MONIKA ARYA ,TELANGANA vs. INCOME TAX OFFICER, WARD-5(3)(1), BANGALORE

ITA 913/BANG/2024Status: DisposedITAT Bangalore25 June 2024AY 2017-188 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held in favor of the assessee, allowing the appeal. The Tribunal agreed with the assessee's contentions that (i) Rule 128(9) of the Rules does not provide for the disallowance of Foreign Tax Credit (FTC) in case of delayed filing of Form No. 67; (ii) the filing of Form No. 67 is a directory requirement, not mandatory; and (iii) the Double Taxation Avoidance Agreement (DTAA) overrides the provisions of the Income Tax Act, 1961, and the Rules cannot be contrary to the Act. The Tribunal found that the issue was not debatable and that the revenue authorities' rejection of the assessee's application was based on merits, not on the issue being debatable. Consequently, the Tribunal directed the Assessing Officer (AO) to grant credit for the foreign tax as per Form No. 67 filed, after due verification. The appeal was allowed, with the operative direction to the AO to grant the FTC.

What were the facts?

The assessee, Monika Arya, is appealing an order from the NFAC (National Faceless Appellate Authority) for Assessment Year 2017-18. The appeal challenges the disallowance of foreign tax credit (FTC) of INR 10,28,752, which was claimed under Section 90 of the Income Tax Act, 1961, read with Article 23 of the India-Canada Double Taxation Avoidance Agreement (DTAA). The disallowance was initially made by the Centralized Processing Centre (CPC) under Section 143(1) of the Act. The assessee contends that Form 67, a procedural requirement for claiming FTC, was filed. The CIT(A) dismissed the assessee's appeal, upholding the disallowance. The matter is now before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the disallowance of foreign tax credit of INR 10,28,752, claimed under Section 90 of the Income Tax Act, 1961, read with Article 23 of the India-Canada DTAA, is valid, considering the assessee paid federal taxes in Canada on doubly taxed income. 2. Whether the filing of Form 67 is a mandatory or directory requirement, and if its delayed filing can lead to the disallowance of FTC. Assessee's arguments: The assessee argues that the disallowance of FTC is bad in law. They contend that Section 90 allows for relief in respect of doubly taxed income, and the DTAA overrides the Act. The filing of Form 67 is a procedural requirement, not a substantive one, and its non-compliance should not disentitle them to FTC. They rely on various High Court and Supreme Court decisions, including *Vinodkumar Lakshmipathi vs. CIT* and *Brinda Rama Krishna*, which held that Rule 128(9) does not mandate disallowance for delayed filing of Form 67 and that DTAA provisions prevail over the Act and Rules. They also cite *Sambhaji and Others v. Gangabai and Others* for the principle that procedure should aid justice, not obstruct it. Revenue's arguments: The revenue reiterates that Rule 128(9) of the Rules is mandatory, justifying the refusal of FTC. They also submitted that the issue was debatable and not subject to Section 154 proceedings.

Which sections of the Income-tax Act were involved?

Section 90,Section 143(1),Section 139(1),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH: BANGALORE

Before: SHRI CHANDRA POOJARI & SHRI PRAKASH CHAND YADAV

For Appellant: Smt. Vaidehi G., A.R
For Respondent: Ms. Neha Sahay, D.R
Hearing: 25.06.2024

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

This appeal by assessee is directed against order of NFAC for the assessment year 2017-18 dated 15.3.2024 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”). The assessee raised following grounds of appeal:

1.

In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) ADDL/JCIT (A)-I Nashik (herein referred to 'Ld. CIT(A)') had erred in upholding the disallowance made by Centralized Processing Centre ('CPC') u/s 143(1) of the Income Tax Act 1961 (‘the Act’) in respect of foreign tax credit of INR 10,28,752 against the federal taxes paid b

The order continues below.

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