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Facts
The assessee, an ordinary resident in India, claimed foreign tax credit (FTC) for taxes paid in Singapore. The assessee filed Form 67 belatedly. The Assessing Officer (AO) denied the FTC under Section 154 of the Act due to the delayed filing of Form 67. The CIT(A) confirmed the AO's order.
Held
The Tribunal held that filing Form 67 is directory and not mandatory. The benefit of FTC should not be denied solely due to the belated filing of Form 67, especially when Form 67 was filed before the intimation under Section 143(1). The Double Taxation Avoidance Agreement (DTAA) provisions prevail over domestic law in case of inconsistencies.
Key Issues
Whether the belated filing of Form 67 precludes the assessee from claiming the benefit of Foreign Tax Credit (FTC) under Section 90 read with Rule 128 of the Income Tax Rules. Whether the DTAA provisions override domestic law in case of inconsistencies.
Sections Cited
Section 90, Rule 128, Section 154, Section 139(1), Article 25 of DTAA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the Addl./JCIT (A-7), Mumbai, dated 23/09/2024, for the assessment years 2018-19 and 2019-20.
The only effective issue raised by the assessee is that the learned CIT(A) erred in confirming the order of the Assessing Officer (AO) by denying the benefit of foreign tax credit (FTC) under section 90 read with Rule 128 of the Income Tax Rules.
The assessee, an individual deriving income under the head ‘salary,’ was an ordinary resident in India during the relevant assessment years. Consequently, the global income of the assessee, including salary income earned from a Singapore-based company, was taxable in India. The assessee claimed a foreign tax credit of Rs. 56,867/- in the return of income filed under Section 139(1) of the Income Tax Act. However, form 67, required for claiming FTC, was filed belatedly. Consequently, the AO denied the benefit of FTC under Section 154 of the Act, citing the delayed filing of Form 67.
On appeal, the learned CIT(A) confirmed the AO’s order, adopting similar reasoning and holding that the belated filing of Form 67 precludes the assessee from claiming the FTC.
Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
The learned Authorized Representative (AR) filed a paper book (pages 1 to 97) and a case law compilation (pages 1 to 110). The key contentions of the AR are that filing Form 67 is directory and not mandatory. Therefore, the benefit of FTC should not be denied solely on account of the belated filing of Form 67. The AR highlighted that Form .
Page 3 of 6 67 was filed before the intimation under Section 143(1), dated 08/06/2020.
6.1 The ld. AR further argued that the Double Taxation Avoidance Agreement (DTAA) between India and Singapore entitles the assessee to FTC on doubly taxed income. The treaty provisions should prevail over domestic law in case of inconsistencies, and the provisions favoring the assessee must apply.
6.2 Without prejudice, the AR argued that the claim of FTC based on Form 67 is a debatable issue, which cannot be made subject to adjustment under Section 143(1) of the Act.
On the other hand, the learned Departmental Representative (DR) supported the orders of the lower authorities. However, the DR submitted that if the benefit of FTC is to be allowed, the issue should be remanded to the AO for verification of the FTC claimed by the assessee.
We have the rival contentions both the parties and perused the materials on record. It is settled law that debatable issues cannot be made subject to adjustment under Section 143(1) of the Act. This view is supported by the judgment of the Hon’ble MP High Court in the case of Kamal Textiles v. ITO (59 Taxman 555) which holds that debatable issues require proper adjudication. The relevant extract is reproduced as under: As regards the submission that section 143(1)(a)(i) is ultra vires, the argument was that before issuing the intimation which is demand under section 143(3), no opportunity is afforded to meet the adverse consequence, if any. The fallacy in the suggestion lay in omitting to see that the intimation was issued on the basis of the assessee’s own return. At that stage, only errors apparent on the .
Page 4 of 6 face of the record alone may be corrected. Even this was permissible on the basis of the information accompanying the return. The assessing authority was not permitted under this guise of making adjustment to adjudicate upon any debatable issue.
8.1 In the present case, the AO denied the claim of the assessee in the proceedings carried out under section 154 of the Act, treating the claim of the assessee being debatable. If the same reasoning is adopted, then such an adjustment can also not be made in the return processed under section 143(1) of the Act.
8.2 The second controversy, whether filing of form 67 is mandatory or directory, has been settled by the Bangalore ITAT in the case of Sanjeev Gupta v. ADIT (145 Taxmann.com 378) wherein it was held that filing Form 67 is not mandatory for claiming FTC under Rule 128 of Rules. Denial of FTC due to delayed filing of Form 67 would be inconsistent with the intent of the provisions. The relevant extract is reproduced as under:
I have given a careful consideration to the rival submissions. I agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing of Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. I am of the view that the issue was not debatable and there was only one view possible on the issue which is the view set out above. I am also of the view that the issue in the proceedings u/s.154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee's application u/s.154 of the Act was not on the ground that the issue was debatable but on merits. I therefore do not agree with the submission of the learned DR in this regard.
In the result, the appeal is allowed."
8.3 Similarly, we note that the Article 25 of the DTAA between India and Singapore provides for FTC where income is taxed in both .
Page 5 of 6 jurisdictions. The treaty mandates allowing credit for taxes paid in Singapore. The relevant Article 25 of the treaty reads as under:
Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Singapore, India shall allow as a deduction from the tax on the income of that resident an amount equal to the Singapore tax paid, whether directly or by deduction.
8.4 Admittedly in the case on hand, the assessee has not filed Form 67 within the stipulated time but the benefit of foreign tax credit cannot be denied to the assessee, as such disallowance would be in consistent to the provisions of the treaty. The Hon’ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan (263 ITR 706) affirmed that DTAA provisions prevail over inconsistent domestic law if beneficial to the assessee. The relevant extract is reproduced as under:
The contention of the respondents, which weighed with the High Court viz. that the impugned circular No.789 is inconsistent with the provisions of the Act, is a total non-sequitur. As we have pointed out, Circular No.789 is a circular within the meaning of section 90; therefore, it must have the legal consequences contemplated by sub-section (2) of section 90. In other words, the circular shall prevail even if inconsistent with the provisions of Income-tax Act, 1961 insofar as assessees covered by the provisions of the DTAC are concerned.
8.5 In view of the above, we hold that the assessee deserves the benefit of FTC claimed in the return of income. However, we note that the quantum of FTC claimed by the assessee requires verification, which was not conducted during the processing under Section 143(1) of the Act. Accordingly, the matter needs to be remanded to the AO for verification. Considering the above, we direct the AO to verify the FTC claim and allow the benefit if found in order. Hence, the ground appeal of the assessee is allowed for statistical purposes.
. an appeal by the assessee for the assessment year 2019-20 8.6 The facts and issues for AY 2019-20 are identical to AY 2018-19. Following the decision for AY 2018-19, the matter for AY 2019-20 is also remanded to the AO for verification. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes.
In conclusion, both appeals filed by the assessee for AY 2018-19 and AY 2019-20 are partly allowed for statistical purposes.
Order pronounced in court on 16th day of December, 2024 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 16th December, 2024 / vms / Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore .