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Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad
Before: Shri R.K. Panda, Vice- & Shri Laliet Kumar
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad Before Shri R.K. Panda, Vice-President AND Shri Laliet Kumar, Judicial Member Assessment Year: 2019-20 Smt.Shalini Bhupal Vs. Dy. C. I. T. Hyerabad Circle 2(1) PAN:ACEPB2655G Hyderabad (Appellant) (Respondent) Assessee by: Shri Kumar Pal, CA Revenue by: Smt. K. Haritha, DR Date of hearing: 02/08/2023 Date of pronouncement: 30/08/2023 ORDER
Per R.K. Panda, Vice-President
This appeal filed by the assessee is directed against the order dated 16.03.2022 of the learned CIT (A)-NFAC Delhi, relating to A.Y.2019-20.
There is a delay of 2days in filing of this appeal by the assessee for which the assessee has filed a condonation petition along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation petition filed along with the affidavit, the delay in filing of this appeal by 2 days is condoned and the appeal is admitted for adjudication.
ITA 271 of 2023 Shalini Bhupal
Although a number of grounds have been raised by the assessee, however, these all relate to the order of the learned CIT (A) NFAC in upholding the order passed u/s 154 of the I.T. Act in which the foreign tax credit of Rs.44,71,763/- was not allowed.
Facts of the case, in brief, are that the assessee is an individual, and a resident of India. She derives income from India as well as income from outside India. For the impugned A.Y, the assessee filed her return of income on 30.08.2019 declaring income of Rs.4,84,21,930/- from India and Rs.1,31,41,800/- from Australia totaling a gross total income of Rs.6,15,63,730/-. While submitting the Income Tax Return, the assessee claimed foreign tax credit of Rs.44,71,163/- towards tax relief u/s 90/91. The return was processed u/s 143(1) vide intimation dated 9.3.2021 wherein the credit for such foreign tax paid outside India was not allowed. The assessee filed an application dated 20.03.2021 u/s 154 for rectification of mistake along with Form No.67. However, the Assessing Officer rejected the application filed by the assessee u/s 154 of the I.T. Act vide order dated 30.03.2021. Subsequently, the assessee filed another application dated 17.4.2021 u/s 154 of the I.T. Act which was also rejected by the Assessing Officer vide order dated 29.04.2021. Aggrieved with such order of the Assessing Officer passed u/s 154 rejecting the claim of foreign tax credit, the assessee filed an appeal before the learned CIT (A) NFAC who vide order dated 16.03.2023 dismissed the appeal filed by the assessee by observing as under:
ITA 271 of 2023 Shalini Bhupal
ITA 271 of 2023 Shalini Bhupal
Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal.
The learned Counsel for the assessee filed the following decisions and submitted that the foreign tax credit cannot be denied for delay in filing of Form No.67:
i) ITAT Hyderabad Benches in the case of Purushothama Reddy Vankireddy (147 Taxmann.com 308) ii) ITAT Bangalore Benches in the case of Brinda Rama Krishna in ITA No.454/Bang/2021. iii) ITAT Mumbay Benches in the case of Rohan Hattangadh in Page 4 of 7
ITA 271 of 2023 Shalini Bhupal iv) Hon'ble Supreme Court in suo motu writ petition (c) No.3 of 2020 in the case of Cognizance for Extension of Limitation.
7. He submitted that the Coordinate Bench of the Tribunal in the case of Purushothama Reddy Vankireddy (Supra) has held that Rule 128(9) of I.T Rules does not provide for disallowance of foreign tax credit in case of delay in filing of Form 67 and that filing of Form 67 is directory and not mandatory.
8. The learned DR, on the other hand, heavily relied on the order of the learned CIT (A) NFAC and submitted that in view of the language implied in Rule 128(9), the assessee is required to furnish statement in Form No.67 and a certificate on or before the due date specified for furnishing of return of income under sub- section (1) of section 39.
9. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer CPC, the learned CIT (A) NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case did not allow foreign tax credit on the ground that Form 67 was not filed along with the return of income. We find the learned CIT (A) NFAC upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned Counsel for the assessee that Rule 128(9) of ITAT Rules does not provide for disallowance of foreign tax credit in case of belated filing of Form No.67 which is directory and not mandatory. We find identical issue had come up before the Coordinate Bench of the Tribunal in the case of Page 5 of 7
ITA 271 of 2023 Shalini Bhupal Purushothama Reddy Vankireddy (Supra) wherein the Tribunal after considering various decisions has directed the Assessing Officer to allow foreign tax credit after due verification. The relevant observation of the Tribunal from Para 6 onwards read as under: “6. We have gone through the record in the light of the submissions made on either side. It could be seen from the view taken in Murali Krishna Vaddi (supra), the decision of the Bangalore Tribunal in the case of M/s. 42 Hertz Software India (P) Ltd (supra), was brought to the notice of the Bench, but looking at the abnormal delay of more than two years without any valid and reasonable cause, the Bench held that such delayed filing of Form 67 was in compliance with Rule 128(9) of the Rules.
Coming to the decisions relied upon by the assessee it could be seen that in the case of M/s. 42 Hertz Software India (P) Ltd (supra), reliance was placed on the decision in Ms. Brinda Rama Krishna (supra) and all the other decisions were following of the same. In Ms. Brinda Rama Krishna (supra), the Bench considered the issue in the light of the provisions of DTAA, section 295(1) of the Act, the decisions of the Hon'ble Apex Court in the case of Mangalore Chemicals & Fertilizers Ltd. Vs. Deputy Commissioner (1992 Supp (1) SCC 21), Sambhaji Vs. Gangabai (2008) 17 SCC 117 and a lot many decisions of the Hon'ble Apex Court including the case in Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC) etc. and reached a conclusion that since Rule 128(9) of the Rules does not S.A.No. 19/Hyd/2022 Page 4 of 5 provide for disallowance of FTC in the case of delay in filing Form 67 and such filing within the time allowed for filing the return of income under section 139(1) of the Act is only directory, since DTAA over rides the Act, and the Rules cannot be contrary to the Act.
We find from Article 25(2)(a) of the DTAA that where a resident of India derives income which, in accordance with the provisions of the convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of the resident an amount equal to the income tax paid, paid in the United States, whether directly or by deduction. In view of this provision over riding the provisions of the Act, according to us, Rule 128(9) of the Rules has to be read down in conformity thereof. Rule 128(9) of the Rules cannot be read in isolation. Rules must be read in the context of the Act and the DTAA impacting the rights, liabilities and disabilities of the parties.
With this view of the matter, we are of the considered opinion that the decisions relied upon by the assessee are applicable to the facts of the case on hand while respectfully following the same, we allow the appeal, and direct the Learned Assessing Officer to verify the details of the foreign tax paid by the assessee on the earnings at foreign source and take a view inconformity with the established law discussed above.”
Respectfully following the decision of the Coordinate Bench of the Tribunal, we deem it proper to restore the issue to Page 6 of 7
ITA 271 of 2023 Shalini Bhupal the file of the Assessing Officer with a direction to verify the details of foreign tax paid by the assessee and give due credit of the same. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.