From concession to confusion: The ITAT’s Maharishi ruling

By treating Sec 115BAA as all-powerful provision overriding even those within its own Chapter, the Tribunal has erased the words “subject to”

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he Income Tax Appellate Tribunafs recent ruling in Maharishi Education Corporation (P.) Ltd. vs ITO (Delhi Bench, SMC) may seem, at first glance, like an obscure dispute about how a particular section of the Income-tax Act applies to a company.

But in reality, the decision—if allowed to stand—has the potential to unsettle the entire structure of India’s concessional tax regimes, distort the interpretation of special rate provisions, and reopen crores of completed assessments.

At the heart of the controversy lies a deceptively simple phrase: “subject to the provisions of this Chapter.” These six words, appearing at the very start of Section 115BAA of the Income-tax Act, 1961, embody the delicate legislative balance that governs the concessional corporate tax regime introduced in 2019. The Tribunals failure to give meaning to this phrase has resulted in an interpretation that is legally untenable and fiscally perilous.

The Background: In September 2019, the government introduced Section 115BAA to provide domestic companies an option to pay income tax at a concessional rate of 22 per cent (plus surcharge and cess), in exchange for giving up specified exemptions and deductions. This move was part of a larger strategy to make India’s corporate tax regime globally competitive, attract investment, and simplify compliance.