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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI MANJUNATHA. G & SHRI MANOMOHAN DAS
PER MANOMOHAN DAS, J.M: These two appeals filed by the assessee is directed against the order of the Learned Commissioner of Income-Tax (Appeals)-20, Chennai [CIT(A)] dated 07-07-2023 and pertains to the Assessment Years [AY] 2018-19 & 2019-20 respectively. The grounds of the assessee in ITA No.857/Chny/2023 are as under: “The appellant submits the following grounds of appeal in addition to various others which will be put forth at the time of hearing of the appeal:
ITA Nos.857 & 858/Chny/2023 :- 2 -: GROUNDS OF APPEAL 1. The learned Commissioner of Income-tax (Appeals) erred in confirming the order of the CPC Bengaluru in denying the foreign tax credit of Rs.28,65,292/- for the delayed submission of Form No.67.
The appellant submits that the foreign tax credit cannot be denied simply because the Form No.67 was filed beyond the due date u/s 139(1).
The appellant submits that it is not in dispute that the foreign income offered in the tax return was subjected to tax both in India and in Japan and therefore the same income cannot be subjected to tax in both the countries without granting double taxation relief.
The authorities below erred in not granting the foreign tax credit due to delayed submission of Form 67 when admittedly the foreign income suffered tax at the foreign country.
The appellant submits that the provisions of DTAA overrides the provisions of the Act as far as it is beneficial to the assessee and the Rules cannot be contrary to Act especially when the filling of Form 67 is not a mandatory requirement but only directory and the Rule 128(9) does not provide disallowance of foreign tax credit in case of delay in filing Form 67. 6. The appellant submits that the non submission of Form 67 along with the return of income was due to lack of knowledge and not willfull or wanton.
The appellant submits that the Hon'ble ITAT Mumbai Bench in the case of Rohan Hattangadi Vs CIT (A) in ITAT No.1896/Mum/2022 dated 02/12/2022 has allowed the foreign tax credit in a case of delayed submission of Form 67 after referring to the decision of the ITAT Visakhapatnam relied on by the learned Commissioner of Income-tax (Appeals). 8. The appellant would be put to irreparable loss if the foreign tax credit is not granted due to the delay in filing Form 67 . 9. The appellant therefore prays that he may be allowed foreign tax credit of Rs. 28,65,292/- and the demand of Rs. 51,69,984 raised may be deleted.”
ITA Nos.857 & 858/Chny/2023 :- 3 -: 2. The issues involved in both the appeals is identical except the
differences in amounts which was disallowed by the AO, CPC and that
disallowance was confirmed by the Ld. CIT(A).
As the identical issues are involved in both the appeals, we take
the Appeal No.857/Chny/2023 for adjudication for the sake of
convenience, however, our observations shall be applicable on both
the appeals of the assessee.
The facts of the case are that the assessee is an individual and
is a director of M/s Erbis Engineering Co. Ltd, Tokyo, Japan. The
company is a distributor of CANNON (Formerly Toshiba) Medical
Equipment’s for India and neighbouring countries. The company had
established a Branch Office in India. The assessee is in charge of
India operations and operations in Bangladesh and Nepal. He is
required to interact and deal with the company’s principal in Japan.
During the year under consideration he, the assessee stayed for 188
days in India, 68 days in Japan and 109 days in other countries and
received salary of Rs. 1,40,31,792 from M/s Erbis Engineering Co.
Ltd., Tokyo, Japan on which TDS of Rs. 28,65,292/- was deducted in
Japan. The assessee filed his return of income in India admitting
salaries from M/s. Erbis Engineering Co. Ltd. The assessee claimed
TDS credit for tax deducted in Japan. The CPC processed the returns
ITA Nos.857 & 858/Chny/2023 :- 4 -: of income, however, vide order dated 08-04-2020 disallowed the
Foreign Tax Credit (FTC) observing that Form 67 was not filed by the
assessee.
