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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI MAKARAND VASANT MAHADEOKAR
(Assessment Year: 2020-21) Subhash Ishvarbhai Patel, Vs. ACIT, Plot No.86, CPC, Bengaluru Sector 19, (Present Jurisdiction Gandhinagar-382021. The ACIT, Gandhinagar Circle, Gandhinagar.) [PAN No.AAYPP4576C] (Appellant) .. (Respondent) Appellant by : Ms. Nupur Shah, A.R. Respondent by: Shri Sudhakar Verma, Sr. DR Date of Hearing 03.09.2024 Date of Pronouncement 10.09.2024 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 26.03.2024 for Assessment Year 2020-21.
The Assessee has taken the following grounds of appeal:-
The Ld.CIT(A) has grossly erred in law and on facts in dismissing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant before him. Denial of claim of Relief U/s.90/91 for the tax paid in USA for the income from USA left to be considered while processing the return of Income by CPC.
Subhash I Patel vs. ACIT Asst.Year 2020-21 - 2– 1. The Ld.CIT(A) has erred in law and on fact in not giving the relief claimed by the appellant u/s.90/91 for tax paid in USA for Income from USA while processing the return of Income CPC in the order u/s. 143(1) of the Act as well as while passing the order u/s. 154 of the Act on the ground that the appellant failed to file form No. 67 before the time limit specified u/s139(1) for A.Y. 2020-21 2. The Ld. CIT (A) has erred in law and on facts in not considering the fact that the income earned by the appellant in USA of US$ 55,353.35 (Equivalent Rs. 39,45,510/- ) on which the Tax of US$6,825.62 (equivalent to Rs. 4,86,257/- has been deducted in USA. The appellant had offered the income earned in USA to tax under Income from Other Sources and being eligible, claimed relief u/s. 90 of the Act as per DTAA between Government of India and USA and already taxed by the USA Government.
The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that filing of Form 67 is a procedural/directory requirement and violation of procedural norms does not extinguish the substantive right of claiming the credit of Foreign Tax Credit.
The Ld. CIT(A) has erred in law and on facts in not considering the decision of Hon'ble Ahmedabad Tribunal in the case of Manoj Kaushikprasad Jingar vs. The Assessing Officer, CPC, Bangalore (ITA No. 412/Ahd/2023) (Ahd-Trib.) 2023 ITL 2974 as well as the decision of Hon'ble Income Tax Appellate Tribunal, Bangalore Benches "SMC-B" in the case of Ms. Brinda Ramakrishna vs. The Income Tax Officer Ward 5(3)(1), Bangalore - ITA No. 454/Bang/2021. The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.
The brief facts of the case are that the assessee filed its return of income for AY 2020-21, declaring taxable income of Rs.2,20,41,980/-. The assessee while preparing the return of income claimed relief u/s.90/90A of the Act for Rs.4,86,257/- on income received from USA amounting to Rs.39,45,510/- ( which was disclosed as “income from other sources” in the return of income ). However, in the intimation received by the assessee u/s.143(1) of the Act, dated 24.12.2021, relief claimed u/s.90/90A of the Act was not allowed to the assessee. The reason for non grant of credit of TDS was that there was a delay in filing of Form No.67 for claiming relief as per the DTAA between the Government of India and USA u/s.90/90A of the Act and this Form was filed by the assessee on 10.03.2021. The assessee filed appeal before the Ld.CIT(A), and submitted that the assessee had duly filed Form no.67 along with certificate of taxes withheld issued by USA based employer of the assessee and therefore, it is fit case where the relief should be granted to the assesee and since assessee had paid taxes on the said income in USA, the assessee cannot be taxed twice on the said amount and credit of taxes paid/withheld in the overseas jurisdiction i.e USA should be granted to the assessee.
However, the Ld.CIT(A), dismissed the appeal of the assessee with the following observation: 4.1 The Appellant is aggrieved by the denial of foreign tax credit of Rs.4,86,257/-, which according to CPC is not available when form 67 has not been filed before the time limit specified u/s.139(1) and hence credit was denied while processing the ROI u/s 143(1) dated 24.12.2021 resulting in a tax demand of Rs. 5,95,980/- The appellant preferred a petition for rectification u/s 154, and the CPC in the order dated 28.12.2021 reiterated its earlier contention. Aggrieved by the said reject the appellant has preferred this appeal and the GoA and SoF filed as a consequence were carefully considered. 4.2 The facts of the case and the compliance to the rules laid down u/r.128 of the Income tax Rules, 1962 are carefully examined. The appellant had filed copy of Form No.67 which is dated 10.03.2021 and bears Receipt No.2806094041100321. It is an admitted fact that Form No.67 has not been filed by the Appellant before the time limit specified u/s.139(1) for AY 2020-21 and such omission is attempted to be justified by the Appellant on the pretext that filing of Form No.67 is not mandatory relying on certain judgements of the Tribunal. With due respect to the judicial authorities who had rendered in favour of the tax payers like that of the Appellant, it is brought on record that filing of Form No.67 is mandatory to claim the benefit of Foreign Tax Credit.
