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Facts
The assessee claimed Foreign Tax Credit (FTC) of Rs. 3,48,632/- in his return of income. However, Form 67, required for claiming FTC, was filed belatedly. The CPC processed the return under section 143(1) and rejected the FTC claim. The assessee's rectification application and subsequent appeal to NFAC were also rejected.
Held
The Tribunal held that the delay in filing Form 67 was due to circumstances beyond the assessee's control (Corona Pandemic) and that the requirement of filing Form 67 is directory, not mandatory. Relying on previous ITAT Bangalore Benches' decisions, the Tribunal ruled that FTC cannot be disallowed for a procedural delay.
Key Issues
Whether disallowance of Foreign Tax Credit is permissible due to belated filing of Form 67 when the delay was due to unavoidable circumstances, and if a rectification application under Section 154 is maintainable in such a scenario.
Sections Cited
90, 143(1), 154, 139(1), 128(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2020-21 Praveen Saxena v. Income Tax Officer 6(1) Flat No.G-01, Tower-J Lucknow - New Shalimar Gallant Vigyanpuri, Mahanagar Lucknow TAN/PAN:AJPPS5818N (Appellant) (Respondent) Appellant by: Shri Samrat Chandra, C.A. Respondent by: Shri Sanjeev Krishna Sharma, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 07.02.2024, passed by the ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2020-21.
2.0 The brief facts of the case are that the assessee filed his return of income for the year under consideration on 09.01.2021, declaring a total income of Rs.22,57,120/- and also claimed relief under section 90 of the Income Tax Act, 1961 (hereinafter called “the Act’) for a sum of Rs.3,48,632/- being Foreign Tax Credit. The Centralized Processing Centre (CPC) processed the return under section 143(1) of the Act and rejected the relief of Rs.3,48,632/- claimed by the assessee under section 90 of the Act. Thereafter, the assessee filed a rectification application under section 154 of the Act on 09.01.2021 before the CPC, which was rejected by the CPC, vide order dated 03.12.2022.
2.1 Aggrieved by the order of the CPC, rejecting the rectification application under section 154 of the Act, the assessee preferred an appeal before the NFAC. However, the NFAC dismissed the appeal of the assessee, observing that the assessee had filed the appeal before the NFAC against the order passed by the CPC, rejecting rectification application under section 154 of the Act and not against the proceedings initiated by the CPC under section 143(1) of the Act. The NFAC observed that the assessee ought to have filed appeal against the intimation under section 143(1) of the Act before the NFAC and not against the order rejecting the rectification application under section 154 of the Act.
2.2 Now, the assessee has approached this Tribunal challenging the impugned order of the NFAC by raising the following grounds of appeal:
1. Because on the facts and in the circumstances of the case the order of Ld. CIT(A) is bad in law as the Ld. CIT(A) passed the order without considering the facts that delay in form 67 is technical breach and therefore the same should have been accepted by the CPC.
2. Because on the facts and in the circumstances of the case the order of Ld. CIT(A) is bad in law as the Ld. CIT(A) passed the order without considering the facts that order U/s 154 is an appealable order and the appeal should have been adjudicated on merit.
3. Because on the facts and in the circumstances of the case the order of Ld. CIT(A) is bad in law as treating order u/s 154 as a separate order when the same had superseded the intimation u/s 143(1) of the Act.
Because on the facts and in the circumstance of the case, the order of Assessment has been passed in absolute violation of the principles of Natural Justice, without providing adequate opportunity of being heard and therefore deserves to be declared a nullity. 5. The appellant craves for leave to add, modify, amend or delete any other and further grounds of appeal with permission.
3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the grievance of the assessee was the denial of Foreign Tax Credit as claimed by the assessee due to the reason of delay in filing Form 67 which was filed on 18.08.2022. It was submitted that due to such denial of Foreign Tax Credit, an amount of Rs.3,48,632/- was not being allowed by the Department against tax liability of the assessee. The Ld. A.R. submitted that the return of income was filed on 09.01.2021 and it came to be processed by the CPC, Bangalore under section 143(1)(a) of the Act on 24.12.2021, but since Form 67 had not been filed by the assessee, the CPC did not allow the credit of Foreign Tax Credit. It was further submitted that the captioned year pertains to the year of Corona Pandemic and all the global flights had been suspended. It was submitted that the assessee was an NRI at that point of time and due to the Corona Pandemic, he could not travel back to India in time to collect various documents and information required to file Form 67 within time, as there was complete lockdown in Europe also and all the offices were closed. It was submitted that, thus, there was a genuine reason for delay in filing of Form 67.