Being aggrieved, the assessee filed 1st appeal before the ld. 5.
CIT(A). However, the ld. CIT(A) vide order dated 07-07-2023
dismissed the appeal of the assessee.
The ld. CIT(A) after considering the submissions of the assessee
observed that the assessee failed to file Form No. 67 within the
prescribed time as per Rule 128 of the Income Tax Rules, 1963. The
ld. CIT(A) further observed that the DTAA does not override Income
Tax Rules and such rules are mandatory. The ld. CIT(A) relied on the
decision of the ITAT, Vishakhapattanam Bench dated 14-06-2022 in
the case of Muralikrishna Vaddi vs. ACIT in ITA No. 269/Viz/2021
while dismissing the appeal of the assessee. The ld. CIT(A) observed
as under:
“7.2. Now the question that needs examination is whether FTC can be granted to the appellant even if there is delay in filing Form 67. If we look at language used in Rule 128(9) which requires assessee’s claiming FTC to file Form 67, it used word “shall be furnished”, making filing of Form 67 within time limit prescribed a mandatory requirement for claiming FTC. During appellate proceedings, the appellant failed to give any specific reasons for delay of 93 days in filing Form 67 for the year under consideration. The only reason cited was that the appellant failed to file it along with return of income due to oversight. In the present case Form 67 was filed with a delay of almost 2 years i.e. 678 days to be precise. Oversight of appellant can’t be considered as a reasonable ground for late filing of Form 67
ITA Nos.857 & 858/Chny/2023 :- 5 -: when such huge delay is involved. Hon’ble Visakhapatnam tribunal in the case of MuralikrishnaVaddi Vs. ACIT, ITA No. 269/viz/2021 dated 14-06-2022 has upheld the decision of the AO denying FTC in similar circumstances. Relevant portion of Hon’ble ITAT order is reproduced as under.
“5. We have considered the rival contentions and the orders of the authorities below. Based on the written submissions made by the assessee’s representative, we find that the Form 67 was not filed by the tax consultant of the assessee due to oversight and pleaded that mistake may be considered as technical mistake and there was a reasonable cause. We find no merit in the submissions made by the assessee’s representative that the above reason mentioned by the assessee in his written submissions is reasonable. The assessee has realized the filing of Form 67 only after the scrutiny proceedings were initiated by the AO. We also note that Form 67 has been filed with a delay of more than two years without any valid and reasonable cause. We also extract herein below Rule 128(9) of the IT Rules, 1962 for reference: “128(9) The statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. 6. From the plain reading of Rule 128(9) of the IT Rules, it is clear that the statement in Form 67 shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139 of the Act. Therefore, we are of the considered view that since the word “shall” has been used in the Rule 128(9) that is mandatory in nature and not directory as claimed by the Ld. AR. We therefore find no infirmity in the order of the Ld. CIT(A), NFAC and hence no interference is required”.
In the case before Hon’ble ITAT, the appellant failed to give any reasons for delay in filing for 67 which is similar to the case at hand.
7.3 Coming to the argument of the appellant that DTAA over rides provisions of IT Act, it is true that DTAA over rides provisions of Act as far as allowability or otherwise of FTC is in question but w.r.t. procedural requirement to claim credit for FTC. Rule 128 as applicable to the year under consideration mandated filing of Form 67 on or before due date of filing of return of income. However, CBDT vide notification 100/2022 dated 18-0-2022 extended due date to file Form 67 till the end of the assessment year to the previous year in which income w.r.t. which FTC is claimed offered to tax or assessed to tax in India and return for such assessment year has been filed u/s 139(1) or 139(4) from Assessment Year 2023-24 onwards. Explanatory memorandum of Amended Rule states that “this amendment is effective from 01-04-2022 so that it applies to all the claims of foreign tax credit furnished in Financial year 2022-23. It is hereby clarified that no person is being adversely affected by giving retrospective effect to this rule.
