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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
PER S. BALAKRISHNAN, Accountant Member :
This appeal filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre [Ld. CIT(A)-NFAC] vide DIN & Order No. ITBA/NFAC/S/250/2022-23/1047730810(1), dated 30/11/2022 arising out of the order passed U/s. 154 r.w.s 143(1) of the 2 Income Tax Act, 1961 [the Act], dated 8/9/2021 for the AY 2019- 20.
Brief facts of the case are that the assessee being an individual Non-Resident Indian filed his return of income on 29/10/2019 admitting a total income of Rs. 3,01,43,390/-.
Subsequently, the return was summarily processed by the CPC wherein the CPC disallowed the assessee’s claim of relief U/s. 90 / 90A of the Act with regard to foreign tax credit. Accordingly an addition was made under the head income from other sources for Rs. 23,35,811/-. The assessee filed a rectification petition U/s. 154 of the Act. The Ld. AO cited the Income Tax Rules, 1962 [the Rules] disallowed the foreign tax credit stating the return of income was not filed before the due date of filing of the return of income U/s. 139(1) of the Act. Aggrieved by the rectification order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A)-NFAC. The Ld. CIT(A)-NFAC observed that the Ld. AO by relying on the Income Tax Rules, 1962 has disallowed the foreign tax credit claimed by the assessee since it was not filed within the due date of furnishing the return of income U/s. 139(1) of the Act. The Ld. CIT(A)-NFAC relying on the CBDT’s Notification No.100/2022/F.No.370142/35/2022-TPL, dated 22/08/2022 and 3 on the various judicial decisions allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A)-NFAC, the Revenue is in appeal before the us by raising the following grounds of appeal:
“1. The Ld. CIT(A) failed to appreciate the fact that filing of Form-67 is mandatory as per Rule 128(9) but not a procedural one.
2. The Ld. CIT (A) is not justified in granting relief by completely discarding the requirement of filing of Form-67.
3. Any other ground that may be urged at the time of hearing of the appeal.
4. The appellant craves leave to add or delete or amend or substitute any ground of appeal.”
The main issue that arises out of the grounds of appeal raised by the Revenue is with regard to the granting of relief of the foreign tax credit by the Ld. CIT(A)-NFAC even though the filing of Form-67 as per Rule 128(9) was not adhered to by the assessee.
Before us, the Ld. Departmental Representative fully supported the order of the Ld. AO and pleaded that the assessee has not complied with the provisions of Rule 128(9) of the IT
4 Rules, 1962 and therefore the denial of foreign tax credit by the Ld. AO be upheld.
Per contra, the Ld. AR vehemently objected to the denial of foreign tax credit by stating that as per section 295(1) of the Act which gives power to the CBDT to prescribe Rules for various purposes. Clause-(ha) of section 295(2) gives power to the CBDT to issue Rules for FTC [foreign tax credit]. The relevant extract is as follows:
“Sec. 295(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters :— ………. (ha) the procedure for granting of relief or deduction, as the case may be, of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, against the income-tax payable under this Act;]”
It was further submitted that Rule 128(9) provides that Form-67 should be filed on or before the due date for filing the return of income as prescribed U/s. 139(1) of the Act whereas the Rule nowhere provided that if the said Form-67 is not filed within the above stated time frame, the relief as sought by the assessee U/s. 90 of the Act would be denied. It was further submitted by the Ld. AR that filing of statement under Form- 67 is a procedural / directory requirement and not a mandatory requirement. Further, the Ld. AR also relied on the CBDT Notification
