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Facts
The assessee, an individual working in Infosys Pune, was deputed to Germany for a project. For AY 2017-18, the assessee claimed Foreign Tax Credit (FTC) of Rs. 2,56,130/- and credit for TDS of Rs. 1,86,089/-. The FTC claim was initially disallowed due to the belated filing of Form 67, more than five years after the due date.
Held
The Tribunal held that the filing of Form 67 is a procedural and directory requirement, not mandatory. Therefore, the FTC claim cannot be denied solely for the delay in filing Form 67. The Tribunal also directed verification and allowance of the TDS claim.
Key Issues
Whether Foreign Tax Credit can be denied for belated filing of Form 67, considering it as a procedural requirement? Whether the TDS claim should be allowed based on the available information?
Sections Cited
90, 90A, 139(1), 143(1), 154, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
आदेश / ORDER
PER ASTHA CHANDRA, JM :
The appeal filed by the assessee is directed against the order dated 30.04.2024 of the Ld. Additional/Joint Commissioner of Income Tax (Appeals)-1, Ludhiana [“Addl./JCIT(A)”] pertaining to Assessment Year (“AY”) 2017-18.
The assessee has filed this appeal with a delay of 46 days. The assessee has filed an application for condonation of delay along with a sworn affidavit stating therein the reasons for delay in filing of the appeal. On perusal of the same, we are satisfied that the delay in filing of appeal is not intentional or deliberate but has occurred for the reasons mentioned in the affidavit. After hearing both the sides, we are of the view that the delay is attributable to the sufficient cause. We, therefore condone the said delay and proceed to decide the appeal.
The assessee has raised the following grounds of appeal :-
1. That, on the facts and in circumstances of the case, the order of the Ld. ADDL/JCIT(A), NFAC in dismissing the appeal filed by the appellant is arbitrary, erroneous, contrary to law and is opposed to the principles of natural justice, equity and fair play.
2. That, on the facts and in circumstances of the case, the Ld. ADDL/JCIT(A), NFAC has passed the order u/s 250 without giving sufficient opportunity of being heard and thus violating the principles of "audi alteram portem."
3. That, on the facts and in circumstances of the case, the Ld. ADDL/JCIT(A), NFAC has passed the order u/s 250 without application of mind and without observing the principles of natural justice.
4. That, the Ld. ADDL/JCIT(A), NFAC has erred in not allowing the credit claimed by the appellant u/s 90/90A of the Income Tax Act, 1961 for Rs. 2,56,130/-.
5. That, the Ld. ADDL/JCIT(A), NFAC erred in concluding that Rule 128 of the Act vide Notification No. 100 of 2022 dated 18.08.2022 is not applicable in the case of the appellant.
6. That, the Ld. ADDL/JCIT(A) erred in not appreciating the judgements in this regard, wherein it has been held that the filing of Form 67 is provisional and not mandatory.
7. That, the Ld. ADDL/JCIT(A) has erred in confirming the action taken by CPC AO/JAO without appreciating the facts and circumstances of the case.
8. That, the Ld. ADDL/JCIT(A), NFAC has erred in concluding that in absence of filing of Form 67, the due credit claimed u/s 90/90A cannot be allowed.
9. That, the Ld. ADDL/JCIT(A) erred in confirming the disallowance of TDS for Rs.1,86,170/- without any basis.
10. That, the ADDL/JCIT(A), NFAC erred in confirming the demand so raised for Rs.5,73,550/- which is unfounded, ungrounded and devoid of merits.
11. The appellant may kindly be allowed to add, alter or modify any other points to the grounds of appeal at any time before or at the time of hearing.