3.1 The Ld. A.R. further submitted that Double Tax Avoidance Agreement does not provide that Foreign Tax Credit should be disallowed for non-compliance of any procedural requirements. He also referred to Rule 128(1) of the Income Tax Rules and submitted that this Rule provides that Form 67 should be filed on or before due date for filing of return of income under section 139(1) of the Act, but all the same, the said Rule nowhere provides that if the said Form 67 is not filed within the specified time, the benefit of Foreign Tax Credit would be denied. The Ld. A.R. submitted that the requirement of filing of Form 67 was directory and not mandatory and in this regard he placed reliance on the order of the ITAT Bangalore Bench in the case of Deepak Shimoga Padmaraju vs. ADIT reported in [2024] 162 taxmann.com 96, wherein, vide order dated 17.04.2024, the Co- ordinate Bench of the Tribunal had held that Rule 128(9) of the Income Tax Rules did not provide for disallowance of Foreign Tax Credit in case of delay in filing of Form 67 and further that filing of Form 67 was not mandatory, but a directory requirement. The Ld. A.R. further submitted that in the said order of the Tribunal, it was also ordained that proceedings under section 154 of the Act can be resorted to for rectifying this kind of situation. It was further submitted that similar view had been taken by the Bangalore Bench of the Tribunal in the case of Vinodkumar Lakshmipathi vs. NFAC, Delhi reported in [2022] 145 taxmann.com 235, vide order dated 6.9.2022.
3.2 It was further submitted that in view of the above facts and the settled law, the ld. CIT(A) was not justified in rejecting assessee’s appeal against rectification order passed under section 154 of the Act on the ground that the assessee should have filed appeal against the intimation passed under section 143(1) of the Act. It was also pointed out that the assessee had filed rectification application before the AO after filing of Form 67, but all the same, the Foreign Tax Credit had been claimed in the original return of income itself and, therefore, non-filing of Form 67 was not to be equated with the assessee’s failure to have claimed credit of Foreign Tax Credit in the original return of income. It was prayed that the assessee’s appeal be allowed.
4.0 Per contra, the Ld. Sr. D.R. reiterated the observations of the Ld. First Appellate Authority and submitted that the assessee should have filed appeal against intimation issued under section 143(1)(a) of the Act and not against the order denying rectification under section 154 of the Act, as there was no mistake apparent from the record. The Ld. Sr. D.R. argued that the assessee was trying to make a backdoor entry by filing appeal against the order passed under section 154 of the Act whereas the original cause of action was to file appeal against the intimation under section 143(1)(a) of the Act and, therefore, since there was no mistake apparent from the record at the stage of 154 proceedings, the present appeal was infructuous and should be dismissed as such.
5.0 I have heard the rival submissions and have also perused the material on record. The facts are not in dispute. The first question to be considered by me is whether the assessee can be given benefit of Foreign Tax Credit even though the prescribed Form 67 was filed belatedly. The other question before me is as to whether the assessee can avail the help of provisions of section 154 of the Act by filing rectification application although the original course of action against which the assessee should have appealed was the intimation under section 143(1) of the Act.
5.1 It is seen that there is no dispute to the claim of the assessee that he was entitled to the claim of Foreign Tax Credit and the only objection of the Department for not granting the benefit of Foreign Tax Credit was that the prescribed Form 67 was filed beyond the prescribed date. It is true that Form 67 could not be filed before the due date for filing of return of income under section 139(1) of the Act, but it is also not in dispute that the amount of Foreign Tax Credit being claimed was duly reflected in the original return of income.
5.2 The assessee has also stated that Form 67 could not be filed in time for the reason that there was outbreak of Corona Pandemic and as such since the global flights were suspended, he could not travel from Europe to India for the purposes of completing the formalities relating to filing of Form 67. This, in my considered view, is a reasonable cause and for circumstances beyond the control of the assessee, the assessee cannot be held to be in fault. Further, the issue before me is squarely covered by the order of the ITAT Bangalore Bench in the case of Deepak Shimoga Padmaraju vs. ADIT (supra) and by the Tribunal’s order in the case of Vinodkumar Lakshmipathi vs. NFAC, Delhi (supra) again of the Bangalore Bench of the ITAT wherein the Bangalore Bench had referred to an earlier case of Bangalore Bench in Brinda Rama Krishna in vide order dated 17.11.2021, wherein it was held as under:
“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 (1) 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 (ii) 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 us. 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. 5.3 Thus, it is seen that in the above orders of the Bangalore Bench of the Tribunal, it has been held that since the requirement for filing Form 67 was only directory and not mandatory, recourse to provisions of section 154 of the Act can be availed of. The Bench also observed that the issue in this regard was not a debatable one, but was to be considered on merits. Therefore, on overall view of the facts in this case and respectfully following the aforesaid orders of the ITAT Bangalore Bench, I am of the considered view that the assessee should be allowed the benefit of Foreign Tax Credit and it is directed accordingly. The order of the Ld. First Appellate Authority is set aside and the AO is directed to provide benefit of Foreign Tax Credit to the assessee.
6.0 In the final result, the appeal of the assessee stands allowed.
Order pronounced in the open Court on 03/07/2025.