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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri Manjunatha, G. & Shri K. Narasimha Chary
Per Manjunatha, G. A.M These two appeals filed by the assessee are directed against the separate, but identical orders passed by the learned Addl/JCIT-1 Ludhiana dated 26/06/2024 and 25/06/20254 and pertains to A.Ys 2020-21 & 2021-22. Since facts are identical and issues involved in these appeals are common, for the sake of convenience, both these appeals were heard together and are being disposed off by this common order.
ITA No.760/Hyd/2024 – A.Y 2020-21
The brief facts of the case are that the appellant is an individual and is a resident for the purpose of I.T. Act, 1961. The Page 1 of 7 appellant is a salaried employee and was in receipt of salary from Mastech Digital Private Limited. The appellant was on an assignment to the USA during the year and was in receipt of salary from Mastech Digital Technologies Inc, USA. The appellant being a resident for the A.Y 2020-21, his global income was offered to tax in India. Accordingly, salary received in respect of the services rendered outside India was offered to tax in India. The appellant had also filed tax return in the USA as well. The appellant has filed his return of income for the A.Y 2020-21 u/s 139(4) of the I.T. Act, 1961 on 31.3.2021 and declared total income of Rs.95,92,944/- which includes salary received from outside India for employment with Mastech Digital Technologies Inc, USA and also claimed foreign tax credit of Rs.11,28,012/- as per section 90 of the I.T. Act, 1961 and Article 25(2)(a) of the Indio-USA Double Taxation Avoidance Agreement (DTAA). The return of income filed by the assessee was processed u/s 143(1) and intimation was issued, where the Assessing Officer CPC denied foreign tax credit for belated filing of the Form 67 in terms of Rule 128(9) of the I.T. Rules, 1962. The appellant has filed a petition u/s 154 of the Act, along with Form No.67 and acknowledgement for filing the said form on 1/4/2021, but the rectification petition filed by the assessee has been rejected by the Assessing Officer.
The appellant carried the matter in appeal before the first appellate authority, but could not succeed. The learned JCIT/Addl.CIT (A), for the reasons stated in their appellate order dated 26/06/2024 rejected the explanation of the assessee and upheld the denial of Foreign Tax Credit for belated filing of Form 67.
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Aggrieved by the order of the learned JCIT (A)/Addl.CIT (A), the assessee is in appeal before the Tribunal.
The learned Counsel for the assessee submitted that this issue is squarely covered in favour of the assessee by the decision of the ITAT Hyderabad Benches in the case of Shri Nagababu Kuchibhotla vs. Income Tax Officer in 2024, dated 27/02/2024, where identical issue has been considered by the Coordinate Bench and held that filing of Form 67 for claiming Foreign Tax Credit is only directory in nature but not mandatory and thus, for belated filing of Form 67, credit for taxes paid outside India cannot be denied. Therefore, he submitted that the FTC claimed by the assessee towards taxes paid outside India should be allowed.
The learned DR, on the other hand, supporting the order of the learned JCIT/Addl.CIT (A) submitted that as per Rule 128(9) of the I.T. Rules, 1962, filing of Form 67 on or before the due date for filing of the return of income u/s 139 is mandatory. Since the appellant has not filed form 67 along with the return of income, the Assessing Officer has rightly denied the Foreign Tax Credit and thus, the order of the learned JCIT/Addl.CIT(A) should be upheld.
We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the appellant has not filed Form 67 on or before the due date for filing of the return of income u/s 139(1) of the Act, in terms of section Page 3 of 7 90 of the I.T. Act, 1961 and Rule 128(9) of the I.T. Rules, 1962. However, such form 67 has been filed on or before the Assessing Officer passed the order u/s 143(1) of the Act which is evident from the date of intimation issued by the Assessing Officer u/s 143(1) of the Act for the A.Y 2020-21 i.e. on 24.12.2021 and the date of filing of Form 67 i.e. 1/4/2021. Since the appellant has filed Form 67 on or before the Assessing Officer passed the assessment order, in our considered view, the Assessing Officer ought to have given credit for taxes paid outside India when the global income of the appellant has been taxed in India. Further, a similar issue has been considered by the Coordinate Bench of the ITAT Hyderabad in the case of Shri Nagababu Kuchibhotla vs. Income Tax Officer in dated 27th Feb. 2024 where under identical set of facts the Tribunal directed the Assessing Officer to allow credit for Foreign Taxes paid outside India. The relevant findings of the Tribunal are as under: “12. We find identical issue had come up before the Coordinate Bench of the Tribunal in the case of Govinda Rajulu Dhondu (Supra) wherein the Tribunal, following the decision of the Coordinate Bench of the Tribunal in the case of Baburao Alturi vs. Dy.CIT in ITA No.108/Hyd/2022 and distinguishing the decision of the Vizag Bench of the Tribunal in the case of Muralikrishna Vaddi vs. ACIT/Dy.CIT (Supra) has restored the issue to the file of the Assessing Officer with a direction to allow the FTC after due verification. The relevant observation of the Tribunal from Para 8 to 9 read as under: “8. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case rejected the 154rectification application on the ground that Form No.67 was not furnished before the due date as provided u/s 139(1) in compliance to Rule 128(9). We find the learned CIT (A) NFAC upheld the action of the Assessing Officer in denying the relief for foreign tax credit, the reasons of which have already been reproduced in the preceding paragraph. We find an identical issue had come up before the Page 4 of 7 Coordinate Bench of the Tribunal in the case of Shri Baburao Atluri (Supra) wherein the Tribunal, after considering various decisions, has allowed the foreign tax credit, although there was delay in filing of such Form 67 beyond the due date of filing of the return. Relevant observation of the Tribunal from Para 10 onwards read as under: “10. We have heard the rival arguments made by both the sides, perused the orders of the AO and NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case did not allow the Foreign Tax Credit (FTC) on the ground that Form No.67 has been filed beyond the due date of filing of the return. We find the NFAC upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned Counsel for the assessee that filing of foreign tax credit certificate in Form-67 is directory in nature Baburao Atluri and not mandatory and therefore the NFAC is not justified in denying the Foreign Tax Credit.
