APARNA GIRISH HEBBANI,AUSTRALIA vs. INT TAX WARD 2(2)(1), MUMBAI, MUMBAI

That the learned CIT(A) erred in not considering the settled legal position that procedural lapses should not defeat substantive rights, particularly where no malafide is alleged and the claim is otherwise genuine and verifiable.

That the learned CIT(A) failed to take into account the judicial precedents, including various decisions of Hon'ble ITAT and High Courts, which have held that FTC cannot be denied merely due to delay in filing Form 67, especially when the return of income was filed within the prescribed due date and the taxes were paid abroad.

That the learned CIT(A) ought to have appreciated the bona fide reasons for the delay in filing Form 67, including technical difficulties faced by the Appellant, being a Non-Resident Indian residing outside India with limited access to OTP- based verification systems.

That the order passed under Section 250 upholding the denial of FTC is bad in law, contrary to the principles of natural justice, and liable to be quashed.” 2.1. The sole issue involved in the present appeal is in respect of foreign tax credit claimed by the assessee which was not granted due to delay in the filing of Form – 67.

Brief facts of the case are that assessee is a non-resident Indian (NRI) and is engaged in teaching in Australia. Return of income was filed on 31.08,2019 reporting total income at Rs.46,41,830/-. Assessee claimed relief u/s. 90/90A of Rs.11,95,270 with respect to tax paid by Aparna Girish Hebbani AY 2019-20 her in Australia in respect of income from teaching. According to the assessee, Form-67 was filed along with the Income-tax return itself but remained to be verified within the prescribed due date due to technical glitches. Assessee being resident outside India, could not verify and submit Form-67 within the prescribed due date as her mobile number of India was not active and therefore One Time Password (OTP) required to verify could not be received. The return filed by the assessee was processed by the Centralised Processing Centre, Bengaluru (CPC), of the Department and intimation was issued on 17.03.2021 u/s.143(1) denying the credit of foreign taxes paid in Australia and raising a demand on the assessee. Assessee could not visit India until November, 2021 due to Covid 2019 restriction on international travels. She visited India in December, 2021 and got her Indian mobile number activated which is registered with the Department and filed Form – 67 on 06.12.2021. Pursuant to this, rectification application u/s.154 was filed claiming credit for the foreign taxes paid by her. Rectification order u/s.154 was passed on 15.01.2022 declining the claim made by the assessee in respect of foreign tax credit, against which assessee went in appeal before the ld. CIT(A).

Though ld. CIT(A) noted that assessee qualifies u/s.6(1) as a “resident and ordinarily resident” in India for the year under consideration, he by referring to Rule 128 of the Income-tax Rules, 1962 (The Rules) for filing of Form-67 and referring to various judicial precedents, dismissed the appeal of the assessee. In para – 6.10, ld. CIT(A) despite cognisance of the decision of Coordinate Bench of ITAT, Mumbai in the case of Sonakshi Sinha vs. CIT(A) in dated 20.09.2022 did not follow the said decision, by taking strength from the ratio laid down by the Hon'ble Supreme Court

Before us, ld. Counsel for the assessee reiterated the facts narrated above. We have heard both the parties and perused the material on record. Having considered the orders of the authorities below as well as paper book along with written submission placed on record, what is important for us to deal with in the present appeal is the compliance of Rule 128 of the Rules while claiming credit for foreign taxes claimed by the assessee. Rule 128(9) prescribes that Form-67 shall be furnished on or before the due date of furnishing the return of income. This provision is procedural and aims to streamline processing, not to restrict the substantive right conferred u/s.90 of the Act and the Double Taxation Avoidance Agreement (DTAA). The context and object of Rule 128 are embedded in chapter IX of the Act, titled ‘Double Taxation Relief’. Thus, denial of foreign tax credit leads to unjust double taxation which defeats the purpose of DTAA and India’s international obligation as enunciated by section 90 of the Act. The object of Rule 128 is to grant relief from double taxation in accordance of section 90 of the Act and the applicable DTAA. It is not to deprive tax payers of such relief on procedural grounds. Reading “shall” as mandatory in the said Rule would directly result in double taxation which is contrary to both the intent of the legislature and the principles of equity and fairness recognised by the Apex Court, in Razabuland Sugar Company Ltd. Vs. Municipal Board, Rampur AIR 1965 SC 895. In this decision, Hon'ble Supreme Court observed that determination of whether the provision is mandatory or directory depends on legislative intent, purpose and the consequences of interpretation. If a mandatory reading results in injustice or defeats the objects of the provision, it should be read as directory. Reliance is also placed on the decision of Hon'ble Supreme

Considering holistically the factual matrix and the provisions of the Act u/s. 90/91 r.w. India-Australia DTAA and the judicial precedents discussed above, ld. Assessing Officer is directed to give credit for the foreign taxes paid by the assessee and claimed in her return. Accordingly, grounds raised by the assessee in this respect are allowed.

In the result, appeal of the assessee is allowed.