SANTOSH KUMAR YEKULA,CHENNAI vs. INCOME TAX OFFICER, WARD- 5(3)(3), BANGALORE

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ITA 561/BANG/2022Status: DisposedITAT Bangalore25 August 2022AY 2019-204 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the requirement to file Form 67 is directory, not mandatory, and foreign tax credit cannot be denied for a delay in filing. The issue was remanded to the AO for consideration based on proper verification of supporting documents.

What were the facts?

The assessee filed an appeal before the CIT(A) with a delay, which was condoned. However, the CIT(A) allegedly did not consider Form 67 for the claim of foreign tax credit and made a disallowance under Section 143(1) without proper intimation.

What were the issues?

Whether foreign tax credit can be denied for non-compliance with procedural requirements like filing Form 67, especially when DTAA provisions override domestic law.

Which sections of the Income-tax Act were involved?

Section 143(1)

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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE

Before: SMT. BEENA PILLAI & SHRI LAXMI PRASAD SAHU

For Appellant: Ms. Risha P, CA, Shri Sankar Ganesh K, JCIT
For Respondent: DR ITAT

ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 18/05/2022 passed by the National Faceless Appeal Centre, Delhi relating to A.Y. 2019-20. 2. It is submitted by Ld.AR that the appeal was filed before the Ld.CIT(A) with a delay of 8 months and 2 days which was condoned by the Ld.CIT(A). However, in respect of the issue on merits, the Ld.AR submitted that the Ld.CIT(A) did not consider Form 67 for Page 2 of the claim of foreign tax credit and the disallowance was made u/s. 143(1) of the Act without giving an intimation to the assessee. 3. The Ld.AR submitted that on an appeal before the Ld.CIT(A), the Ld. CIT(A) considered the issue by observing as under:

On the contrary, the Ld.DR relied on the orders passed by authorities below.

4.

We note that an identical issue of non-consideration of Form 67 by the Ld.CIT(A) has been dealt with by this Coordinate Bench of this Tribunal in case of M/s. 42 Hertz Software India Pvt. Ltd. vs. Page 3 of ACIT in by order dated 07/03/2022 wherein this Tribunal observed as under: “4. It was submitted that when there is no condition prescribed in DTAA that the FTC can be disallowed for non-compliance of any procedural provision. As the provisions of DTAA override the provisions of the Act, the Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision.

5. On the contrary, the Ld.DR submitted that fulfillment of requirement under rule 128(9) of the Rules, is mandatory and hence the revenue authorities were justified in refusing to FTC. We have perused he submissions advanced by both sides in light of records placed before us.

6.

There is no dispute that the Assessee is entitled to claim FTC. On perusal of provisions of Rule 128 (8) & (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view, 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.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda Kumar Krishna vs.ITO in ITA no.454/Bang/2021 by order dated 17/11/2021.

7.

It’s a trite law that DTAA overrides the provisions of the Act and the Rules, as held by various High Courts, which has also been approved by Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471.

8.

We accordingly, hold that FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/evidences in support of its claim. We thus remand this issue back to the Ld.AO to consider the claim of assessee in accordance with law, based on the verification carried out in respect of the supporting documents filed by assessee. Accordingly the grounds raised by assessee stands allowed for statistical purposes.”

5.

Respectfully following the above, we direct the Ld.AO to consider the issue in accordance with law by considering the disclosure made in Form 67 by the assessee after proper verification. Accordingly the grounds raised by assessee stands allowed for statistical purposes. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 25th August, 2022.

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