We find the Bangalore Bench of the Tribunal in the case of M/s. 42 Hertz software India Pvt. Ltd (supra) while deciding an identical issue has held that FTC cannot be denied to the assessee, where the assessee filed FTC in Form No.67, although belatedly since filing of such Form 67 is not mandatory but directory in nature. The relevant observation of the Tribunal from para 6 onwards reads as under:- "6. There is no dispute that the Assessee is entitled to claim FTC. On perusal of provisions of Rule 128 (8) & (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view, this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda Kumar Krishna vs. ITO in by order dated 17/11/2021.
It's a trite law that DTAA overrides the provisions of the Act and the Rules, as held by various High Courts, which has also been approved by Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471.
We accordingly, hold that FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/evidences in support of its claim. We thus remand this issue back to the Ld.AO to consider the claim of assessee in accordance with law, based on the verification carried out in respect of the supporting documents filed by assessee. Accordingly, the grounds raised
by assessee stands allowed for statistical purposes."
12. We further find, in the instant case, the delay in filing of the FTC certificate in Form-67 was explained to be due to non-receipt of the tax deduction certificate form the foreign deductor from Zambia within time for which the said Form-67 was filed belatedly by 14 days. It was stated
Page 5 of 7 that the tax jurisdiction of the Zambian deductor follow different period for taxing the income and have different due dates for filing the return as compared to India. So, Baburao Atluri far as the decision relied on by ld. DR in the case of Muralikrishna Vaddi(supra) is concerned, we find there is a delay of more than two years without any valid and reasonable cause. Therefore, the said decision in our opinion cannot be applicable to the facts of the present case. In any case, when there are two view possible, the view which is favourable to the assessee has to be followed as held by Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. reported in (1972) 88 ITR 192. Since, the assessee in the instant case has filed FTC certificate in Form No.67 with delay of only '14' days, therefore following the decision of the Bangalore Bench of the Tribunal in the case of M/s. 42 Hertz Software India Pvt.Ltd.(supra), we direct the AO to allow the FTC after due verification. The grounds raised by the assessee are accordingly allowed.”
Since the facts of the instant case are identical to the facts of the present case, therefore, respectfully following the decision of the Coordinate Bench of the Tribunal, we direct the Assessing Officer to allow the foreign tax credit of Rs.58,69,594/- after due verification. Grounds raised
by the assessee are accordingly allowed.”
13. Respectfully following the decision of the Coordinate Bench of the Tribunal in the case of Govind Rajulu Dhondu (Supra) we restore the issue to the file of the Assessing Officer with similar direction to allow the FTC of Rs. 4,40,939/- after due verification. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.”
In this view of the matter and by respectfully following the order of the Coordinate Bench of the Tribunal in the case of Nagababu Kuchibhotla in dated 27/02/2024, we direct the Assessing Officer to verify Form 67 filed by the assessee to claim credit for Foreign Tax Credit and allow the credit for taxes paid outside India.
In the result, appeal filed by the assessee is allowed.
Page 6 of 7 ITA No.761/Hyd/2024 – A.Y 2021-22 10. The facts and issues involved in this appeal filed by the assessee are identical to the facts and issues which we had considered in for the A.Y 2020-21. But for figures, the reasons given by us in preceding paragraph Nos.7 & 8 shall mutatis mutandis apply to this appeal as well. Therefore, for similar reason, we direct the Assessing Officer to verify form 67 filed by the assessee and allow credit for taxes paid outside India.
In the result, both the appeals filed by the assessee are allowed. Order pronounced in the Open Court on 7th October, 2024. Sd/- Sd/- (K. NARASIMHA CHARY) (MANJUNATHA, G.) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 7th October, 2024 Vinodan/sps Copy to: S.No Addresses 1 Shri Ramesh Babu Jasti, 27 Vivana Villas, Gandipet Main Road, Gandipet, Hyderabad 500075 2 Income Tax Officer Ward -12(6) Hyderabad 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order
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