VIVEK SINGHAL ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BANGALORE

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ITA 1606/BANG/2024Status: DisposedITAT Bangalore06 January 2025AY 2017-18Bench: SHRI LAXMI PRASAD SAHU (Accountant Member), SHRI SOUNDARARAJAN K. (Judicial Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the filing of Form 67 is a directory requirement and not mandatory. The Tribunal also noted that Double Taxation Avoidance Agreements (DTAA) override the provisions of the Act and Rules. Thus, FTC cannot be denied solely for the delay in filing Form 67.

What were the facts?

The assessee claimed foreign tax credit (FTC) in its return of income. The AO denied the FTC on the grounds that Form 67 was not filed within the due date. The CIT(A) upheld the AO's decision.

What were the issues?

Whether disallowance of foreign tax credit is justified solely on the ground of delay in filing Form 67, when the claim is otherwise in order and supported by DTAA provisions.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3),Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE

Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.

For Appellant: Shri Navaneeth .N. Kini, CA
For Respondent: Shri Subramanian .S, JCIT-DR

ORDER

PER SOUNDARARAJAN K., JUDICIAL MEMBER

1.

This is an appeal filed by the assessee challenging the orders of the NFAC, Delhi dated 27/06/2024 in respect of the A.Y. 2017-18 on following grounds of appeal:

1. Foreign tax credit has been disallowed on the grounds that form 67 has not been filed within the due date. This requirement can never be met as a) Form 67 is prescribed vide Rule 128. b) Rule 128 was inserted by Eighteenth Amendment to Income Tax Rules, 2016 w.e.f. 01.04.2017 i.e., the said rule is relevant from the AY 2018-19.

The procedure for filing form 67 with the requirement that it shall precede filing of return of income, was issued vide notification no. 9 dated, 19-Sep-2017. d) The return was filed on 05-Aug-2017, the due date for filing the return was 05-Aug-2017 and form 67 was notified on 19-Sep-2017.

2. Without prejudice to the above contention, with the filing of form 67 on 05-Apr-2019 vide ack no. 461884540050419, disallowance of foreign tax credit holding that tiling of form 67 within the due date is a pre- condition for grant of foreign tax credit is not in line with the decision of this bench of the Honourable tribunal in the case of Ms. Brinda Ramakrishna. vide its order dated 17-Nov-2021 and M/s. 42 Hertz Software India Pvt. Ltd. vide its order dated 07-Mar-2022.

3.

Delete consequential interest u/s 234B and 234C arising out of disallowance of foreign tax credit.”

2.

The brief facts of the case are that the assessee is an individual and he had claimed the foreign tax credit while filing the return. The AO had denied the foreign tax credit paid by the assessee in a country outside India, on the ground that the assessee had not filed the form 67 along with the return of income filed by the assessee. As against the said order, the assessee filed an appeal before the Ld.CIT(A) and contended that he had claimed the foreign tax credit in his return of income and also submitted that the foreign income received by him has been offered to tax in India and tax dues were also paid by him and therefore he is entitled for the tax paid in the foreign country while making the assessment. The Ld.CIT(A) had dismissed the appeal for the reason that the assessee should have filed form 67 along with the return of income but in this case, no such form 67 was filed along with the return and therefore held that the assessee is not entitled for deduction of tax paid in a foreign country. As against the said order, the assessee is in appeal before this Tribunal.

3. At the time of hearing, the Ld.AR submitted that even though, the form 67 was filed later on, the assessee made the claim in the return of income filed by him which was filed in time and therefore prayed to allow the appeal. The Ld.AR further submitted that there is no dispute that the foreign income on which tax was paid in the foreign country but was included in the return of income filed by the assessee in India and the necessary taxes were also remitted to the department and hence they are entitled for deduction. On the other hand, the Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.

4.

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

5.

From the facts narrated as above, it is clear that the assessee had claimed the credit for the foreign tax paid by him on the income earned by him in other countries which was also reported to the department while filing the return of income and on that basis, he has also remitted the tax dues to the department. The only mistake committed by the assessee is that the form 67 was not filed along with the return of income filed by the assessee. Therefore both the authorities have held that the assessee is not entitled for deduction on the payment of foreign tax. Before that the assessee tried his level best to get the relief before the authorities but not able to get the relief. Thereafter he approached the Appellate authority but not got the relief. We are not in agreement with the view expressed by the authorities since admittedly assessee was remitted the tax in the foreign country and also reported the said income in the return of income filed by him in India and claimed the deduction on the foreign tax paid by him. Therefore the filing of form 67 along with the return could be treated as a directory and not a mandatory one when the facts are not in dispute. Further the allowance of foreign tax credit is based on the DTAA signed between the countries. The Rule 128 also does not bar the claim of FTC when the assessee had not filed the Form 67 along with the return of income. In the facts and circumstances of the case, the disallowance of the foreign tax paid by the assessee is not correct.

6. We have also considered the order of the Coordinate Bench of this Tribunal in dated 17/11/2021 in the case of Ms. Brinda RamaKrishna vs. ITO wherein it was held as follows: “16. I have given a careful consideration to the rival submissions. I agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. I am of the view that the issue was not debatable and there was only one view possible on the issue which is the view set out above. I am also of the view that the issue in the proceedings u/s.154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee's application u/s.154 of the Act was not on the ground that the issue was debatable but on merits. I therefore do not agree with the submission of the learned DR in this regard.”

7.

In another order of the Coordinate Bench of this Tribunal reported in (2022) 139 taxmann.com 448 in the case of 42 Hertz Software India (P.) Ltd. vs. ACIT wherein it was held as follows: “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. 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.”

8.

In view of the above said categorical findings given by the Coordinate Benches of this Tribunal, we have no hesitation to grant relief as prayed for by the assessee and direct the AO to grant necessary relief in accordance with law, after due verification.

9.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 06th January, 2025.

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