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Facts
The assessee, an individual working in Hong Kong, earned salary income for AY 2021-22 and paid taxes there. Due to the COVID-19 pandemic, the assessee overstayed in India and was deemed resident. He filed a belated return and claimed foreign tax credit (FTC) for taxes paid in Hong Kong. The CPC denied this credit.
Held
The Tribunal held that the amendment to Rule 128(9) of the Income Tax Rules, which allowed filing of Form 67 by the due date of return filing u/s 139(4), should be applied retrospectively. The Tribunal also noted that filing Form 67 is directory and not mandatory, and delays should not preclude the assessee from getting tax credit benefits.
Key Issues
Whether the assessee is eligible for foreign tax credit when Form 67 was filed belatedly along with a belated return, especially in light of the retrospective amendment to Rule 128(9)?
Sections Cited
Sec. 90, Sec. 139(1), Sec. 139(4), Rule 128
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘E‘ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 26/12/2023 passed by Addl. / JCIT (Appeal)-11, Mumbai for the A.Y.2021-22 with regard to denial of foreign tax credit in the intimation u/s.143(1).
Shri Shivan Vinod Mehra 2. The assessee is aggrieved by denial of foreign tax credit of Rs.20,86,652/- u/s.90 of the Act by the CPC in the intimation u/s.143(1).
The brief facts are that assessee is an individual and was working with Timex Nederland B.V. Sequel Services, Hong Kong. The assessee was earning his income from salary earned in Hong Kong on which he has paid taxes in Hong Kong on the said salary income for the A.Y.2021-22, which was claimed as relief in terms of FTC u/s.90 of the Act to the extent of Rs.20,80,652/-. The assessee has filed Form 67 on 31/03/2022 along with certificates / statements specifying the nature of income and amount of tax paid as per Rule 128 of the Income Tax Rules, 1962. The assessee had filed the return of income in India u/s.139(4) on 31/03/2022 and alongwith the return he has filed Form No.67 on the same date. The return filed by the assessee was processed and intimation was received on 17/11/2022, whereby it was informed vide order dated 03/10/2022 u/s.143(1), the CPC has raised demand including interest of Rs.26,29,760/-. The CPC has not computed the relief u/s.90 of the Act and no FTC was given of Rs.20,80,652/- claimed by the assessee.
Before the ld. CIT(A) assessee submitted that the assessee had come to India in F.Y.2020-21 to visit his father in India and due to Covid-19 pandemic, lockdown was imposed and he could not return to Hong Kong and only for this reason for the A.Y.2021-22 assessee was deemed to be resident and ordinarily resident for tax purpose in India. Since assessee was under Shri Shivan Vinod Mehra bonafide belief that he won’t be liable to pay tax in India on the income earned in Hong Kong as the same was already taxed in Hong Kong, therefore he could file return on the due date of return u/s 139(1). Later on, assessee took advice from a tax consultant in India, who advised that since he has overstayed in India for more than 183 days, therefore, he has to file return for A.Y. 2021-22 in India. Accordingly, he compiled his data and filed the return of income which was earned in Hong Kong on 31/03/2022. It was return filed u/s.139(4) declaring total income of Rs.1,56,58,090/- which mostly included income earned in Hong Kong of Rs.1,53,04,989/-. The main income was purely on account of salary received in Hong Kong and small amount of capital gain interest income earned declared as other sources in India. He had paid taxes including interest of Rs.41,38,154/-. The ld. CIT(A) after incorporating the entire submission and bonafide explanation of the assessee from pages 2-9 of his order, observed that the due date of filing of return u/s.139(1) was 31st August 2021 which was extended up to 31/12/2021 and therefore, assessee was liable to file Form No.67 before the due date of filing of return of income i.e. 31/12/2021, whereas assessee has filed return u/s.139(4) alongwith Form No.67 on 31.03.2022. Thus, there was delay of 3 months in filing the Form No.
The ld. CIT(A) while dismissing the assessee’s claim for FTC on his taxable income has relied on the CBDT Notification No.100/2022/F.No.370142/35/2022-TPL, which for sake of ready reference, scan copy is reproduced hereunder:-.
Ld. CIT(A) held that since this notification is applicable from 01/04/2022 and since assessee’s appeal pertain to A.Y. 2021- 22, therefore aforesaid notification is not applicable and accordingly, he denied the foreign tax credit of Rs. 20,86,652/-.
After considering the aforesaid facts and the order of the ld. CIT(A), we find there is no dispute that the assessee’s major income which was declared in the return of income in India was salary earned in Hong Kong of Rs.1,53,04,989/- out of total income declared of Rs.1,56,58,090/-. Due to adverse circumstances of second wave of Covid-19 Pandemic and circumstances beyond his control, assessee who had come to India to visit his father had over stayed because of complete lockdown all across. Thus due to this reason, he was treated as resident and ordinarily resident for tax purpose in India. Later on, on the advice of tax consultant in India, assessee filed return of income which was belated return u/s.139(4) on 31/03/2022 Shri Shivan Vinod Mehra and alongwith said return of income assessee had filed Form 67 as required in terms of Rule 128 of the Income Tax rules. From the bare perusal of the CBDT notification, it is seen that sub-rule (9) of Rule 128 was amended wherein it was provided that statement in Form No.67 can be furnished on or before the time specified under sub-section (1) or sub-section (4) of Section 139. Explanatory Memorandum clearly states that this amendment is effective from 01/04/2022. If such notification has been issued to include the due date up till the date of filing of return u/s.139(4), which is beneficial to the assessee and to remove the rigours, then same should be held to be applied retrospectively. Otherwise also during the Covid period, the Hon’ble Supreme Court in the case of Cognizance for Extension of Limitation reported in 411 ITR 722 had given relaxation for initiation of any kind of proceedings and applications and statutory compliances till March 2022. This judgment has overriding effect in all such situations. Before us various judgments of Co-ordinate Benches of ITAT have been cited wherein it has been held that filing of Form 67 is directory in nature and not mandatory and mere delay in filing of Form No.67 will not preclude the assessee from getting benefit of tax credit and the above amendment in Rule 128 is curative in nature and therefore, it has to apply retrospectively. Accordingly, we direct the ld. AO to allow the foreign tax credit of Rs.20,86,652/.
In the result, appeal of the assessee is allowed.
Order pronounced on 31st May,2024.