SHRI RAJARAJAN NAGESHWAR RAO,KANCHIPURAM vs. ITO, NCW-22(6), CHENNAI

I state that, the delay in filing the appeal is neither willful nor wanton, but due to the aforesaid unavoidable circumstances.”

On perusal of the aforesaid reasons, we find there is sufficient cause for delay in filing this appeal and no latches can be attributed to the assessee. Hence, we condone the delay in filing the appeal and proceed to dispose off the appeal on merits. 4. The grounds raised by the assessee read as follows:- 1.The Appellant objects to the order dated 28 January 2025 under Section 250 of the Income Tax Act, 1961 (Act) issued by the Additional/ Joint Commissioner of Income Tax (Appeals). Mysore [CIT(A)] and the Intimation order dated 19 March 2021 under Section 143(1) of the Act issued by the Centralized Processing Center (CPC) for the aforesaid assessment year on the following grounds:

Denial of claim of Foreign tax credit u/s 90 of the Act 2.1 The order of the Commissioner of Income Tax (Appeals) [CIT (A)] is contrary to law, facts and circumstances of the case. 2.2 The CIT (A) has erred in confirming the order of the AO in denying Foreign Tax Credit merely on the ground that Form 67 was not filed before filing the original tax return u/s 139(1) of the Act. 2.3 The CIT (A) has failed to appreciate the fact that Rule 128 nowhere provides that if the Form 67 is not filed within the due date of filing return us 139(1), the relief as sought by the assessee u/s 90 ought to be denied. 2.4 The CIT(A) has failed to appreciate that the assessee is entitled to claim foreign tax credit as per the Double Taxation Avoidance Agreement (DTAA) between India and the host juri iction even if a Form 67 is filed beyond the due date. 2.5 The CIT (A) has ought to have appreciated that DTAA takes precedence over domestic laws for determining the eligibility for FTC. 2.6 The CIT(A) erred in not appreciating the fact that filing of Form 67 is a procedural requirement and the same cannot control the claim of foreign tax credit which is otherwise allowable under the provisions of the Act vis a vis respective DTAA. 2.7 The CIT(A)CPC ought to have granted the relief u/s 90 amounting to Rs. 1,12,674/- by considering the fact that Fornm 67 was filed along with supporting documents as required under Rule 128 of Income-tax Rules, 1962. 3. Miscellaneous 3.1 The impugned order passed by the CIT(A) without providing sufficient opportunity for hearing is invalid. 3.2 The CPC erred in levying excessive interest under sections 234B and section 234C of the Act amounting to Rs. 34,130/- 4. The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra as also all consequential relief thereto.

The Appellant craves to add, alter, amend, substitute, rescind, modify and / or withdraw in any manner Whatsoever all or any of the foregoing grounds at or before the hearing of appeal.

Brief facts of the case are as follows: The assessee is an individual. For the AY 2019-20, return of income was filed on 31.08.2019 declaring total income of Rs.3,97580/-. Subsequently, the assessee filed revised return on 31.03.2020 declaring total income of Rs.10,97,700/-. In the revised return, assessee had included foreign salary received from Denmark. The assessee had also claimed Foreign Tax Credit (FTC) u/s.90 of the Act amounting to Rs.1,12,674/- on the salary income received from Denmark (since taxes were paid both in India as well as in Denmark). The assessee had also filed Form 67 along with the revised return for claiming the aforesaid foreign tax credit. The return was processed u/s.143(1) of the Act on 19.03.2021 accepting the total income declared by the assessee in the revised return. However, the Foreign Tax Credit of Rs.1,12,674/- claimed as deduction u/s.90 of the Act was disallowed.

Aggrieved by the intimation passed u/s.143(1) of the Act, assessee filed appeal before the First Appellate Authority (FAA). The First Appellate Authority confirmed the disallowance of Foreign Tax Credit. The relevant finding of the FAA reads as follows:- “8.1 I have perused the submissions of the appellant alongwith other records available. The due date of filing return of income u/s.139(1) in case of the appellant was 31/08/2019. The date of filing Form 67 for claiming Foreign Tax Credit was 30/03/2020. One of the criteria of claiming Foreign Tax Credit in Form 67 is that the same should have been filed within due date of filing of return of income. As the appellant failed to do so, the appellant should not have been entitled for Foreign Tax Credit u/s.90 of the Act. In view of this, I do not find any infirmity in the action of the AO in disallowing Foreign Tax Credit. Thus, the grounds of appeal are dismissed.”

Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The Ld.AR submitted that the issue in question is squarely covered in favour of assessee by the Chennai Bench order of the Tribunal in the case of Ariyalur Deva Senathipathy vs. ADIT (order dated 16.02.2023). The Ld.AR further submitted that as against the intimation issued u/s.143(1) of the Act, assessee had preferred rectification application and the Juri ictional Assessing Officer vide his rectification order dated 23.11.2024 had allowed the Foreign Tax Credit. The Ld.AR placed on record, a copy of order of the Juri ictional AO dated 23.11.2024 allowing the Foreign Tax Credit.

We have heard rival submissions and perused the material on record. The assessee had received salary from Siemens, Denmark amounting to Rs.8,38,622/-. The same was included in the return of income filed (revised return filed on 31.03.2020). Since salary paid in Denmark was taxed in Denmark as well as in India, assessee claimed Foreign Tax Credit in the revised return filed amounting to Rs.1,12,674/- under the Double Tax Avoidance Agreement u/s.90 of the Act. The sole reason for denying the benefit of FTC in the intimation issued u/s.143(1) was that Form No.67 in support of claiming the FTC under Rule 128 of the Income-tax Rules, 1962 was not filed within the due date prescribed u/s.139(1) of the Act. Filing of Form 67 is procedural requirement and same cannot deny the claim of Foreign Tax Credit which is otherwise allowable under the Act viz-a-viz the respective DTAA. Various judicial pronouncements had categorically held filing of Form No.67 is only directory and not mandatory. In the instant case, Form No.67 was filed along with the revised return on 30.03.2020 and the intimation u/s.143(1) of the Act was issued only on 19.03.2021. Therefore, Form No.67 was available as on the date of processing of return u/s.143(1) of the Act. The Chennai Bench of the Tribunal in the case of Ariyalur Deva Senathipathy, supra had decided an identical issue and held filing of Form No.67 is directory and not mandatory. The relevant finding of the Chennai Bench of the Tribunal in the case of Ariyalur Deva Senathipathy reads as follows:- “4. We find that filing of Form 67 has been held to be directory and not mandatory in many decisions of the Tribunal. The Mumbai Tribunal, in its recent decision, titled as Sonakshi Sinha vs. CIT (142 Taxmann.com 414), held as under: -

We have carefully considered the rival contention and perused the orders of the lower authorities. Short question in this appeal is whether assessee is entitled to foreign tax credit even when form number 67 required to be filed according to the provisions of rule 128 (9) of the Income Tax Rules on or before the due date of filing of the return of income, not complied by the assessee, but same was filed before the completion of the assessment proceedings. Precisely, the fact shows that assessee filed return of income u/s 139 (1) of the income tax act. In such a return of income, she claimed the foreign tax credit. However, form number 67 was filed during the course of assessment proceedings and not before the due date of filing return. Rule 128 (9) of the Income-tax Rules, 1962 provides that the statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. We find that coordinate bench in 42 Hertz Software India (P.) Ltd. (Supra) wherein following its earlier order in the case of Ms. Brinda Rama Krishna (supra) it was held 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 and that 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. 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 wi om 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.

The appeal stand allowed.”

We find from the rectification order of the Juri ictional AO dated 23.11.2024, he has looked into the claim of FTC and allowed the same. Since the juri ictional AO has examined the claim in Form 67, we find no reason to remand the issue to the files of the AO. Hence, we direct the AO to allow the Foreign Tax Credit as claimed in Form No.67. It is ordered accordingly.

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

अपीलाथȸ/Appellant

Ĥ×यथȸ/Respondent 3. आयकर आयुÈत /CIT, Chennai 4. ͪवभागीय ĤǓतǓनͬध/DR 5. गाड[ फाईल/GF.