12. Any other order in the interest of justice may kindly be passed.”
4. Briefly stated, the facts of the case are that the assessee is an individual and is working as a Group Project Manager in Infosys, Pune. During the relevant AY 2017-18, the assessee was deputed at Infosys, Germany for a client based project. For the relevant AY 2017-18, the assessee filed his return of income on 03.08.2017. Vide intimation order u/s 143(1) of the Income Tax Act, 1961 (the “Act”) issued by the Ld. Jurisdictional Assessing Officer (“AO”), Centralized Processing Centre (CPC), Bengaluru dated 30.03.2019 the Foreign Tax Credit (“FTC”) of Rs.2,56,130/- claimed by the assessee u/s 90 of the Act was disallowed and a demand of Rs.3,33,288/- was raised. The assessee became aware of the demand raised by the Department on his return to India in August 2022. He was then advised by his Chartered Accountant (CA) to furnish Form 67 to claim FTC. The assessee therefore raised a rectification request for reprocessing of ITR dated 25.08.2022 along with the belated Form 67 filed on 23.08.2022. Vide rectification order u/s 154 of the Act dated 09.01.2023, the Ld. AO disallowed the claim of FTC of Rs.2,56,130/- and also the claim of tax withheld by Infosys, India (TDS) of Rs.1,86,089/- thereby raising a fresh demand of Rs.5,73,550/-.
4.1 On appeal before the Ld. Addl./JCIT(A) against the impugned rectification order u/s 154 of the Act, the above claim(s) of the assessee were rejected by the Ld. Addl./JCIT(A) by observing as under : “3. Determination & Decision: The statement of facts, grounds of appeal, and the order appealed against, written submissions, and copies of documentary evidence/explanations have been thoroughly examined. The central issue for adjudication among all the grounds of appeal raised pertains to the issue of denial of relief u/s 90 amounting Rs. 2,56,130/- as well as disallowance of TDS. Therefore, all grounds of appeal are being clubbed and adjudicated together. After verification of the facts, statement of facts, grounds of appeal and submissions made by the appellant, the following observations have been made: i. The Appellant is an Individual and the appellant had filed its original return of income for A.Y. 2017-18 on 03/08/2017 and the due date for this assessment year was 05/08/2017. Hence, the return of income was filed on time. The said return was processed u/s 143(1) and intimation order issued dated 30/03/2019. Thereafter, the appellant has filed the rectification request which was processed on 09/01/2023 by not considering the credit claimed u/s 90/90A of the Act of Rs. 2,56, 130/-. ii. A resident taxpayer who has credit for the amount of any. foreign tax paid in a country outside India by way of deduction or otherwise is required to furnish the statement in Form 67 to claim credit of such taxes before the due date of filing of the return. Appellant has furnished the statement in Form 67 on 23/08/2022, i.e. more than five years after the due date of filing of the original return. iii. Thus, the appellant has not filed the Form-67 till the due date of the return. It was infact filed on 23/08/2022, i.e more than five years after the due date of filing of the original return. Neither any letter for the condonation of delay regarding the delay in filing of the Form-67 was filed before the Jurisdictional PCIT. Hence, it was a lapse on the part of the appellant and the CPC-AO was right in his action.
It is further to be clarified that, the amendment to the Rule 128 of the Act vide Notification No 100 of 2022 dated Aug 18, 2022 was effective from the 1st day of April, 2022, as mentioned in this notification "This amendment is effective from the 1st day of April, 2022, so that it applies to all the claims of foreign tax credit furnished during the financial year 2022-2023. Hence, the expansion of the time-limit for the filing of Form-67 won't be applicable in the appellant's case. Therefore, the action taken by the CPC-AO/Jurisdictional A.O was not wrong in any manner and was correct in denying the benefit of Foreign Tax Credit. Thus, as per the above discussion, all the grounds of appeal are hereby rejected. However, to take the relief, the appellant may file an application for the condonation of delay regarding the delay in filing of the Form-67 before the Jurisdictional PCIT. If the condonation is granted, she may again apply for rectification before the Jurisdictional Α.Ο.”
4.2 Aggrieved, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.
The Ld. AR vide his written submission filed before the Bench (pages 7-13 of the paper book refers) submitted that the impugned order u/s 154 of the Act was passed by the Ld. Addl./JCIT(A) without granting any opportunity of hearing to the assessee. No notice of hearing was issued by the Ld. Addl./JCIT(A) and therefore an opportunity be granted to the assessee to present its case before him. On merits of the case, the Ld. AR submitted that the impugned order of the Ld. Addl./JCIT(A) is completely silent on the issue of disallowance of the TDS of Rs.1,86,089/- deducted by Infosys India and the same has not been adjudicated upon by the Ld. Addl./JCIT(A). The Ld. AR further submitted that there was no willful intention of the part of the assessee in not filing Form 67 within the prescribed time period and admittedly the lapse occurred due to lack of knowledge on the part of the assessee regarding furnishing of Form 67 in order to claim the FTC. The Ld. AR submitted that filing of Form 67 is provisional/directory in nature and not mandatory and therefore, the Ld. Addl./JCIT(A) is not justified in denying the FTC claimed by the assessee. In support thereof, the Ld. AR relied on the following judicial pronouncements : “i. Honourable Supreme Court vide their order in the case of Sambhaji& Ors. V. Gangabai& Ors., (2008) 17 SCC 117: 2009 TaxPub(Ex) 1999 (SC), (Case PB-39) wherein it has been held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be construed as mandatory: the procedural law is always subservient to and is in aid to justice.
