of 22% under section 115BAA of the Income-tax Act, 1961 (“the Act”), the said concessional tax rate applies to the “total income,” including Long‑Term Capital Gains (LTCG). The said decision was given in the judgement of Maharishi Education Corporation P. Ltd. v. ITO1 pronounced on dated 24th October 2025. This interpretation may have significant implications raising the interpretational concerns.
1. Facts of the Case
Maharishi Education Corporation P. Ltd (“Assessee”), a domestic company, had opted for concessional tax rate of 22% under section 115BAA of the Act by filing Form 10-IC for Assessment Year (“AY”) 2020‑21. For the said AY, Assessee reported LTCG from sale of land along with a short-term capital loss. While filing the return of income, Assessee taxed LTCG at 20% under section 112 of the Act. On processing the said income tax return under section 143(1) of the Act, the Revenue recomputed tax at the rate of 22% under section 115BAA of the Act, raising additional tax demand on the Assessee. On being aggrieved by the summary assessment, Assessee filed an appeal before the Commissioner of Income Tax – Appeals (“CIT(A)”). CIT(A) upheld the said adjustment on account of which the Assessee has filed an appeal before the Hon’ble ITAT.
2. Assessee’ Contention
Assessee argued that LTCG on sale of land should continue to be taxed at the special rate of 20% as per section 112 of the Act. Section 112 of the Act specifically governs taxation of LTCG and therefore overrides general tax rate provisions. Hence, tax on LTCG should not be levied at the income tax rate as prescribed under section 115BAA of the Act (i.e. 22%).
3. Issues raised before the ITAT
Whether LTCG should continue to be taxed at the rate of 20% under section 112 of the Act despite Assessee opting for concessional tax rate under section 115BAA of the Act.
4. ITAT Findings & Decision
ITAT observed that the Assessee suo-moto opted to be governed by the taxation under section 115BAA of the Act. Once 115BAA is exercised, the concessional rate of 22% applies to the total income of the company, including LTCG. Accordingly, ITAT upheld the CIT(A)’s order and sustained application of 22% tax on LTCG.
5. Conclusion
Section 115BAA of the Act begins with a non‑obstante clause however it expressly mentions that the said section is “subject to the provisions of this Chapter XII – Determination of Tax in certain Special cases,” which includes section 112 governing LTCG taxation. Special rate provisions (like section 112) have historically been interpreted to override general provisions unless explicitly excluded. It will be imperative to notice how other Courts interpret the said judgement in order to ensure alignment with the legislative intent.
[1] TS-1409-ITAT-2025 (DEL)
