VISHAL JAGDISHBHAI MEHTA,RAJKOT vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL-1, RAJKOT

The solitary grievance of the assessee in this appeal is that Ld. CIT(A) erred in law as well as on facts in upholding the denial of Foreign Tax Credit of Rs. 7,42,300/- claimed u/s. 90 of the Act in respect of the receipts in United States of America offered for tax in the return of income.

Succinctly, the factual panorama of the case is that assessee before me is an Individual.The assessee had filed his return of income u/s. 139(1) of the Income Tax Act, 1961 (“the Act”) on 05/10/2020, declaring total income of Rs.39,41,570/-, which includes salary received by the assessee in US$ 50000/- (Rs. 37,11,500/- in INR). The Copy of return of income, bank statement and computation of total income were filed by the assessee with the return of income. In respect of the foreign income, which was accrued in USA, the assessee was subjected to tax in USA of US$ 10000/- (Rs.7,42,300/- in INR terms). In view of the same the assessee claimed Relief u/s. 90/90A of the Act of Rs.7,42,300/-, in respect of the double taxation avoidance agreement. The assessee furnished all relevant information about the nature of receipt in foreign country, amount in INR, corresponding tax deducted at USA and also tax identification number of the assessee in the return of income itself. The assessee inadvertently failed to file Form No. 67 along with return of income however later on, the assessee furnished form no. 67, as stipulated by rule 128 of Income Tax Rules, 1962 on 02/05/2022 vide acknowledgement number 605310830020522 before Assessing Officer. However, relief claimed under section 90 of the Act of Rs.7,42,300/- was not given to the assessee by the Ld. CIT(A), therefore, assessee is in further appeal before this Tribunal.

Learned Counsel for the assessee, argued that assessee is entitled to relief under section 90 of the Act read with the applicable Double Taxation Avoidance Agreement, which is a substantive statutory right, which cannot be denied merely on account of procedural non-compliance relating to the timing of filing of Form No. 67. The learned CIT(A) denied foreign tax credit (FTC) solely on the ground that Form No. 67 was not filed on or before the due date of filing of return, without appreciating that Rule 128 of the Income-tax Rules, 2 1962 is procedural in nature and cannot override the provisions of section 90 of the Act. In fact, later on, the assessee filed Form No.67 before the assessing officer during the assessment proceedings. Therefore, such denial foreign tax credit (FTC) in the present case results in impermissible double taxation of the same income, which is contrary to the object and spirit of section 90 of the Act and the applicable tax treaty. Therefore, foreign tax credit, should be allowed to the assessee.

On the other hand, learned DR for the revenue relied on the findings of the authorities below.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that foreign income was taxed in the hands of the assessee, in foreign, however, the FTC was not allowed to the assessee. Though, no reason has been accorded for not giving the relief as claimed in the return of income and same has not been granted because of late filing of Form No. 67 as stipulated under rule 128 of the Income Tax Rules, 1962. In this connection, I note the following points Viz. (a). The foreign income has been disclosed in the return of income, by the assessee (b). Tax on the foreign income has been paid in USA. (c). India has Double Taxation Avoidance Agreement with USA (d). The assessee is legitimately eligible for the relief of FTC u/s. 90 of the Act and (e). Form no. 67 has been submitted albeit in delay. I note that as far as the requirement to file form no. 67 on or before due date specified u/s. 139(1) of the Act is concerned, it is a procedural requirement under rule 128 of the rules. It is only directory and not mandatory requirement, therefore, assessee is entitled for foreign tax credit. 7. I note that it is settled principle of law that FTC cannot be denied to an assessee just because assessee filed Form No. 67, late. In the case of Niravsinh Kishoresinh Gehlot vs. Income-tax Officer, CPC [2024] 159 taxmann.com 743 (Ahmedabad - ITAT)/[2024] 206 ITD 123 (Ahmedabad - ITAT)[08-02-2024], the Ahmedabad ITTA held that where assessee claimed Foreign Tax Credit (FTC) and filed Form No. 67 after due date specified for furnishing return under Section 139(1) but before completion of assessment proceedings, assessee's FTC claim was to be allowed. Considering the above facts and circumstances, I direct the assessing officer to allow the foreign tax credit to the tune of Rs.7,42,300/- to the assessee, hence, I allow the appeal of the assessee.

In the result, appeal filed by the assessee is allowed.