KRISHNA DALAL,BENGALURU vs. INCOME TAX OFFICER, WARD-4(2)(3), BANGALORE

Thus, the assessee preferred an appeal before the learned CIT(A).

The assessee before the learned CIT(A) submitted that the adjustment under section 143(1) of the Act regarding the claim of FTC was made without prior intimation which is in violation of first proviso to section 143(1) of the Act and violation of principles natural justice. Further, the claim of FTC was disallowed in intimation order issued under section 143(1) of the Act without specifying any reason which is again a Page 3 of 6

1 The assessee also submitted that all the requirements for claiming the FTC as per section 90 of the Act r.w.r. 128 of the IT Rule have been duly complied with. The form 67 was not filed on or before the due date prescribed under section 139(1) of the Act for the reason that the FTC was claimed through revised return. As such, the Form-67 was filed only before filing the revised return of income. Therefore, the delay in filing of Form-67 was not deliberate or intentional but due to the reasonable cause.

However, the learned CIT(A) found that the assessee though has filed Form 67 as required under rule 128(8)(i) of the IT Rules but failed to furnish other documents as specified under rule 128(8)(ii) of IT Rule which are detailed as under: (ii) Certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,— (a) from the tax authority of the country or specified territory outside India; or (b) from the person responsible for deduction of such tax; or (c) signed by the assessee: Provided that the statement furnished by the assessee in clause (c) shall be valid if it is accompanied by,— (A) an acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee; (B) proof of deduction where the tax has been deducted.

1 Accordingly, the learned CIT(A) held that in the absence mandatory details the CPC rightly disallowed the claim of the assessee with respect to the claim of FTC. Page 4 of 6

The learned AR before us submitted paper book running from pages 1 to 160 and contended that the lower authorities have erred both in law and on facts in denying the claim of the assessee. It was argued that the intimation under section 143(1) of the Act, which was confirmed by the learned CIT(A), is bad in law and liable to be quashed. The ld. AR pointed out that the assessee had duly furnished all relevant details and supporting documents for claiming foreign tax credit as per section 90 of the Act, but despite this, the claim was rejected mechanically by the authorities below.

1 The ld. AR further submitted that the denial of foreign tax credit of ₹1,85,150/- is unjustified. The assessee had complied with the prescribed requirements and furnished proof of taxes paid abroad. On proper appreciation of facts and law, the assessee is entitled to such credit as claimed in the return of income. The authorities failed to appreciate that the assessee had fulfilled all the conditions laid down for availing the foreign tax credit and hence the credit ought to have been allowed.

On the other hand, the learned DR vehemently supported the finding of lower authorities.

We have heard the rival contentions of both the parties and perused the materials placed on record, including the paper book filed by the assessee. The undisputed facts are that the assessee, an Page 5 of 6

1 On perusal of the records, we find that the assessee has produced before us the copy of Federal Tax Payment Voucher and copy of US Tax Return, available at pages 79 to 160 in the paper book. These documents substantiate that the assessee had indeed paid tax in the USA on the foreign income offered to tax in India. Thus, the requirement of Rule 128(8)(ii) of the Income-tax Rules, 1962, stands duly complied with.

2 It is a settled principle that denial of substantive benefit like Foreign Tax Credit, which is guaranteed under section 90/91 of the Act read with applicable DTAA, cannot be denied merely on technical or procedural lapses, particularly when the assessee has subsequently furnished all the relevant details and evidences. Several Hon’ble High Courts as well as the Tribunal in various decisions have held that the filing of Form 67 within prescribed time limit i.e. on or before due date specified u/s 139(1) of the Act (prior to amendment applicable from A.Y. 2022-23) is directory in nature and the assessee cannot be deprived of legitimate FTC merely on account of procedural delay.

3 In view of the above discussion and after considering the evidence of foreign tax payment placed in the paper book, We are of the Page 6 of 6

In the result appeal of the assessee is hereby allowed subject to direction.

The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file