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Facts
The assessee, a salaried person employed with M/s. Larsen & Toubro Infotech Limited, was posted to the USA for service where they received salary and paid taxes. The assessee claimed Foreign Tax Credit (FTC) of Rs. 4,21,428/- but it was denied by the CPC because Form 67 was not filed along with the return of income.
Held
The Tribunal held that filing of Form 67 is a procedural and directory requirement, not mandatory. Violation of procedural norms does not extinguish the substantial right of claiming FTC. The Tribunal directed the AO to allow the FTC credit, stating that Rule 128(9) of the Income Tax Rules, 1962, does not provide for disallowance of FTC due to delay in filing Form 67, and DTAA overrides the provisions of the Act and Rules.
Key Issues
Whether denial of Foreign Tax Credit solely on the ground of delayed filing of Form 67 is justified when the credit is otherwise admissible.
Sections Cited
Rule 128(9) of the Income Tax Rules, 1962
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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI RAJ KUMAR CHAUHAN, HON’BLE
PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order of the NFAC, Delhi, dt. 29/03/2024, pertaining to AY 2020-21. 2. The sum and substance of the grievance of the assessee is that the ld. CIT(A), erred in not holding that the assessee was entitled to Foreign Tax Credit (FTC) of Rs. 4,21,428/- merely on the ground that Form 67 was not filed along with the return of income.
Briefly stated the facts of the case are that the assessee is a salaried person and was employed with M/s. Larsen & Toubro Infotech Limited. The assessee was sent abroad and posted in U.S.A., for service by his employer where the assessee received salary and paid taxes for which Form 67 was filed. The claim of the assessee was denied by the 2
CPC, for the simple reason that Form 67, was not filed along with the return of income.
Representatives of both the sides heard at length. There is no dispute that the assessee holds a foreign tax credit certificate for Rs.4,21,428/-. In our considered opinion filing of Form 67 is procedural/directory requirement and is not mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantial right of claiming the credit of FTC. We accordingly direct the AO to allow the credit of FTC and hold that Rule 128(9) of the Income Tax Rules, 1962 (Rules) does not provide for disallowance of FTC in the case of delay in filing of Form 67 as the same is not mandatory but a directory requirement and DTAA over-rides the provision of the Act and the Rules.
The Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy vs. PCIT in W.P. No. 5834 of 2022 vide order dt. 06/10/2023, has held in para 11 to 13 as under:- “11.The law laid down by the Hon'ble Apex Court in Commissioner of Income-Tax, Maharashtra v. G.M.Knitting Industries (P) Limited in Civil Appeal Nos.10782 of 2013 and 4048 of 2014 dated 24.06.2015, which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature. This is what the Hon'ble Supreme Court had held in the above cases when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of assessment order.
Further, in the present case, the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC was rejected by the respondent, which is not proper and the same is not in accordance with law. Therefore the impugned order is liable to be set aside. 3
Accordingly the impugned order dated 25.01.2022 is set aside. While setting aside the impugned order, this Court remits the matter back to the respondent to make reassessment by taking into consideration of the FTC filed by the petitioner on 02.02.2021. The respondent is directed to give due credit to the Kenya income of the petitioner and pass the final assessment order. Further, it is made clear that the impugned order is set aside only to the extent of disallowing of FTC claim made by the petitioner and hence, the first respondent is directed to consider only on the aspect of rejection of FTC claim within a period of 8 weeks from the date of receipt of copy of this order.”
Respectfully following the same, we direct the AO to examine the claim as per Form 67 and allow the claim of FTC as per the relevant provisions of law.
In the result, appeal of the assessee is allowed. Order pronounced in the Court on 24th July, 2024 at Mumbai. (RAJ KUMAR CHAUHAN) ACCOUNTANT MEMBER Mumbai, Dated 24/07/2024 *SC SrPs *SC SrPs *SC SrPs *SC SrPs
आदेश की "ितिलिप अ"ेिषत/Copy of the Order forwarded to : अपीलाथ" / The Appellant
""थ" / The Respondent 2. संबंिधत आयकर आयु" / Concerned Pr. CIT 3. आयकर आयु" अपील
( ) / The CIT(A)- िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 5. गाड" फाई/ Guard file. 6. आदेशानुसार/ BY ORDER,