ii. Incase of Brinda Rama Krishna vs ITO 135 taxmann.com 358 the Hon'ble Bengaluru Bench (SMC) of ITAT (Case PB1 to 8) has directed the revenue to allow the relief of FTC u/s 90 where the Form 67 was filed after the prescribed due date after holding that- (Case PB-8) (para 16 of judgement) Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67. Filing of Form 67 is not mandatory but a directory requirement, and DTAA overrides the provisions of Act and Rules cannot be contrary to the Act. iii. In the case of Ritesh Kumar GargVs ITO (ITAT Jaipur), Date of Judgement/Order: 15/09/2022, Related Assessment Year: 2020-21, ITAT Jaipur held that filing of Form 67, for claiming Foreign Tax Credit, is a procedural requirement and violation of procedural norms does not extinguish the substantive right of claiming the credit of Foreign Tax. iv. In the case of Duraiswamy Kumaraswamy, the Hon'ble High Court of Madras observed that a rule is only for implementation of the provisions of the Income Tax Act and is only directory in nature and remitted the matter back for giving due credit to the FTC claimed. v. In the case of Asha Rani Pandya, Indore vs CPC Bengaluru on 28 June, 2024 the Income Tax Appellate Tribunal, Indore has allowed the appeal and directed the AO to give credit for foreign tax credit as per Form 67 filed on 22.9.2018 before Ld. CIT (A) after due verification as filing of Form 67 is not mandatory but a directory requirement. The ITAT, Indore has relied on the judgements given by the Tribunal in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC)CIT V Eli Lily & Co (India) P Ltd (2009) 178 Taxman 505 (SC) GE India Technology Centre P Ltd v CIT (2010) 193 Taxman 234 (SC) Engineering Analysis Centre of Excellence P Ltd v CIT (2021) taxmann.com 42 (SC) (Pg. 106-109 of PB 2-Para 25 & 26) CBDT Circular No 333 dated 2/4/82 137 ITR 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 per the provisions of DTAA override the provisions of the Act, the assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision. vi. In the case of Suchi Agrawal Vs. ITO Ward 5(2)(4), Noida the Delhi Bench of Income Tax Appellate Tribunal (ITAT) has set aside the orders of the authorities below and restore the matter to the file of Ld. AO with the direction to verify the assessee's claim in respect of foreign tax credit as per law after admitting/accepting Form 67 and decide the issue in accordance with law. Consequently, the appeal of the assessee is allowed as indicated above for statistical purpose. vii. In the case of Kasper Pieter Tideman, Pune Vs. Income Tax Officer, Ward - 7(1), the Hon'ble ITAT Pune wherein it has been held that "We have heard the rival arguments made by both the sides, perused the orders of the AO and NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case did not allow the Foreign Tax Credit (FTC) on the ground that Form No.67 has been filed beyond the due date of filing of the return. We find the NFAC upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that filing of foreign tax credit certificate in Form-67 is directory in nature and not mandatory and therefore the NFAC is not justified in denying the Foreign Tax Credit. We find the Bangalore Bench of the Tribunal in the case of M/s. 42 Hertz software India Pvt.Ltd (supra) while deciding an identical issue has held that FTC cannot be denied to the assessee, where the assessee filed FTC in Form No.67, although belatedly since filing of such Form 67 is not mandatory but directory in nature. Since the FTC certificate/statement in Form No. 67 was not examined by the Ld. AO, therefore, considering the totality of the facts and circumstances of the case and in the interest of justice, we deem it appropriate to restore the issue to the file of the Ld. AO with the direction to verify Form No. 67 and allow consequential FTC in accordance with law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes."
