Loading judgment…
Facts
The appellant, Mr. Dheeraj Tolaram Talreja, filed his income tax return for AY 2020-21 considering himself as a Resident and Ordinarily Resident (ROR). However, he later claimed to be a Resident but Not Ordinarily Resident (RNOR) based on his stay in India and abroad. This change in status affected the taxability of his Singapore-sourced income and his claim for foreign tax credit.
Held
The Tribunal held that denying foreign tax credit solely on the ground of not filing Form 67 before the due date, without giving the appellant an opportunity to be heard, is not justified. The AO's action was deemed not justified.
Key Issues
Whether the denial of foreign tax credit due to non-filing of Form 67 before the due date, without providing an opportunity of being heard, is justified. Also, the correctness of the residential status and its impact on taxability of foreign income and foreign tax credit.
Sections Cited
Sec. 6(1), Sec. 6(6), Sec. 5(1), Sec. 90, Sec. 139(1), Rule 128, Sec. 234A, Sec. 234B, Sec. 234C, Sec. 143, Sec. 154, Sec. 156
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI RATNESH NANDAN SAHAY
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “I”, MUMBAI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER
ITA No.3359/M/2024 Assessment Year: 2020-21 Mr. Dheeraj Tolaram Income Tax Officer, Talreja International Taxation, A – 605, Ward 4(1)(1) Oberoi Esquire, Air India Building, Oberoi Garden City, Nariman Point, Vs. Goregaon East, Mumbai- 400021. Mumbai- 400063. PAN: ADOPT3185J (Appellant) (Respondent)
Present for : : Shri Nikhil Tiwari/ Nishit Shah, A.R. Assessee by : Shri Anil Sant - Addl. CIT D.R. Revenue by
Date of Hearing : 14 . 08 . 2024 Date of Pronouncement : 25 . 10 . 2024
O R D E R Per : Ratnesh Nandan Sahay, Accountant Member: 1. This appeal has been filed by the appellant against the Order of the Ld. CIT (Appeals) passed u/s. 250 of the Income Tax Act [the ‘Act’ in short]
2 Page | 2 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21 vide DIN & Order No. ITBA/APL/S/250/2024-25/1064476563(1) Dated 30/04/2024 for the Assessment Year 2020-21. 2. Following grounds of appeal have been raised by the appellant: “Not considering correct residential status of the Appellant 1. erred in denying consideration of correct residential status of the Appellant as Resident but not Ordinary Resident ('RNOR') and instead considering the residential status as Resident and Ordinary Resident (ROR") as inadvertently reported in the ITR: Income from House Property in Singapore: 2. erred in considering Rs.10,88,526 as an income from Singapore house property as taxable in India, without considering that the Appellant is RNOR, and such income is not taxable in India, Salary income from Singapore: 3. erred in considering the entire salary income from Singapore of Rs.2,16,55,911 as taxable in India, instead of Rs.1,55,33,354 which pertains to India visit days and should only be taxable in India considering the Appellant is RNOR, 4. erred in denying the foreign tax credit u/s. 90 of the Act on salary income, which should have been Rs.26,54,257/- Denial of foreign tax credit due to non-filing of form 67 before the due date of filing the return of income: 5. erred in denying the foreign tax credit claimed u/s 90 of the Act 6. erred in confirming the denial of foreign tax credit on the ground that form 67 was not filed on or before the due date of filing of return of income u/s 139(1) of the Act and the Appellant did not comply with Rule 128 (9) of the Income-tax Rules, 1962: Interest u/s 234A of the Act, 7. erred in levying additional interest of Rs.2,51,195/- under section 234A of the Act: Interest u/s 2348 of the Act,
3 Page | 3 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21 8. erred in levying additional interest of Rs.8,35.295/- under section 234B of the Act; Interest u/s 234C of the Act, 9. erred in levying additional interest of Rs.1,81,222/- under section 234C of the Act, without appreciation interest u/s 234C can be levied only on the return income; The Appellant submits that each of the above grounds of appeal is without prejudice to the other. The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of the appeal.”
