SH. PAWAN KUMAR,CHANDIGARH vs. DCIT, CIRCLE 1(1), CHANDIGARH

Briefly the facts of the case are that the assessee filed his return of income on 21/03/2020 declaring total income of Rs. 6,51,41,832/-. In the return of income, the assessee has shown his foreign sourced income in form of capital gains amounting to Rs

The assessee thereafter filed a grievance petition before the Assessing officer on 07.10.2021 which was disposed off by the AO on 12.01.2022 stating that "rectification is not possible as Form 67 was filed by the assessee after due date of filing of return u/s 139(1). Now, no action is pending with this office, therefore, grievance of the assessee is being disposed off."

Against the aforesaid intimation, the assessee moved in appeal before the Ld. CIT(A), NFAC Delhi wherein the decision of the AO/CPC to disallow the relief claimed by the assessee was held to be as per law as the Form No. 67 which was required to be filed under Rule 128(9) of the Income Tax Rules 1962 has been filed after the time limit as prescribed.

Against the said findings and order of the Ld. CIT(A), NFAC Delhi, the assessee is in appeal before us.

During the course of hearing, the Ld. AR submitted that during the year under consideration, the assessee has shown foreign sourced income of Rs. 6,49,88,678/- and has claimed foreign tax relief of Rs 86,35,117/-being the taxes paid in USA while filing his return of income which was filed on 21/03/2020. It was submitted that Form No. 67 which was required to be filed as per the Rule 128 was filed online with the Department on the same date i.e, 21/03/2020 and our reference was drawn to assessee’s paperbook pages 37-86 and same was on the record of the Department well before the processing of the return of income by CPC and issue of intimation under section 143(1) dt. 18/03/2021. 7. It was submitted that while processing the return of income, the CPC Bangalore has not taken cognizance of Form No. 67 which was duly filed by the assessee which has resulted in the tax demand so raised by the CPC in terms of intimation issued under section 143(1) of the Act. It was submitted that neither Section 90 nor India-USA DTAA provides that Foreign Tax Credit (FTC) shall be disallowed for non compliance with any procedural requirement. It was submitted that FTC is the assessee’s vested right as per Article 25(2)(a) of the India-USA DTAA r.w.s 90 of the Act.

It was further submitted that Rule 128(9) provides that Form No. 67 should be filed on or before the due date of filing the return of income as prescribed under section 139(1) of the Act. However, the Rule nowhere provides that if the said Form is not filed within due date, the benefit of FTC would be denied which the assessee is otherwise eligible to and in respect of which, necessary claim has been made in the return of income.

It was submitted that the matter is covered by the decisions of various Benches of the Tribunal and reliance was placed on the decisions of Coordinate Bangalore India (P) Ltd. vs. ACIT 139 Taxmann.com 448, Coordinate Jaipur Benches in case of Suresh Kumar Doodi vs ACIT (ITA No. 164/JP/2023 dated 28/07/2023) and Ritesh Kumar Garg vs ACIT (ITA No. 261/JP/2022 dated 15/09/2023), Coordinate Calcutta Benches in case of Mahua Bagchi vs ACIT (ITA No. 03/kol/2023 dated 19/07/2023) and the recent decision of the Hon’ble Madras High Court in case of Duraiswamy Kumaraswamy vs PCIT reported in 2023 SCC online Mad 8026. 10. Per contra, the Ld. DR has drawn our reference to the findings of the Ld. CIT(A),NFAC, Delhi and it was submitted that in order to claim relief under section 90/90A, the assessee is required to file Form No. 67 within the time limit as provided under Rule 128(9) of the Income Tax Rules and filing of Form No. 67 is mandatory in nature and not just procedural requirement as claimed by the assessee. It was submitted that in the instant case, the assessee had filed the return of income u/s 139(4) of the Act wherein he has claimed credit for the foreign taxes paid, however, Form 67 has not been filed within the prescribed time period within the due date u/s 139(1) of the Act and therefore, the claim has been rightly rejected by the AO and sustained by the ld CIT(A). It was submitted that both rules and notification dated 19.09.2017 in explicit terms provides that necessary forms for claiming tax credit have to be filed before the due date for filing return of income under section 139(1) of the Act. Further, reference was drawn to notification no. 100/2022 dated 18/08/2022 whereby the due date for filing and claiming foreign tax credit has been extended to the end of the assessment year as per section 139(4) of the Act. It was submitted that said relaxation has been made applicable from 1/04/2022 and no such relaxation is available to the assessee for the period relevant to assessment year 2019-20. 11. We have heard the rival contentions and purused the material available on record. We have dealt with a similar issue in case of Bachaspatimayum Umakanta Sharma vs DCIT, Central Circle -1, Chandigarh (in ITA NO. 740/Chd/2022 dated 18/04/2023) and the relevant findings therein read as under:

3 In the aforesaid decision, the Coordinate Mumbai Benches have taken note of the amendment to Rule 128(9) wherein the time limit has been extended for filing Form 67 on or before the end of the assessment year and have also referred to the Hon’ble Supreme Court decision in case of Wipro Ltd and has held that delay in filing Form 67 is not the case of violation of any of the provisions of the Act but of the rule, which does not provide for any consequence, if not complied with and therefore, even though there is a delay in filing Form 67, the same cannot lead to denial of foreign tax credit.