5.1 Referring to the provisions of Article 23 of the Double Taxation Avoidance Agreement between India and Germany (“DTAA”), the Ld. AR has contended that the disallowance of FTC in respect of tax already paid by the assessee in Germany shall be in violation of the said provisions of Article 23. To support this contention, the Ld. AR relied on the decision of the Pune Tribunal in the case of Kasper Pieter Tideman Vs. Income Tax Officer in for AY 2021-22, dated 06.08.2024 and submitted that u/s 90 of the Act read with Article 23 of the DTAA between India and Germany, the claim of FTC cannot be disallowed for non- compliance of procedural requirement prescribed under the Rules. DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act.
5.2 It is also the submission of the Ld. AR that Rule 128 nowhere provides that if Form 67 is not filed within the prescribed time, the relief as sought by the assessee u/s 90 of the Act would be denied. (Notification No. 100/2022, dated 18.08.2022) which has substituted sub-rule (9) of Rule 128 allowing the assessee to file Form 67 till the end of assessment year and where return is being filed under updated return the time for filing Form 67 is extended to such date of furnishing of updated return and submitted that although the said Notification has come into effect from 01.04.2022, being a notification giving relief to taxpayers, the same should also be applied to cases pertaining to period earlier to the said notification.
5.3 In the light of his above submissions and since the Ld. Addl./JCIT(A) did not give any opportunity to the assessee to present its case before him, the Ld. AR prayed that the matter be set aside to the file of the Ld. Addl./JCIT(A) to decide the impugned issue(s) afresh i.e. disallowance of FTC on merits after due verification of Form 67 filed by the assessee and also give credit of TDS by giving adequate opportunity of hearing to the assessee.
The Ld. DR supported the order of the Ld. Addl./JCIT(A).
We have heard the Ld. Representatives of the parties and perused the material on record, various judicial precedents cited by the Ld. AR and also the paper book containing pages 1 to 92 filed by the assessee. The facts are not in dispute. Admittedly, the assessee failed to file Form 67 before the due date of filing of return u/s 139(1) of the Act which was due to the filed on 05.08.2017 for the relevant AY 2017-18. The assessee filed Form 67 only on 23.08.2022. His return was already processed u/s 143(1) of the Act vide intimation order dated 30.03.2019. The rectification request of the assessee was rejected on 09.01.2023 disallowing the claim of FTC of Rs.2,56,130/-. Perusal of the order of the Ld. Addl./JCIT(A) reveals that he has disallowed the claim of FTC for the reason that the assessee has not filed Form 67 within the due date of filing of the original return and the amended Rule 128 vide Notification No. 100/2022, dated 18.08.2022 does not apply to the assessee’s case as the amendment is effective from 1st of April, 2022 so it applies to all the claims of FTC furnished during the FY 2022-23. He has also observed that the assessee did not file an application for condonation of delay in filing of Form 67 before the Jurisdictional PCIT and therefore CPC-AO rightly disallowed the FTC claim of the assessee. The Ld. Counsel for the assessee has submitted before us that filing of Form 67 is only procedural/directory requirement and is not a mandatory one. There are no conditions prescribed in the DTAA that the FTC can be disallowed for non-compliance of any procedural provisions and therefore the assessee cannot be denied the claim of FTC u/s 90 of the Act r.w. Article 23 of the DTAA between India and Germany. We find some force in the arguments of the Ld. AR that the claim of FTC cannot be disallowed for non-compliance of procedural requirement prescribed under the Rule. The Rule nowhere provides that if Form 67 is not filed within time relief sought by the assessee u/s 90 of the Act would be denied. Various Co-ordinate Benches including Pune Tribunal have held that filing of Form 67 is a procedural/directory requirement and is not a mandatory requirement. Thus, in our opinion, the view taken by the Ld. Addl./JCIT(A) needs reconsideration. We therefore direct the Ld. Addl./ JCIT(A) to verify the claim of FTC of Rs.2,56,130/- made by the assessee and allow the same as per the fact and law. We also direct the Ld. Addl./JCIT(A) to allow the TDS claim of Rs.1,86,089/- after due verification thereof in accordance with fact and law. We hold and direct accordingly. Accordingly, ground Nos. 1 to 9 raised by the assessee are allowed for statistical purposes. Ground No. 10 is consequential and ground No. 11 and 12 are general in nature.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 28th January, 2025.