KRISHNA KUMAR CHAUDHARY,KOLKATA vs. D.C.I.T., CPC, DURGAPUR, DURGAPUR

Though the assessee has raised nine grounds of appeal, but the sole grievance raised by the assessee is that the ld. CIT(Appeals) erred in not granting the foreign tax credit of Rs.6,97,756/- claimed by the assesese by way of filing Form 67 after the due date of filing of the return of income.

At the outset, ld. Counsel for the assessee stated that the issue stands squarely covered in favour of assessee by plethora of judgments including that of the Hon’ble Tribunal of Kolkata Bench in the case of Satreena Consultants Pvt. Limited –vs.- ITO in dated 22nd February, 2023, wherein it has been held that filing of Form 67 is a mere procedural formality and the assessee should not be denied the foreign tax credit for late filing of such form. Similar view was also taken in the case of Atanu Mukherjee –vs.- ITO, Ward-50(1), Kolkata in ITA No. 439/KOL/2022.

On the other hand, ld. Departmental Representative though supported the order of both the lower authorities failed to controvert the submission made by the ld. Counsel for the assessee by placing any other binding precedence in favour of revenue. Assessment Year: 2019-2020 Krishna Kumar Chaudhary 5. We have heard the rival contentions and perused the relevant record placed before us. The sole grievance of the assessee is that the ld. CIT(Appeals) erred in not granting foreign tax credit for the reason that Form 67 was filed after the due date of filing of the return of income. We notice that the assessee is an individual and earned income of Rs.36,56,726/- during A.Y. 2019-20 and during this period was employed by Minas De Benga, LDA, a Company based in Mozambique, Africa and received a salary of Rs.23,69,373/- from its Mozambique employer and filed the return for A.Y. 2019-20 on 18.08.2019 but did not file Form 67 as provided under Rule 128(9) of the Income Tax Rules, 1962, in support of the foreign tax credit of Rs.6,97,756/- deducted by the Mozambique employer. Subsequently Form 67 was filed on 10.02.2021. Both the lower authorities have denied this claim of the assessee.

We further find that it has consistently held that filing of Form 67 is procedural in nature and the assessee should not be denied the benefit of foreign tax credit for such delay. We find support from the decision of this Tribunal in the case of Satreena Consultants Pvt. Limited (supra), wherein similar issue was decided in favour of the assesese, wherein also Form 67 was filed after the due date of filing of the return of income but the claim of the assessee was allowed by this Tribunal observing as follows:- “7. We have heard the rival contentions and gone through the relevant records placed before us. The only issue for our consideration is regarding relief under section 90 of the Act at Rs.7,38,649/- claimed by the assessee but denied by both the 3 Assessment Year: 2019-2020 Krishna Kumar Chaudhary lower authorities for delay in filing Form No. 67. We observe that it is not in dispute that the assessee earned income from Tanzania and Rs.21,24,975/- was deducted as withholding tax and the credit for the same was claimed as relief under section 90 of the Act against the tax liability arising in India at Rs.7,38,649/-. We notice that for the purpose of foreign tax credit, Rule 128(8) of the Income Tax Rules provides the procedure wherein for the purpose of credit of any foreign tax shall be allowed on furnishing various documents, which includes Form No. 67, which is a statement of income from the country or specified territory outside India offered for tax for the previous year of foreign tax deducted or paid on such income and the same needs to be verified in the specified manner, which includes any one of the three, namely, tax authority of the country, or specified territory outside India or from the person responsible for deduction of such tax or signed by the assessee. There are certain other requirements, which need to be fulfilled for the purpose of filing Form No. 67.

8. Now our attention was drawn towards the Notification issued by the Central Board of Direct Taxes on 18th August, 2022. The time limit for filing the Form 67 was before the last date of filing the return under section 139(4) of the Act and the method of filing Form 67 was prescribed on 19.09.2017. Further we find that the method of filing Form no. 67 was prescribed on 19.09.2017 i.e. after the date of filing the return of income by the assessee. It is also not in dispute that the last date for filing the return under section 139(4) of the Act for A.Y. 2017-18 was 31.03.2019 and the assessee filed Form 67 on 28.09.2018 alongwith revised return. Under these given facts and circumstances, where the assessee filed the original return on 06.07.2017 when there was no mechanism for filing Form No. 67, as it came into effect on 19.09.2017 and thereafter before the expiry of the due date prescribed under section 139(4) of the Act, the assessee furnished Form 67 and also filed the revised return. I am of the considered view that the claim of the assessee towards withholding taxes paid in Tanzania is to be given against the tax liability on the income declared in India. Even otherwise filing of Form 67 has been held to be ITA No. 113/KOL/2023 Assessment Year: 2019-2020 Krishna Kumar Chaudhary directory in nature by the Coordinate Bench, Mumbai in the case of Sonakshi Sinha –vs.- CIT(A) [ITA No. 1704/MUM/2022 dated 28.09.2022] and the relevant finding of this Tribunal is reproduced below: “12. We have carefully considered the rival contention and perused the orders of the lower authorities. Short question in this appeal is whether assessee is entitled to foreign tax credit even when form number 67 required to be filed according to the provisions of rule 128 (9) of the Income Tax Rules on or before the due date of filing of the return of income, not complied by the assessee, but same was filed before the completion of the assessment proceedings. Precisely, the fact shows that assessee filed return of income u/s 139 (1) of the income tax act. In such a return of income, she claimed the foreign tax credit. However, form number 67 was filed during the course of assessment proceedings and not before the due date of filing return. Rule 128 (9) of the Income Tax Rules 1962 provides that 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. We find that coordinate bench in 42 Hertz Software India (P.) Ltd v. ACIT [2022] 139 taxmann.com 448 (Bangalore – Trib.) wherein following its earlier order in the case of Ms. Brinda Rama Krishna v.ITO [2022] 135 taxmann.com 358 (Bang – Trib) it was held that “one of the requirements of Rule128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns and that this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.

Same view is also taken by a coordinate division bench in Vinodkumar Lakshmipathi V CIT(A) NFAC 06.09.2022. It is well settled that while laying down a particular procedure, if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Admittedly, Rule 128 does not prescribe denial of credit of FTC. Further the Act i.e. section 90 or 91 also do not prescribe timeline for filing of such declaration 5 Assessment Year: 2019-2020 Krishna Kumar Chaudhary on or before due date of filing of ROI. Further rule 128 (4) clearly provides the condition where the foreign tax credit would not be allowed. Rule 128 (9) does not say that if prescribed form would not be filed on or before the due date of filing of the return no such credit would be allowed. Further by the amendment to the rule with effect from 1 April 2022, the assessee can file such form number 67 on or before the end of the assessment year. Therefore, legislature in its own wisdom has extended such date which is beyond the due date of filing of the return of income. Further , the fact in the present case is quite distinct then the issue involved in the decision of the honourable Supreme Court in case of Wipro Ltd (supra). Here it is not the case of violation of any of the provisions of the act but of the rule, which does not provide for any consequence, if not complied with. Therefore, respectfully following the decisions of the coordinate bench on this issue, we hold the assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income Tax Rules, which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground number 2 of the appeal of the assessee is allowed”.

Similar view was also taken by this Tribunal in another case of Atanu Mukherjee (supra). We, therefore, respectfully following the decision referred hereinabove and since the ld. D.R. having not placed any binding precedence in favour of the revenue, direct the ld. Assessing Officer to accept the Form 67 filed by the Assessment Year: 2019-2020 Krishna Kumar Chaudhary assessee and allow the eligible foreign tax credit in accordance with law and allow the grounds of appeal raised by the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 13th April, 2023.