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Facts
The assessee, engaged in software development, had a branch in Norway. They claimed foreign tax credit for taxes paid in Norway on income earned by the branch, but this claim was not made in the original return. The Assessing Officer (AO) did not accept the claim without reason. The assessee then claimed it before the CIT(A)/NFAC.
Held
The Tribunal held that while the AO may not entertain claims made without a revised return, appellate authorities like the CIT(A) and ITAT have the jurisdiction to consider additional claims even if not included in the original or revised return.
Key Issues
Whether appellate authorities can consider a foreign tax credit claim not made in the original return, despite the assessee not filing a revised return as per Supreme Court precedent.
Sections Cited
90, 244A, 254
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Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE
Before: SHRI NARENDER KUMAR CHODHRY & SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the order passed by the NFAC, Delhi vide order dated 10/02/2025 in DIN No. ITBA/NFAC/S/250/2024-25/1073077689(1) for the assessment year 2020-21.
The only issue raised by the Revenue is that the learned CIT(A) erred in not appreciating the fact that the assessee has not filed the revised return as required under the law and failed to follow the principles laid down by the Hon’ble Supreme Court in the case of Goetze India Pvt Ltd.
The relevant facts are that the assessee, an Indian company engaged, is in the business of software development and IT Enabled support services. The assessee also has branch office in the foreign country “Norway”. The assessee claimed the income earned from the “Norway” office was included in the income offered to tax in India. However, the at the time of filing of the return of income no taxes were paid in “Norway”, hence credit of foreign tax was not claimed in the return. Subsequent to filing of return, tax was paid in Norway on the income earned from impugned branch. Therefore, the claim for credit of foreign tax payment in accordance with the provision of section 90 of the Act read with India-Norway DTAA was made before the AO during the assessment proceeding. However, the AO has not accepted the claim of the assessee without giving any reason in the assessment order.
4. The aggrieved assessee preferred an appeal before the learned CIT(A)/NFAC who allowed the assessee’s claim subject to verification. The relevant finding of the learned CIT(A) reads as follows: 8.3 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 and the same cannot be disallowed for mere delay in compliance of a procedural provision. Therefore, the AO is directed to consider the claim of the appellant and if found correct, the foreign tax credit be allowed to the appellant. If such credit results in refund, the same be given to the appellant alongwith interest applicable u/s. 244A of the Act. As the appellant has paid the taxes in Norway on 07.01.2022 .
the interest u/s. 244A of the Act shall be applicable from that date and not from 01.04.2020. Ground no. 7 is treated to have been partly allowed.
Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us.
The learned DR before us contended that the learned CIT(A) was not right in allowing the assessee’s claim because the assessee did not follow the prescribed procedure of filing a revised return. He argued that under the law, if a taxpayer wants to make a new claim that was not part of the original return, it must be made through a valid revised return within the time allowed. Since, the assessee failed to do so, the claim could not be entertained at the assessment stage. The learned DR further pointed out that the Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT reported in 284 ITR 323 has clearly held that the Assessing Officer cannot admit a fresh claim otherwise than by filing a revised return. Therefore, according to him, the learned CIT(A) has erred in not applying this legal position.
On the other hand, the learned AR argued that the assessee is eligible for foreign tax credit as the provision under India-Norway DTAA which the assessee cannot be deprived merely for the reason that same was not claimed through revised return. The learned AR further argued the legal and new claim can be raised at appellate stage. The Hon’ble Supreme Court in Goetze (India) Ltd only prohibit the AO to accept new claim without filing revised return. As such no restriction was placed on the appellate authority.
Page 4 of 5 7.1 Both the ld. DR and the ld. AR before us vehemently supported the order of the authorities below as favourable to them.
We have heard the rival contentions of both the parties and perused the materials available on record. Without going into details, we note that the Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC) clarified that while the AO may not entertain claims made otherwise than through a revised return. However, the appellate authorities such as the learned CIT(A) and ITAT have the jurisdiction to consider additional claims made by the assessee without filing the revised return. The relevant observation of Hon’ble Supreme Court reads as under:
The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.
8.1 In the present case, the assessee made the claim during the assessment proceedings which was not accepted. The assessee again made such claimed during the appellate proceeding before the learned CIT(A) which has been allowed. In view of the above discussion, the appellate authority is empowered to allow legitimate claims even if they were not included in the original or revised return of income. Hence in our considered opinion, the learned CIT(A) rightly accepted the claim of the assessee for foreign tax credit as per the DTAA subject to verification. Thus, the ground of appeal of the revenue is hereby dismissed.
In the result appeal of the Revenue is hereby dismissed.