SHRI KRISHNAMOORTHY EZHILARASAN,CHENNAI vs. ITO, INT. TAXATION WARD-1(1), CHENNAI

1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/Addl./JCIT(A)-1, Nashik, (hereinafter referred to as “the Ld.CIT(A)”), dated 16.12.2024 for the Assessment Year (hereinafter referred to as "AY”) 2018-19.

At the outset, the Ld.AR of the assessee brought to our notice that the appeal has been filed belatedly by ‘152’ days and assessee has filed an affidavit explaining the cause for the delay. Having gone through the contents of the same, we find that cause for delay was reasonable, so we excuse the same and proceed to hear the assessee’s appeal on merits.

The main grievance of the assessee is against the action of the Ld.CIT(A) denying the Foreign Tax Credit (FTC) as claimed by the assessee. Brief facts are that the assessee filed his original return of income (RoI) for AY 2018-19 u/s.139(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act”) on 28.08.2018 declaring income of ₹6,44,580/-; and thereafter the assessee filed a revised RoI u/s.139(5) of the Act on 31.03.2019 declaring an income of ₹11,97,760/- and claimed FTC by filing Form 67 of ₹1,01,446/-. According to the assessee, he had travelled on short-term assignment to Denmark [08.10.2017 to 23.12.2017] where he was working for M/s Siemens Gamesa Renewable Energy, Denmark. Being a resident and ordinarily resident (RoR) of India for AY 2018-19, assessee offered income earned from Denmark employment as income to tax in India. At this juncture, it needs to be noted that the income earned in Denmark was also taxed in Denmark.

Hence, the assessee claimed relief u/s.90 of the Act amounting to ₹1,01,446/- since the ibid income has already been subjected to tax in Denmark. Assessee is noted to have filed Form 67 for seeking relief u/s.90A of the Act r.w.r.128 of the of the Income Tax Rules, 1962 (hereinafter referred to as ‘the Rules‘). The assessee received an intimation u/s.143(1) of the Act dated 06.03.2020 from CPC/AO denying relief claimed u/s.90 of the Act amounting to ₹1,01,446/-.

Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who confirmed the action of the CPC/AO on the ground that Form 67 was not filed by the assessee on time [i.e. on or before extended due date of filing of return i.e. 31.08.2018 whereas assessee has filed the same only on 31.03.2019 along with revised RoI].

Having heard both the parties and after perusal of the records, we note that the assessee has filed the original Income Tax Returns u/s.139(1) of the Act on 28.08.2018 and revised Income Tax Returns on 31.03.2019 u/s.139(5) of the Act along with Form 67 and claimed FTC of ₹1,01,446/-. The CPC/AO has passed orders u/s.143(1) of the Act inter alia disallowed the amount u/s.90 of the Act to the tune of Rs.1,01,446/-.

Same view is also taken by a coordinate division bench in Vinodkumar Lakshmipathi v. CIT(A) [IT Appeal No. 680/Bang/2022, 6-9-2022. It is well settled that while laying down a particular procedure, if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Admittedly, Rule 128 does not prescribe denial of credit of FTC. Further the Act i.e. section 90 or 91 also do not prescribe timeline for filing of such declaration on or before due date of filing of ROI. Further rule 128 (4) clearly provides the condition where the foreign tax credit would not be allowed. Rule 128 (9) does not say that if prescribed form would not be filed on or before the due date of filing of the return no such credit would be allowed. Further by the amendment to the rule with effect from 1 April 2022, the assessee can file such form number 67 on or before the end of the assessment year. Therefore, legislature in its own wisdom has extended such date which is beyond the due date of filing of the return of income. Further, the fact in the present case is quite distinct then the issue involved in the decision of the honourable Supreme Court in case of Wipro Ltd (supra). Here it is not the case of violation of any of the provisions of the act but of the rule, which does not provide for any consequence, if not complied with. Therefore, respectfully following the decisions of the coordinate bench on this issue, we hold the assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income-tax Rules, which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground number 2 of the appeal of the assessee is allowed. In the absence of any contrary decision on record and respectfully following the consistent view of Tribunal on this issue, we direct lower authorities to grant the foreign tax credit as claimed by the assessee.

The appeal stand allowed.

Respectfully following the judicial precedents cited supra, we are of the view that the condition prescribed for filing Form 67 along with RoI u/s.139(1) is directory in nature, and since, the assessee has filed the same before the intimation u/s.143(1) of the Act was passed, the FTC claim ought to have been allowed. Hence, we direct Ld. CIT(A) to grant Foreign Tax Credit to the assessee after verifying Form No.67.

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