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Facts
The assessee, an Indian resident, earned income from an assignment in Netherlands, which was taxed in both countries. She claimed Foreign Tax Credit (FTC) of Rs. 5,94,987/- in a revised return (Section 139(5)), but the mandatory Form No. 67 for FTC claim was filed belatedly. The CPC denied the FTC in an intimation under Section 143(1) and subsequently refused to rectify this denial under Section 154, a decision upheld by the CIT(A) citing Rule 128 of the Income Tax Rules, 1962.
Held
The Tribunal dismissed the assessee's appeal `in limine` as not maintainable within the narrow scope of rectification proceedings under Section 154 of the Act, ruling that the CPC's denial of FTC due to belated Form 67 filing was not an 'apparent error' rectifiable under Section 154. However, the Tribunal granted the assessee liberty to pursue an appeal on merits against the original intimation under Section 143(1) and advised a benign view on condonation of delay for such an appeal.
Key Issues
Whether the denial of Foreign Tax Credit (FTC) due to belated filing of Form No. 67 constitutes an 'apparent error' rectifiable under Section 154 of the Income Tax Act, 1961, and the maintainability of an appeal against such a rectification order.
Sections Cited
Section 90 of Income Tax Act, 1961, Section 154 of Income Tax Act, 1961, Section 139(1) of Income Tax Act, 1961, Section 139(5) of Income Tax Act, 1961, Section 250 of Income Tax Act, 1961, Section 143(1) of Income Tax Act, 1961, Rule 128 of Income Tax Rules, 1962
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Income Tax Appellate Tribunal, DELHI BENCH “G” DELHI
Before: SHRI KUL BHARAT & SHRI PRADIP KUMAR KEDIA
PER PRADIP KUMAR KEDIA-AM:
The captioned appeal has been filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre, Delhi (NFAC) [‘CIT(A)’ in short] dated 13.05.2023 arising from rectification order passed under section 154 of the Income Tax Act, 1961 (the Act) by the ADIT, CPC dated 10.01.2023 in relation to intimation dated 13.10.2022 processed by CPC under section 143(1) of the Income Tax Act, 1961 (the Act) concerning A.Y. 2020-21.
As per the grounds of appeal, the assessee has challenged the denial of Foreign Tax Credit (FTC) of Rs.5,94,987/- under Section 90 of the Act due to belated filing of Form No. 67 prescribed for
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eligibility of such credit under Rule 128 of the Income Tax Rules, 1962.
The assessee an individual, an ordinary resident of India was on assignment from India to Netherlands. Being resident and ordinarily resident (ROR) of India, the assessee was liable to tax in India on global income as per the provisions of the Act. As the salary income from Netherlands was taxed in Netherlands as well as in India, the assessee claims to be eligible for relief under Section 90 of the Act r.w. Article 4 and Article 23 of Double Taxation Avoidance Agreement (DTAA) between India and Netherlands. The assessee filed return of income under Section 139(1) of the Act wherein the income received from assignments in Netherlands was omitted to be reported. Likewise, the claim of Foreign Tax Credit on such income was also not made. The assessee thereafter filed the revised return under Section 139(5) of the Act wherein the income generated and corresponding FTC of Rs.5,94,987/- was claimed. The AO-CPC issued intimation under Section 143(1) of the Act wherein the claim of FTC was not granted. As a sequel to denial of FTC, the assessee filed online rectification request with CPC under Section 154 of the Act. The relief towards FTC claim was however not given to the assessee in the rectification order.
Aggrieved by the rectification order, the assessee filed appeal before the NFAC. The CIT(A)-NFAC however in its order dated 13.05.2023 passed under Section 250 of the Act denied any relief towards FTC claimed on the ground that relevant Form No. 67 prescribed for grant of FTC was filed beyond the due date specified under Section 139(1) for filing ITR. To justify the denial of relief, the CIT(A) referred to Rule 128 of the Income Tax Rules, 1962 related to FTC.
Further aggrieved, the assessee preferred appeal before the
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Tribunal.
We have considered the rival submissions and perused the intimation issued under Section 143(1), rectification order under Section 154 passed by the AO and the first appellate order under Section 250 of the Act. The claim of FTC in terms of Form No.67 r.w. Rule 128 of the Income Tax Rules, 1962 is subject matter of controversy.
It is the case of the Revenue that in terms of Rule 128 of the Income Tax Rules, 1962, it is statutory obligation on the part of the assessee to file Form No.67 seeking claim of FTC within a time limit prescribed under Section 139(1) of the Act read with Rule 128 of the Income Tax Rules, 1962. The assessee in the instant case has filed Form No.67 beyond time limit so prescribed under Section 139(1) of the Act. Consequently, the claim of the assessee made beyond the prescribed time limit is not eligible in law.
It is the case of the assessee that Co-ordinate Benches have taken a view that the assessee is entitled to claim FTC despite breach of prescribed time limit in terms of erstwhile Rule 128 of the Rules holding such provision to be directory requirement.
Needless to say, an interpretative process whereby a provision is read as directory requirement and conditions therein are relaxed is in the realm of subjective exercise involving long drawn process. As noted, the genesis of controversy has come to surface in the instant case in pursuance of rectification proceedings and thus needs to be tested on the touch stone of Section 154 of the Act.
9.1 Section 154 of the Act provides for rectification of any mistake apparent on the face of record. Hence, the scope of ambit of Section 154 is quite narrow. Patent, manifest and self-evident error is one which does not require elaborate discussion of evidence or arguments
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to establish it. An error cannot be said to be apparent on the face of record if one has to travel beyond the record to see whether the action is correct or not. An error apparent from record means an error which strikes one on mere looking and does not need any serious justification. It is trite that the power of rectification can be exercised only when the mistake which is sought to be rectified is an obvious and patent mistake which is apparent from record in distinction to a purported mistake which requires to be established by arguments and long drawn process of reasoning on points on which there may conceivably be two opinions.
9.2 In the instant case, the assessee has preferred captioned appeal arising in the rectification proceedings before the lower authorities to establish the factum of apparent mistake. In view of the narrow and limited scope of section 154 of the Act, it is difficult to say that CPC- AO has committed apparent error per se within the scope of section 154 of the Act while rejecting the FTC claimed as admissible credit in terms of Rule 128 of the Rules. In the wake of erstwhile Rule 128 of the Rules, the CPC do not appear to have committed any apparent error per se while making adjustment under Section 154 of the Act. Any position to be taken contrary to the Rules codified, being in the realm of subjectivity, is plainly opposed to the basic tenets of section 154 of the Act. Therefore without expressing our opinion on eligibility of FTC on merits, we are of the view that alleged error sought to be pointed out on behalf of the assessee does not fall within the sweep of prima facie mistake of apparent nature envisaged under section 154 of the Act. The appeal of the assessee in rectification proceedings is thus not maintainable and hence requires to be summarily dismissed at the threshold owing to narrow scope of such proceedings.
9.3 However, on conspectus of all the facts and circumstances and having regard to the plea of the assessee that such FTC is eligible
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despite credit belated intimation in Form 67 in view of judicial precedents, we consider it expedient to grant liberty to the assessee in the interest of fair play to pursue appellate remedy against the original proceedings carried out under Section 143(1) of the Act in accordance with law if so legally advised. It shall be open to the assessee to raise an appropriate plea for condonation of delay owing to lapse of time due to ongoing rectification proceedings before the appellate authorities. The first appellate authority shall take into account such bonafides while admitting belated appeal against intimation issued under Section 143(1) for adjudication on merits and shall take a benign view in the matter.
In terms of delineations noted above, the appeal of the assessee is dismissed in limine as infructuous.
Order pronounced in the open Court on 10/07/2024
Sd/- Sd/- [KUL BHARAT] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /07/2024 Prabhat