ITA Nos.857 & 858/Chny/2023 :- 6 -: 7.4. Explanatory memorandum makes it clear by specifying that no retrospective effect to amended rule can be given. Therefore, as far as assessment year under consideration is concerned, Form 67 can’t be filed beyond due date of filing of return of income and time limit given by Rule 128(9) is strictly enforceable. In the present case, as has been stated above form 67 was filed with 678 days delay. Rule 128 stipulated mandatory filing of Form 67 by prescribed time for granting FTC credit to assessee. The AO, CPC while processing the return has verified whether appellant’s claim of FTC is in accordance with conditions laid down under Rule 128 or not. When no Form 67 was filed till the date of processing of the return of income, FTC was denied for which fault can’t be found with CPC. Further appellant’s authority is not given any power at present to condone the delay in filing Form 67 notwithstanding the act that the appellant has not filed any condonation application. Further, as discussed above, appellant could not give any valid reason for delay in filing Form 67. In view of the above, I am of the considered opinion that no fault can be found with intimation u/s 143(1) dated 08-04-2020 denying FTC of Rs. 28,65,292/- in the hands of appellant for assessment year 2018-19. Hence, disallowance of FTC Rs. 28,65,292/- made by AO, CPC is upheld. Grounds of appeal of appellant Numbering 1-3 are dismissed. 8. As a result, appeal of the appellant is dismissed.”
Being aggrieved, the assessee filed appeal before the Tribunal.
Heard representatives of both the parties and perused the
materials on record.
The Ld. AR submitted that the assessee filed Form 67 and
accordingly sought remand of the matter to the Ld. AO to which the Ld.
DR has no objection.
We carefully considered the submissions of both the parties. We
also observe that the assessee relied on the following decisions which
were decided in favour of the assessee in identical cases. They are:
ITA Nos.857 & 858/Chny/2023 :- 7 -: I. ITA No. 3 / Kol / 2023, MahuaBagchi vs. ACIT, Kolkata decided on July 19, 2023; II. ITA No. 1896 / Mum / 2022 (ITAT, Mumbai) decided on 02-12- 2022; III. ITA No. 708 / Bang / 2022 (ITAT Bangalore); IV. ITA No. 261 / JP / 2022, Sri Ritesh Kumar Garg vs. The ITO, Ward 4 (2) decoded on 15-09-2022; V. Ms. Brinda Ramakrishna v. Income Tax Officer [2022] 135 taxmann.com 358 (Bangalore Trib); VI. ITA No. 71 / JP / 2023, Shri Sanjeev Agrawal, Jaipur v. DCIT, Central Circle-4, Jaipur decided on 10-05-2023.
We observe that the AO, CPC disallowed the claim of the
assessee for FTC due to non-filing of the Form 67. The assessee
furnished copies of Form 67 which were filed on 09-07-2020 for the
Assessment Years 2018-19 & 2019-20 and sought remand of the case
to the AO for reconsideration of the claims of the assessee.
In view of the aforesaid discussions, it is our considered opinion
that the AO should consider the claims of the assessee for FTC
afresh. Accordingly, we set aside the order of the ld. CIT(A) dated 07-
07-2023 as well as the AO, CPC’s order dated 08-04-2020 and direct
the AO, CPC to consider the case of the assessee afresh after
providing reasonable opportunity of being heard to the assessee. At
the same time, we direct the assessee to substantiate his claims
before the AO, CPC.
ITA Nos.857 & 858/Chny/2023 :- 8 -: 12. In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 01st November, 2023.
Sd/- Sd/- (मंजुनाथ. जी) (मनोमोहन दास) (Manjunatha. G) (Manomohan Das) �ाियक सद�/Judicial Member लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य चे�ई/Chennai, �दनांक/Dated: 01st November, 2023. EDN/-
आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ)/Appellant 2. *+थ)/Respondent 3. आयकर आयु,/CIT 4. िवभागीय *ितिनिध/DR 5. गाड' फाईल/GF