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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri Laliet Kumar & Shri Madhusudan Sawdia
Per Laliet Kumar, J.M These appeals filed by the assessee are directed against the separate orders dated 27/02/2024 of the learned CIT (A)-Addl/JCIT (A)-3 Bengaluru, relating to A.Ys.2019-20 & 2021- 22 respectively.
Although a number of grounds have been raised by the assessee, however, these all relate to the order of the learned CIT (A)-Addl/JCIT (A)-3 Bengaluru in in upholding the
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disallowance of Rs.1,17,02,466/- being Foreign Tax Credit claimed by the assessee by way of tax relief u/s 90 of the I.T. Act, 1961.
Facts of the case, in brief, are that the appeal instituted on 14.11.2022 emanates from the rectification of the intimation order u/s 154 r.w.s. 143(1) of the I.T. Act passed by the Asstt. Director of Income Tax, CPC Bengaluru for the A.Ys 2019-20 on 7.11.2022. The assessee is an individual who was working for Microsoft India Pvt Ltd e-filed his return of income on 22nd July, 2020 declaring total income of Rs.14,78,26,790/- and the assessee filed Form 67 on 4.11.2022 in connection with the relief u/s 91. The income earned by the assessee from abroad was taxed and relief claimed u/s 91 was not granted by the CPC. Since no action was taken, the assessee again filed Form No.67. Thereafter, the assessee filed a rectification petition u/s 154, however, the CPC vide rectification order declined to allow the FTC u/s 90. The assessee again filed a rectification application u/s 154.
Aggrieved with such rejection of the rectification application, the assessee filed appeal before the learned CIT (A)/Add. JCT(A)-3 Bengaluru who rejected the application filed by the assessee and relied on the decision of State of U.P vs. Singhara Singh, AIR (1964) S.C 358 & Chandra Kishore Jha vs.Mahavir Prasad (199) 8 SCC 266, where the Hon'ble Court
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has mentioned that “if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in other manner”.
Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal.
The learned Counsel for the assessee referring to page volume of the paper book drew the attention of the Bench to the acknowledgement of filing of Form No.67 along with copies of Form 67 and Form No.8879, Department of the Treasury Internal Revenue Service. Referring to the decision of the Coordinate Bench of the Tribunal in the case of Shri Govinda Rajulu Dhondu vs. ACIT in ITA No.113/Hyd/2023 dated 11.5.2023 for the A.Y 2019-20, he submitted that the Tribunal considering various decisions including the decision of the Vizag Bench of the Tribunal in the case of Muralikrishna Vaddi vs. ACIT/Dy.CIT (Supra) has directed the Assessing Officer to allow the FTC after due verification. He accordingly submitted that he has no objection, if the matter is restored to the file of the Assessing Officer with similar direction to allow the FTC after due verification.
The learned DR, on the other hand, heavily relied on the order of the Assessing Officer and the learned CIT (A) NFAC.
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We have heard the rival arguments made by both the sides and perused the orders of the authorities below. We find the AO in the instant case rejected the 154-rectification application filed u/s 154 of the I.T. Act, 1961 on the ground that Form 67 was not furnished before the due date as prescribed u/s 139(1) in compliance to Rule 128(9). We find the learned CIT (A) upheld the action of the Assessing Officer on the ground that the filing of Income Tax Return offering the relevant income in USA is sine qua non for subjecting the income to tax in USA, which is the primary requirement of allowing foreign tax credit under Article 23 of the relevant DTAA.
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
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(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 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. 11. 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 ITA no.454/Bang/2021 by order dated 17/11/2021. 7. 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.
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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 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.”
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. 1,17, 02,466/- after due verification. Needless to say, the Assessing Officer shall give due opportunity of being heard to the assessee and
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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 the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 10th June, 2024. Sd/- Sd/- (MADHUSUDAN SAWDIA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 10th June, 2024 Vinodan/sps Copy to: S.No Addresses 1 Shri Sharad Mathur, 145, Marigold LNT Serena County, Gachibowli, Hyderabad 500032 2 Dy.CIT, Circle 12(1) Hyderabad 3 Pr. CIT – Hyderabad/Bengaluru 4 DR, ITAT Hyderabad Benches 5 Guard File By Order
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