5 dated 18/8/2022 wherein it was stated that Form-67 shall be furnished on or before the end of the Assessment Year relevant to the previous year in which the income referred to in sub-rule (1) has been offered to tax or assessed to tax in India and the return for such Assessment Year has been furnished within the time specified under sub-section (1) or sub- section (4) of section 139 of the Act. It was further submitted by the Ld. AR that in the Explanatory Memorandum to the Notification referred above, it has been clearly mentioned that “if no person is being adversely affected by giving retrospective effect to this Rule, the FTC cannot be denied”. Further, the Ld. AR also submitted that even though this Notification is effective from FY 2022-23, this can be applied retrospectively. The Ld. AR further also relied on the decision in the case of CIT (Central)-I vs. Vatika Township Privater Limited [2014] 367 ITR 466 (SC). The Ld. AR further submitted that as per Article-25 of the Double Taxation Avoidance Agreement [DTAA] between India and USA relief on Double Taxation should be provided on behalf of the resident to the foreign tax credit already paid by the assessee in the USA however, should not exceed that part of income tax which may be attributable to the income taxed in the USA. The Ld. AR further submitted that nowhere in Article-25 it is mentioned that the failure of the assessee to file a statement in Form-67 will deny the foreign tax credit. The Ld. AR also submitted that the decision of this Bench of the Tribunal in the case
6 of Muralikrishna Vaddi vs. ACIT in (AY: 2018-19), dated 14/6/2022 is distinguishable on the fact, in that case the assessee filed Form-67 after a delay of more than two years during the scrutiny assessment proceedings and hence cannot be applied to the instant case.
The Ld. AR further submitted that in the instant case the statement in Form-67 has been filed by the assessee on 28/10/2019 which is well within the due date prescribed U/s. 139(4) of the Act. The Ld. AR therefore pleaded that the order of the Ld. CIT(A)-NFAC be upheld.
We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. The only issue involved in this case is with respect to denial of foreign tax credit for Rs. 55,64,385/- being the taxes paid at USA by the assessee. From the submissions made by the Ld. AR we find that the assessee has filed Form-67 on 28/10/2019 by claiming relief as per section 90 / 90A of the Act and as per DTAA with USA. It is also found that the return of income was filed for the AY 2019-20 on 29/10/2019. We also find force in the argument of the Ld. AR that the CBDT Notification dated 18/8/2022 can also be applied retrospectively which is stated by way of Explanatory Memorandum to the above said Notification. Further, there is also no express provision in the India and USA DTAA that the foreign tax credit shall be denied on failure of submission of statement in Form-67 within
7 the due date prescribed U/s. 139(1) of the Act. Further, in the instant case, the assessee has filed Form-67 on or before the due date prescribed U/s. 139(4) of the Act and also before the filing of the return of income on 29/10/2019. Further, we also find that the Form-67 was filed before processing the return of income by the CPC U/s. 143(1) of the Act. We also find that the Ld. AO has also rejected the rectification petition filed by the assessee U/s. 154 of the Act citing the same reason that the assessee has not complied with the provisions of Rule 128(9) of the Rules in submission of Form-67 of the Act. We also noted that the due date for filing of original return of income U/s. 139(1) of the Act for the AY 2019- 20 is 31/8/2019 whereas the belated return U/s. 139(4) of the Act can also be filed on or before 31/3/2020. The CBDT Notification also in its Explanatory Memorandum states that the amendment even though has come into force on 1/4/2022, it can also be applied retrospectively if any person is being adversely affected. In the instant case, the assessee has paid foreign tax credit in USA and has filed his return of income U/s. 139(4) of the Act. Considering the facts and circumstances of the case, we consider it deemed to be fit that the CBDT Notification can be applied retrospectively which is being a beneficial provision to the assessee. In support of this view, we rely on the decision of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd [1973] 88 ITR 192 (SC) wherein their Lordships have held that “.....if two reasonable
8 constructions of a taxing provision are possible, that construction which favours the assessee must be adopted...”. We therefore have no hesitation to come to a conclusion that the Grounds of appeal raised by the Revenue do not have merit and therefore the same are required to be dismissed. Hence, we hereby dismiss the Grounds raised by the Revenue.
In the result, appeal filed by the Revenue is dismissed.
Pronounced in the open Court on 10th August, 2023.