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Income Tax Appellate Tribunal, “SMC-B” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC-B” BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER Assessment Year : 2017-18 Shri. Sunkesulapati Sumanth, Vs. ITO, 2B 502 Arya Hamsa Apartment, Ward – 5(3)(2) and ADIT, CPC, Bangalore South, Bannerghatta S.O, Bengaluru. Bengaluru – 560 083. PAN : BYPPS 8390 R APPELLANT RESPONDENT Assessee by : Shri. Balasubramanyam K V, AR Revenue by : Shri. Ganesh R. Ghale, Standing Counsel Date of hearing : 11.04.2022 Date of Pronouncement : 29.04.2022 O R D E R
This is an appeal filed by the assessee directed against the order of CIT(A), National Faceless Appeal Centre (NFAC), Delhi, relating to Assessment Year 2017-18.
The assessee has raised the following grounds of appeal:
That having regard to the facts and circumstances of the case. 1. the learned Assessing Officer has erred in law and on facts in making the above additions and disallowance without giving an adequate opportunity of being heard and by not observing the principles of natural justice. That having regard to the facts and circumstances of the case, 2. the learned Assessing Officer has erred in law and on facts that the tax credit should not be denied due to a procedure lapse of not filing the Form 67 within the due date as specified Rule 128(9).
That having regard to the facts and circumstances of the case. 3. the learned Assessing Officer has erred in law and on facts that requisite taxes paid are eligible for the Foreign Tax Credit as per Indo-American DTAA. That having regard to the facts and circumstances of the case, the 4. learned Assessing Officer has erred in law and on facts that rule cannot override the provisions of the act. Appellant submits that the provisions of DTAA override the 5. provisions of Income Tax Act. 1961 which is brought out in the cases of Union of India and Anr vs Azadi Bachao Andolan And Anr. Article 51(c) of the Constitution of India provides that the state shall endeavor to foster respect for International Law and Treaty obligations. The Article 253 of the Constitution permits the Parliament to make any law/s for the whole or any part of India for implementing any treaty, agreement and convention with any other country or countries. That having regard to the facts and circumstances of the case, 6. the order is thus prima facie devoid of merits and contrary to law and needs to be quashed and prayed for accordingly. That the aforesaid grounds of appeal are without prejudice to 7. each other. That the relief prayed to condone the delay in filing Form 67, allow Foreign Tax Credit of Rs. 3,29,045 and order of the Assessing Officer be quashed. set aside, annulled or modified
The facts of the issue are that the CPC while processing the case of the assessee under section 143(1) of of the Income Tax Act, 1961 (hereinafter called ‘the Act’) has made addition of Rs.3,29,045/- after adjusting the tax credit under section 90 of the Act during the proceedings under section 143(1) of the Act. The assessee was employed with M/s. Infosys, Bengaluru. The assessee was deputed to the USA by the employer during the previous year and has earned salary in foreign currency. During the year under consideration, the assessee declared total income of Rs.25,97,669/- out of which the income earned outside India is Rs.29,62,743/-. While processing the return of income, the CPC has made addition of Rs.3,29,045/- as the CPC has not taken into consideration the details of tax credit as claimed under section 90 of the Act. Subsequently, the assessee filed rectification under section 154 of the Act and the CPC transferred the rectification rights to the jurisdictional AO. The assessee made a rectification application dated 11.01.2020 providing details of copy of Form 16 issued by the employer viz., M/s. Infosys Ltd., Bengaluru and a copy of Form 67 was filed. Later on, the assessee, on verification of Income Tax portal noticed that rectification rights were transferred back to CPC. The assessee again filed rectification request on 22.01.2021 and the same was rejected on 24.01.2021. The NFAC observed that as per Rule 128(9) of the Income Tax Rules, 1962, it is very much necessary to file Form No.67 within time if a resident wants to claim tax paid on income earned outside India and that should be filed on or before filing the return of income under section 139(1) of the Act. However, in this case, the assessee submitted Form No.67 on 15.04.2019 which is beyond the due date which is prescribed under section 139(1) of the Act i.e., 31.07.2017 for filing the return of income for the Assessment Year 2017-18. Therefore, the claim of the assessee regarding tax paid on income earned outside India was not allowed in this Assessment Year and addition made by the AO in this regard was sustained. Against this, the assessee is in appeal before us.
I have heard both the parties and perused the material on record. In my opinion, this issue was considered by the Bengaluru Bench of the Tribunal in the case of 42 Hertz Softwrae India Pvt. Ltd., in order dated 07.03.2022 wherein it was held as under:
“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 by order dated 17/11/2021.
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.
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.”
In view of the above order of the Tribunal, I am inclined to remit the issue back to the AO on similar direction. The AO to consider the claim of the assessee in accordance with law based on the verification carried out in respect of supporting documents filed by the assessee.
In the result, appeal of the assessee is allowed for statistical purposes.