4.3 Taxes are paid in an alien nation, the particulars of which can never be verified by the Income tax Authorities. It is for such reason that Form No.67 which consists of 4 parts has a verification column, affirming that the claim of the FTC to the best of the knowledge and belief of the Appellant is true and correct. Providing credit of FTC in the absence of such verification is not logical while the authorities erred in failing to comprehend that the claims are otherwise not verifiable. Further, Rule 128 incorporates the word "Shall", which imply that filing of Form No.67 before the time limit u/s.139(1) [now extended to 139(4)) is directory/mandatory. Having failed to file the same within 139(1) limit, the CPC was correct in denying the credit of FTC paid abroad.
Conclusion: Accordingly, the grounds of appeal of the Appellant is DISMISSED.
Subhash I Patel vs. ACIT Asst.Year 2020-21 - 4– 5. The assesee is in appeal before us against the aforesaid order passed by the Ld.CIT(A). Before us, the Ld.Counsel for the assessee submitted that Form no.67 has been duly filed by the assessee on 10.03.2021 i.e even before the date when the return of income of the assessee was processed by CPC on 24.12.2021. Secondly, it was submitted that the Department has not disputed the contents/veracity of the particulars furnished by the assessee in form no.67. The Department is not disputing fact that the assessee has earned salary from USA and the assessee is legitimately claiming benefit of taxes deducted/withheld by the USA Employer which are duly reflecting in form no.67. Therefore, it was submitted before us that the particulars of taxes for which credit/benefit has been claimed by the assessee has not been disputed by the Department at any stage of proceedings. Thirdly, the Ld.Counsel drew our attention to the return of income filed by the assessee and submitted that the assessee had duly declared income earned by the assessee in USA in the return of income filed by the assessee. Therefore, it would be gross injustice to the assessee if the assessee is asked to pay tax on same income twice, once by way of not granting credit of taxes withheld by the US Employer and then again asking the assesee to pay taxes on the same income in India as well. Finally, the Ld.Counsel for the assessee placed reliance on various judicial precedents which have decided the issue in favour of the assessee, on similar facts.
In response, the Ld.DR place reliance on the observations made by the Ld.CIT(A) in the appellate order.
We have heard the rival contentions and perused the material available on record. Firstly, we observe that during the year under consideration, the assessee had earned salary amounting to Rs.39,45,510/- from USA on which Subhash I Patel vs. ACIT Asst.Year 2020-21 - 5– TDS amounting to Rs.48,625/- has been deducted by the US based Employer from such salary. In the return of income filed by the assessee for the impugned year under consideration, the assessee had duly declared his overseas salary in the return of income and had also claimed benefit of taxes paid (deducted by way of TDS) by the assessee outside India amounting to Rs.4,86,257/- . In the return of income filed by the assessee for the impugned year under consideration, the assessee had also mentioned the Tax Payer Identification number in the return of income (schedule TR). Further, the Department has not challenged the genuineness of details of income/TDS paid by the assessee in overseas jurisdiction. The only reason why benefit of claim of TDS withheld by the US Employer was denied to the assesee was on the ground that there was a delay in filing of form No.67 by the assessee, which was required to be filed by the assessee on or before the due date of filing of return of income. We are of the considered view, that the assessee has duly filed form No.67 giving particulars of taxes withheld by the US based employer, albeit with a minor delay but the same was duly filed by the assessee before the return of income of assessee was processed by the CPC u/s.143(1) of the Act on 24.12.2021. The contents/details furnished by the assessee in form No.67 have not been disputed/challenged by the Department at any stage of proceedings. In case of Manoj Kaushikprasad Jingar Vs. Assessing Officer, CPC Bangalore in the ITAT held that late filing of form no.67 cannot deny entitlement to the assessee to tax benefit when the salary earned is from Tanzania and there is a tax treaty between India and Tanzania. The assessee cannot be taxed twice on the same income and therefore the Ld.CIT(A), cannot deny the claim of the assessee.
