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Before: Shri V. Durga Rao & Shri G. Manjunatha
O R D E R
PER V. DURGA RAO, JUDICIAL MEMBER:
Both the appeals filed by the assessee are directed against separate but identical orders of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi, both dated 06.01.2023 relevant to the assessment years 2018-19 and 2019-20.
Brief facts of the case are that the assessee is a resident individual received dividend from CISCO Systems, USA to the extent of ₹.3,22,733/- during the financial year 2017-18. As per DTAA between India and USA, the dividend income is taxable in both the countries. Hence, the same was duly offered for income tax while filing his return of income for AY 2018-19 dated 21.07.2018. The return filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 [“Act” in short] dated 08.06.2020. In the intimation, the tax relief under section 90/90A of the Act has been computed at NIL as against the claim of ₹.80,682/- made by the assessee in the return of income for the assessment year 2018-19. Similarly, the return filed for the assessment year 2019-20 was processed under section 143(1) of the Act dated 17.03.2021 by denying the tax relief sought for under section 90 of the Act of ₹.91,627/-.
On appeal for both the assessment years, the ld. CIT(A) dismissed the appeals of the assessee on the ground that Form No. 67 was not filed on or before the due date of filing of returns of income for the claim made under section 90 of the Act.
On being aggrieved, the assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that section 90 of the Act provides relief from double taxation in respect of income on which taxes paid under the Income Tax Act and income tax in the other country with whom India has entered into an agreement. Rule 128 of the Income Tax Rules, 1962 governs foreign tax credit in respect of resident assessees. It was further submission that since the assessee could not file Form No. 67 before due date of filing return, the genuine claim of the assessee has been denied for both the assessment years. It was further submission that due to the circumstances beyond his control, the assessee could file Form No. 67 belatedly and prayed that the relief claimed by the assessee under section 90 of the Act may be allowed.
On the other hand, the ld. DR has submitted that the assessee did not file Form 67 before due date of filing of return and it was filed on 30.09.2020 for both the assessment years. Since the assessee has not filed Form 67, the CPC Bengaluru rightly denied the claim of the assessee and supported the orders passed by the ld. CIT(A).
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The assessee has claimed Foreign Tax Credit (FTC). While processing the return of income, the CPC denied the credit of withholding tax of ₹.80,682/- for the assessment year 2018-19 and ₹.91,627/- for the assessment year 2019- 20 for the reason that the assessee did not file Form No. 67 before the due date of filing of return of income. The provisions of section 90 of the Act read with Article 25 of India-USA DTAA makes an Indian resident assessee eligible to claim foreign tax credit in respect of income earned in USA and taxed in both the countries. Rule 128 of the Income Tax Rules requires the assessee to file Form 67 before due date of filing of return.
6.1 It is not the case of the Department that the assessee has not filed Form 67 for claiming the FTC. However, the assessee has filed Form 67 belatedly due to the circumstances beyond his control. There is no dispute that the assessee is entitled to claim FTC. Rule 128 of the Income Tax Rules, 1962 provides for giving FTC and reads thus: “Foreign Tax Credit: 128(1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule : Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India.” 6.2 One of the requirements of Rule 128 for claiming FTC is provided by Rule 128 (8) & (9) of the Rules and the same reads thus: “(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:— (i) a statement of income from the country or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein; (ii) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,—
(a) from the tax authority of the country or the specified territory outside India; or (b) from the person responsible for deduction of such tax; or (c) signed by the assessee: Provided that the statement furnished by the assessee in clause (c) shall be valid if it is accompanied by,— (A) an acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee; (B) proof of deduction where the tax has been deducted. (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 subsection (1) of section 139, in the manner specified for furnishing such return of income.” 6.3 No doubt, Rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed under section 139(1) of the Act. However, the Rule nowhere provides that if the said Form 67 is not filed within the above stated time frame, the relief as sought for by the assessee under section 90 of the Act would be denied.
6.4 If the intention of the Legislature was to deny the FTC, either the Act or the Rules would have specifically provided that the FTC would be disallowed if the assessee does not file Form 67 within the due date prescribed under section 139(1) of the Act. There are many sections in the Act which specifically deny deduction or exemption or relief in case the return is not filed within prescribed time, such as, section 80AC, 80- IA(7), 10A(5) and 10B(5), etc. of the Income Tax Act. Such language is not used in Rule 128(9). Therefore, such condition cannot be read into Rule 128(9). Thus, we are of the considered opinion that filing of Form 67 is a procedural/directory requirement and is not a mandatory requirement. Since violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC, we are of the considered opinion that the claim of the assessee should be allowed. Accordingly, we set aside the order of the ld. CIT(A) for both the assessment years and direct the Assessing Officer to allow the relief as sought for by the assessee under section 90 of the Act for both the assessment years under consideration.
In the result, both the appeals filed by the assessee are allowed.