The facts of the case, in brief, are that the assessee is an individual and has filed the return of income electronically for the assessment year 2020- 21 on 27/02/2021 considering his residential status as a Resident and Ordinarily Resident (ROR) of India u/s. 6(1) of the Act and has declared following income: 1. Income from salary – Rs.3,44,15,444/- 2. Income(loss) from house property – Rs.(2,00,000/-) 3. Income from other sources – Rs.4,10,084/- The appellant has declared a net income of Rs.3,44,40,530/- after claiming deduction of Rs.1,85,000/- under Chapter VI-A of the Act. 4. However, the appellant had erroneously filed the above return of income considering his residential status as ROR. During the assessment year 2020-21, the appellant had spend more than 182 days in India and hence he qualified his residential as per section 64 of the Act, however, the
4 Page | 4 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21 appellant had spend less than 729 days during the seven years preceding to assessment year 2020-21 (i.e. period from 1st April, 2012 to 31st March 2019) and accordingly during the said assessment year the appellant qualified as a Resident but not Ordinarily Resident (RNOR) as per section 6(6) of the Act. Accordingly, as per section 5(1) of the Act in case of ‘RNOR’, income received or deemed to be received in India or income accrued or deemed to be accrued in India shall be taxable in India. Thus, in view of the amended residential status of the appellant, revised income earned and taxes payable by the appellant on the sale are summarized as follows: Particulars Amount (Rs.) Income from salary 2,82,92,887 Income/(Loss) from House Property (2,00,000)
Income from Other Source 4,10,084 Gross Total Income 2,85,02,971 Less: Chapter VIA deductions (1,85,000) Net Total income 2,83,17,970 Tax liability on above net income 1,08,00,258
5 Page | 5 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21 Less: Foreign tax credit (26,54,257) Less: Taxes deducted at source and self (1,08,31,904) assessment tax paid Add: Interest under sections 234A, B & 8,87,249 C Net tax payable/(refundable) (17,98,660) House property loss to be carried 18,95,470 forward
During the said assessment years, the appellant was an employee of AAK Singapore Pvt. Ltd. until 31/12/2019 and thereafter, he took a local independent employee contract with AAK Kamani Pvt. Ltd., (hereinafter referred to as ‘AAK IND’). The appellant had received a gross salary of Rs.1,28,36,633/- from AAK India which has been duly reported in the form 16 issued by AAK India. In addition to above, as regards the Singapore employment, the appellant received a gross salary of SGD 5,39,600/- (for the period from 1st January 2019 and 31st December, 2019) and correspondingly a tax of SGD 95,679,54/- was paid by the appellant to the Singapore tax authorities for the said calendar year. However, during the period from 01/04/2019 to 31/12/2019 (period falling in the assessment year 2020-21), the appellant visited India for 195 days and
6 Page | 6 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21 since the appellant qualified as ‘RNOR’, pro-rated salary income pertaining to India visit days of Rs.1,55,33,354/- (SGD 3,06,645/-) is taxable in India. Additionally, the appellant is eligible to claim tax relief in the form of foreign tax credit amounting to Rs.26,54,257/- in India calculated on the basis of proportionate tax payable on doubly taxed salary income in India in accordance with article 25 of India/Singapore Double Tax Avoidance Agreement (DTAA) on the double tax salary income of Rs.1,55,33,354/-/ Further, given that appellant qualifies as ‘RNOR’ in India, the income of in relation to Singapore house property is not taxable in India. 6. The return of income filed by the appellant was processed by Centralized Processing Centre (CPC) u/s. 143 of the Act on 24/12/2021 vide document identification no. CPC/2021/A2/198952752. However, the relief claimed u/s. 90 of the Act in the return of income was not considered by virtue of serial no. 29 of the intimation issued u/s. 143(1) of the Act. The CPC disallowed the relief of Rs.35,88,447/- claimed u/s. 90 of the Act and has also levied additional interest u/s. 234A, 234B and 234C of the Act amounting to Rs.12,67,712/- and the same was resulted into the payment of Rs.48,56,160/- as per the intimation u/s. 143(1) of the Act. 7. Owing to the mistake apparent from the record, the appellant preferred to file a rectification application u/s. 154 of the Act with the CPC.
7 Page | 7 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21 Accordingly, the same was submitted online vide rectification reference no.226825810170222 dated 17/02/2022. The said rectification request was rejected by the CPC and the order u/s. 154 of the Act was issued to the appellant on 02/06/2022. While the claim of foreign tax credit as per section 90 of the Act was not disallowed, additionally, the loss under the head ‘house property’ of Rs.11,33,502/- (as claimed in the original return) was also disallowed by the CPC. Moreover, no reason was provided by the CPC for disallowing the aforesaid claim in the rectification order. Additionally, in view of the above disallowances, CPC has also issued a demand notice u/s. 156 of the Act for payment of demand of Rs.48,56,160/-. 8. Aggrieved by the above rectification order passed u/s. 154 of the Act, the appellant preferred the appeal before the Ld. CIT(A). The Ld. CIT(A) vide impugned order dismissed the appeal of the assessee on the ground that the assessee filed return of income for the assessment year 2020-21 on 27/02/2021, the assessee has not filed form no.67 before due date of filing of return u/s. 139(1) of the IT Act. Therefore, the assessee has not followed rule 128 in respect of filing form no. 67 on or before the due date of filing of return of income for relevant assessment year. Therefore, the denial of foreign tax credit of Rs.35,88,447/- by the Ld. AO(CPC) in the order u/s. 154 of the IT Act was justified.
8 Page | 8 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21 9. We have considered the facts of the case and the submissions made by the appellant. It is found that simply because the assessee has not filed form no.67 before due date of filing of return u/s. 139(1) of the IT Act, the foreign tax credit of Rs.35,88,447/- was denied by the Ld. AO(CPC) and even the same was not given credit while rectifying the order u/s. 154 of the IT Act and that too without giving any opportunity of being heard to the appellant. The action of the AO, therefore, is not justified. We, therefore, direct the JAO to reconsider the claim of the assessee by giving him reasonable opportunity of being heard. We are not making any comment on the merit of the case. 10. In the result, the appeal is allowed. Order pronounced in the open court on 25.10.2024.
Sd/- Sd/- AMIT SHUKLA RATNESH NANDAN SAHAY JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 25.10.2024. Snehal C. Ayare, Stenographer
Copy to:The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench
//True Copy//
9 Page | 9 ITA No.3359/MUM/2024 Mr. Dheeraj Tolaram Talreja ; A. Y.2020-21
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.