7.1 In the case of Sanjeev Agarwal 152 taxmann.com 67 (Jaipur - Trib.), the ITAT held that Foreign Tax Credit could not be denied for delay in filing Form No. 67 as filing of Form No. 67 is not mandatory but a directory requirement. The ITAT made the following observations in the order:
The assessee further submitted that rule 128 was inserted by Income-tax (18th Amendment) Rules, 2016, with effect from 1-4-2017. The requirement for filing Form67 is prescribed under rule 128 only and the same does not emerge out of any of the provisions contained in the I T Act, 1961. It is reiterated that there is no requirement of filing any form, be it Form67 or otherwise, for claiming FTC as per article 24 of the DTAA between India and UK. Thus, rejecting the FTC for delay in filing of Form67 would tantamount to pitting the Income-tax Rules, 1962 on a higher pedestal, in comparison to the provisions of the DTAA. It is well understood that the rules are a form of delegated legislation and are not approved by parliament as against the provisions of the ITA which are amended/modified or introduced by the parliament. Even otherwise, filing of Form67 for the purpose of claiming FTC is a procedural requirement provided in the Income-tax Rules, 1962 and it is a trite law that non- fulfillment of any procedural requirement cannot in any way debar the assessee from any claim or benefit under the law to which he is otherwise entitled to. Even rule 128 nowhere prescribes that if Form67 is not filed within the specified time frame, the relief as sought by the assessee under section 90 would be denied. In case the intention of the statute was to deny the FTC, either the I.T. Act or the relevant rule 128 would have specifically provided that the FTC would be disallowed if the assessee does not file Form67 within the due dates prescribed under section 139(1). The assessee further submitted that there are many sections in the IT Act which specifically denied deduction or exemption or relief in case the return is not filed within the prescribed time frame. Attention was drawn toward section 80-AC, sec. 80-IA, sec. 10A, sec. 10B etc. However, such language is not used in rule 128(9). Therefore, such condition cannot be read into rule 128. In this regard, attention was drawn to the recent decision passed by the Coordinate Bench of the Tribunal, Bangalore Bench in the case of Ms. Brinda Ramakrishna v. ITO [2022] 135 taxmann.com 358/193 ITD 840 (Bang. - Trib.) which laid down the ratio that rule 128(9) does not provide for disallowance of Foreign Tax Credit in case of delay in filing Form67, and filing of Form67 is not mandatory but a directory requirement. In the said case, assessee had not filed Form67 before filing the return of income. Even such Form67 was not filed before the time-limit prescribed under section 139(4). When the FTC claimed by the assessee was rejected while processing the return of income under section 143(1), assessee filed a rectification application. Such rectification application was rejected by the concerned Assessing Officer, similar to the case in hand, by stating that since Form67 was not filed by the assessee, FTC was not to be allowed. The aforementioned decision of the Tribunal, Bangalore Bench, has been subsequently followed by different benches of ITAT, including ITAT, Jaipur Bench.The Coordinate Bench also relied upon the decision of ITAT Bangalore Bench in the case of Ms. Brinda Ramakrishna (supra).[Para 6.2] Therefore, considering the facts of the present case, the FTC deserves to be allowed to the assessee even if Form67 was filed by the assessee after the due date of filing the return under section 139(1), and it is viewed that not allowing foreign tax credit by Assessing Officer (CPC) was nothing, but a mistake apparent on record. Therefore, the revenue is directed to allow the claim of the assessee.
Subhash I Patel vs. ACIT Asst.Year 2020-21 - 7– 7.2 In the case of 42 Hertz Software India (P.) Ltd. 139 taxmann.com 448 (Bangalore - Trib.) , the ITAT held that where for claiming foreign tax credit (FTC), assessee failed to furnish Form67 on or before due date of furnishing return of income prescribed under section 139(1) but submitted same subsequently during assessment proceedings, assessee was entitled to claim Foreign Tax Credit for taxes paid.
7.3 In the case of Rajesh Kumar Lakhran 159 taxmann.com 602 (Jaipur - Trib.), the ITAT held that Foreign Tax Credit (FTC) cannot be denied for delay in filing Form No. 67 as filing of Form No. 67 is not mandatory but a directory requirement.
7.4 Accordingly, looking into the above judicial precedents discussed above, we are of the considered view, the Ld.CIT(A) erred in denying of foreign tax credit claimed by the assessee on the ground that there was a delay in filing form no.67 by the assessee.
In the result, the appeal filed by the assessee is allowed.
This Order pronounced in Open Court on 10/09/2024