EVRY INDIA PRIVATE LIMITED,BANGALORE vs. DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(2)(1), BANGALORE

The brief facts of the case are that the assessee is a company in the business of software development and IT enabled support services. The assessee filed their return of income on 30/11/2019 and thereafter a revised return of income was also furnished on 19/06/2020. The assessee had included the income earned by the branch at Norway while filing the return of income. The branch at Norway has paid the group contributions of the branch at Norway. Initially the group contributions were deductible as an expense while computing the total income in accordance with the Norway Tax Laws. Subsequently, it came to the notice of the branch that the contributions made by the branch to the Norway group entities were not in accordance with the Norway Tax Laws and therefore, the branch had reversed the group contributions made and also revised the tax returns furnished in Norway for the years 2017, 2018 & 2019. The revised tax returns were furnished in the year 2020-21. The Norway tax authorities had also issued the tax invoice for such revised returns. Thereafter the branch discharged their liability on the amount of group contributions on 07/01/2022.

The Norway branch income of the assessee was already included in the total income as per the provisions of the Act. The assessee also paid the tax dues on the income shown in their return of income. At that time, the foreign tax credit discharged by the branch could not be claimed in the return of income filed in India. The Ld.CPC had also accepted the return of income which includes the income already declared in Norway and also tax paid in Norway. As per section 90 and Rule 128, the assessee is eligible for the claim of foreign tax credit and the assessee having no other way, had filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had considered the issue in detail and concluded that the foreign tax credit was not claimed in the return of income and therefore, no question arises of granting the same at the stage of action taken u/s. 143(1) of the Act.

As against the said order, the assessee is in appeal before this Tribunal with a delay of 244 days. The assessee filed an application to condone the said delay. The assessee’s Finance Controller had sworn the affidavit and submitted that the deponent’s health began deteriorating seriously during that period and therefore, the order of the Ld.CIT(A) was escaped from his attention. The deponent further submitted that he suffered a hemorrhagic stroke on 09/08/2025 and was admitted in the Jayadev Memorial Rashtrotthana Hospital & Research Centre and the deponent was diagnosed with left thalamic bleed with midline shift and he was discharged only on 08/09/2025 and resumed the office duties in a phased manner from November, 2025. At that time only, the deponent noticed the order and thereafter steps were taken and the appeal was filed with a delay of 244 days.

We have considered the said reasons stated in the delay condonation application and considering the medical condition of the deponent, we are inclined to condone the delay of 244 days and proceeded to adjudicate the appeal on merits.

At the time of hearing, the Ld.AR submitted that the assessee’s branch at Norway discharged the tax liability after the assessee had filed their return of income in India and therefore, the assessee was not able to claim the foreign tax credit while filing the return of income. The Ld.AR further submitted that the assessee could not claim the said foreign tax credit before the AO without filing the revised return whereas before the appellate authorities, the assessee can make a claim and if the same is in order, the deduction has to be granted. The Ld.AR further submitted that the evidence of payment of tax at Norway was also placed before the Ld.CIT(A) and therefore, the payment of tax in India on the very same income amounts to double taxation as per the DTAA between India and Norway and therefore the assessee is entitled for deduction on the foreign tax credit. The Ld.AR also relied on the order of the Coordinate Bench of this Tribunal in the assessee’s own case for the A.Y. 2020-21 wherein the Tribunal had held that the appellate authority is empowered to allow legitimate claims even if they were not included in the original or revised return of income and therefore prayed to allow the appeal. The Ld.AR also submitted that the PF contributions were deposited before the due date for filing the return of income u/s. 139(1) of the Act and therefore, the said disallowance by the Ld.CPC while processing the return u/s. 143(1) is not correct. The assessee also raised additional grounds about the said disallowance by filing an application.

The Ld.DR submitted that the assessee had not claimed the foreign tax credit in the return of income and therefore, the authorities had correctly rejected the claim. The Ld.DR further submitted that the assessee in para 3 of the additional grounds had admitted that the assessee had inadvertently disallowed an amount of Rs. 64,26,145/- u/s. 36(1)(va) in the return of income whereas in the intimation a sum of Rs. 66,59,662/- was disallowed by the Ld.CPC and further, the assessee had not filed any application u/s154 of the Act before the Ld CPC and also not raised any such dispute before the Ld.CIT(A) and therefore, the additional ground as well as the ground on the PF need not be adjudicated as not maintainable.

We have heard the arguments of both sides and perused the materials available on record.

From the facts as narrated above, we noticed that the assessee had included the income of the Norway branch and paid the tax dues on the said income. Before filing the return of income in India, the assessee’s branch at Norway claimed the exemptions on the group contributions and subsequently, filed revised returns for the years 2017, 2018 & 2019 during the year 2020-21 and discharged the tax liability on 07/01/2022. The assessee based on the original return of income filed by the branch in Norway, had included the said income in the income declared under the Act. By the time the revised return was filed by the Norway branch, the return filed by the assessee in India was processed and the income has been accepted. Thereafter, the time limit for filing the revised return was also exhausted and therefore, the assessee could not claim the foreign tax credit paid in Norway in India. Anyhow the assessee challenged the intimation before the Ld.CIT(A) and produced the details including the Form 67 for claiming the foreign tax credit. The Ld.CIT(A) on the limited ground that the claim was not made in the return and therefore, there is no grievance to the assessee in the intimation made u/s. 143(1) of the Act and dismissed the appeal.

We have considered the issue and also the order of this Tribunal in the assessee’s own case for the A.Y. 2020-21 in which the similar claim was not entertained by the authorities. In the order in ITA No. 948/Bang/2025 dated 14/08/2025, the Coordinate Bench of this Tribunal had held that the appellate authority is empowered to allow legitimate claims even if they were not included in the original or revised return of income. The Coordinate Bench had relied on the principles laid down by the Hon’ble Supreme Court in the case of Goetz India Ltd. vs. CIT reported in (2006) 284 ITR 323.

Respectfully following the principles laid down by the Hon’ble Supreme Court which was followed by the Coordinate Bench of this Tribunal, we are inclined to entertain the ground raised by the assessee for claiming the foreign tax credit and direct the AO to consider the claim made by the assessee after verifying the supporting documents filed by the assessee.

The assessee had raised grounds against the disallowance of the delayed employee PF contribution and also raised an additional ground on the very same issue. We have considered the grounds as well as the additional grounds and from the said grounds, we found that the assessee himself had disallowed the PF contribution of Rs. 64,26,145/- while filing the return of income which was accepted by the Ld.CPC and a disallowance of Rs. 66,69,662/- was made. No doubt the Ld.CPC had disallowed a higher amount than the amount disallowed by the assessee. We find that the disallowance is voluntary while filing the return of income and also the said disallowance was not challenged by way of rectification application by the assessee and also not challenged the disallowance before the Ld.CIT(A) and in that circumstances, we accepted the objection made by the Ld.DR and dismiss the additional ground raised by the assessee and also the grounds raised in ground no. 2 as not maintainable.

We therefore, set aside the order of the lower authorities insofar as it relates to the FTC and remit this issue to the file of the AO for fresh consideration. Insofar as the ground raised against the disallowance of employees PF contribution, we are not adjudicating the said grounds for the reasons stated above.

In the result, the appeal filed by the assessee is partly allowed for statistical purposes.