4 We find that the similar view has been taken in case of Anuj Bhagwati Vs. DCIT (supra) by the Coordinate Mumbai Benches in its decision dt. 20/09/2022 wherein it was held that filing of Form No. 67 is not mandatory but its directory in nature. Similarly, following the earlier decision, in the case of Nirmala Murli Relwani Vs. Asst. DIT (supra), the Coordinate Mumbai Benches vide its order dt. 01/12/2022 has held that mere delay in filing Form No. 67 as per the provisions of Rule 128(9) will not preclude the assessee from claiming the benefit of FTC in respect of tax paid outside India.

5 We, therefore, find that the various Coordinate Benches have consistently held that the delay in filing Form No. 67 cannot result in denial of the FTC as the same have to be read as directory and not mandatory in nature.

6 In the instant case, it is not in dispute that the assessee has not filed Form No. 67 while filing the return of income however, the same has been filed well before the processing of the return of income and thereafter the intimation under section 143(1) has been issued by the CPC. We therefore find that the CPC has erred in not considering the Form No. 67 so filed by the assessee while processing the return of income and therefore the claim of the FTC by the assessee has been wrongly denied to the assessee.

7 As far as the decision of the Coordinate Visakhapatnam Benches in case of Muralikrishna Vaddi (supra) is concerned, in that case, Form No. 67 was filed after scrutiny proceedings were initiated by the AO and that too with a delay of more than two years and in the said factual and distinguishable background however taking into consideration the provision of Rule 128(9) of the Income Tax Rules, the Coordinate Bench vide its order dated 14/06/2022 has held that the word “shall” has been used in Rule 128(9) which shows that filing of Form 67 within prescribed time limit is mandatory in nature and not directory. Here we find that firstly the relevant provisions of the DTAA as well as Act which allow relief to the assessee towards FTC and overrides the rules has apparently not been brought to the notice of the Coordinate Bench and thus not been taken into consideration by the Coordinate Bench and secondly, even the earlier decision of Coordinate Bangalore Benches in case of M/s 42 Hertz Software India (P) Ltd. though brought to its notice has not been considered while passing the said order. Further, as we have noted above, there are series of decisions which have been rendered by the various Coordinate Benches both prior to and even subsequent to the aforesaid decision where a consistent view has been taken holding that the delay in filing Form No. 67 cannot result in denial of the FTC as the same have to be read as directory and not mandatory in nature. We therefore find that the said decision of Coordinate Visakhapatnam Benches cannot act as a binding precedent specially taking into consideration the fact that the relevant provisions of the Act r/w DTAA have not been considered and the fact that a consistent view has been taken by the various Benches of the Tribunal which have held that the provisions of Rule 128(9) as directory in nature and not mandatory.

8 In the instant case, the ld CIT(A) NFAC, having acknowledged the fact that there are series of decisions rendered by different Benches of the Tribunal in favour of the assessee, has decided to follow the solitary decision of the Vishakapatnam Benches which is in favour of the department for the reason that there are conflicting views taken by the different Benches of the Tribunal and there is no decision of the juri ictional Tribunal and therefore, he follows the decision of the Vishakhapatnam Benches. Firstly, the ld CIT(A), NFAC is acting as a quasi judicial authority and is not acting as an tax administrator and therefore, what is relevant for him to appreciate is that where there is no decision of the juri ictional Tribunal Benches and conflicting decisions rendered by the non- juri ictional Tribunal Benches, there are two reasonable construction possible in the facts and circumstances of the present case and it is a settled legal preposition that where two reasonable constructions of a taxing provision are possible in a given case, the construction in favour of the assessee should be followed and necessary relief be allowed to the assessee. In this regard, necessary guidance can be drawn from the decision of the Hon’ble Supreme Court in the matter of CIT vs. Vegetable Products Ltd. (1972) 88 ITR 192 (SC) wherein it was held that "if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted".

9 In view of the aforesaid discussion and in the entirety of facts and circumstances of the case, we are of the considered view that the assessee cannot be denied the claim of FTC merely for the reason that there was a delay in filing the Form No. 67 while processing his return of income and the matter is thus decided in favour of the assessee.” Further, we find that the Hon’ble Madras High Court in case of Duraiswamy

Kumaraswamy vs PCIT (supra), following the Hon’ble Supreme Court decision in case of CIT vs G.M. Knitting Industries (P) Ltd 376 ITR 456, has upheld the aforesaid view and has held that filing of Form 67 for claiming foreign tax credit in terms of Rule 128 is only directory in nature as the rules are only for implementation of the provisions of the Act and will always be directory in nature. Further, in the facts of the relevant case before it, the Hon’ble High Court held that where the Form 67 was filed well before processing of the return of income and issue of intimation u/s 143(1), the Revenue was supposed to provide due credit for foreign tax credit and rejection of the said claim was not proper and cannot be sustained in accordance with law.

In the instant case as well, we find that the assessee has filed his return of income u/s 139(4) on 21/03/2020 and on the same date, Form 67 has been e-filed, therefore, both the return of income and Form 67 was very much on record before the processing of return of income and issue of intimation by CPC u/s 143(1) on 18/03/2021 and therefore, there is no legal and justifiable basis to deny the claim of relief of foreign

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 04/03/2024. आकाश दीप जैन िव"म "सह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा"य" / VICE PRESIDENT लेखा सद"य/ ACCOUNTANT MEMBER AG Date: 04/03/2024

""यथ"/ The Respondent 3. आयकर आयु"/ CIT 4. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड" फाईल/ Guard File