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Income Tax Appellate Tribunal, [ DELHI BENCH “S.M.C.” : DELHI ]
Before: SHRI CHALLA NAGENDRA PRASAD
आदेश / O R D E R PER C. N. PRASAD, J. M. :
This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals) [hereinafter referred to CIT (Appeals)]/National Faceless Appeal Centre [NFAC] Delhi, dated 19.06.2023 for assessment year 2019-20 in denying the Foreign Tax Credit (FTC) to the assessee.
Briefly stated the facts are that the assessee filed her original return of income under section 139(1) of the Income Tax Act, 1961 (the Act) on 29.07.2019. Thereafter a revised return under section 139(5) of the Act was filed on 28.07.2020 declaring income of Rs.27,14,700/- including the income earned from outside India of Rs.27,16,466/-. The original returns under section 139(1) as well as the revised return under section 139(5) of the Act were filed within the extended due date pursuant to the Notification brought out by the Government of India through Taxation & Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 dated 31st March, 2020 vide Notification No. 56/2020/F.No.370142/23/ 2020-TPL) dated 29.07.2020. The assessee in its revised return of income claimed FTC of Rs.5,21,888/-. The revised return was processed by CPC and an intimation was issued under section 143(1) of the Act on 23.03.2021 denying foreign tax credit claimed of Rs.5,21,888/- and computed the net tax liability at Rs.6,51,986/-. The assessee preferred an appeal before the ld. CIT (Appeals) and the ld. CIT (Appeals) sustained the action of the CPC in denying foreign tax credit for the reason that the assessee did not file statement in Form No. 67 before the due date for filing the return under section 139(1) of the Ac, but was filed along with the revised return under section 139(5) of the Act.
I.T.A. No. 2337/Del/2023
The ld. Counsel for the assessee submits that filing of Form 67 along with return of income filed under section 139(1) of the Act is not mandatory, but only directory and in any case Form 67 was filed within the due date specified under section 139(5) of the Act along with the revised return and, therefore, there is no justification in denying FTC to the assessee. The ld. Counsel for the assessee submits that assessee due to factors beyond her control was unable to file Form 67 within the prescribed due date under section 139(1) of the Act. The ld. Counsel submits that the reason for the same is due to death of employer which resulted in procedural delay in receipt of documents from Ghana with respect to foreign income. The ld. Counsel submits that the intention of the assessee was to provide the tax authorities with a true and full disclosure of all the relevant information and filing her ITR along with due verification. Therefore, due to these reasons the assessee filed revised return along with Form 67 which is within the due date specified in the Notification dated 29.07.2020 referred to above.
The ld. Counsel for the assessee further submits that on identical facts in assessees mother’s case Mumbai Bench Tribunal in the case of Nirmala Murli Relwani Vs. ADIT in dated 1.12.2022 allowed foreign tax credit to the assessee’s mother on identical facts and circumstances. The ld. Counsel submits that Mumbai Tribunal following various decisions held that mere delay in filing Form 67 as per the provisions of Rule 128(9) will not preclude the assessee from claiming the benefit of foreign tax credit in respect of the taxes 3 I.T.A. No. 2337/Del/2023 paid outside India. The ld. Counsel submits that the decision is placed at page Nos. 285 to 292 of the paper book and is squarely applicable to the facts of the assessees case.
The ld. DR strongly supported the order of the ld. CIT (Appeals).
Heard rival submissions perused the orders of the authorities below. The only question to be addressed in this appeal is as to whether the assessee is entitled for foreign tax credit though statement in Form 67 is not filed along with the original return under section 139(1) of the Act within the due date specified therein but was filed along with the revised return under section 139(5) of the Act which was also within the due date for filing revised return for the year under consideration. It is not under dispute that original as well as revised returns were filed within the due dates extended by the Notification by the CBDT. The assessee due to factors beyond her control was unable to file Form 67 along with the original return under section 139(1) of the Act. However, on obtaining the information/documents assessee could file Form 67 along with the revised return under section 139(5) of the Act. The reason for the delay was stated to be that due to the death of her employer it resulted in procedural delay in receipt of documents from Ghana with respect to foreign income. 7. I observe that an identical issue arose in the case of Nirmala Murli Relwani Vs. ADIT (supra) who is the mother of the assessee and the co-ordinate bench of the Mumbai Tribunal on identical facts held that the assessee is entitled for foreign tax credit. While holding so the Tribunal observed as under:-
“7. We have considered the rival submissions and perused the material available on record. In the present case, the assessee filed the revised return of income under section 139(5) of the Act on 26/08/2020, and claimed the foreign tax credit of Rs. 11,79,796. It is the claim of the assessee that she has received certain income amounting to Rs. 48,10,498, from foreign sources, on which tax was already paid in Ghana. Due to certain factors beyond her control, the assessee received Form No.67, after some delay. However, as soon as the assessee received the aforesaid Form, she filed a revised return of income under section 139(5) of the Act. In the present case, both the original return of income and revised return of income were filed by the assessee before the due date and there is no dispute on this aspect by the Revenue. The ACIT, CPC, Bengaluru, while processing the revised return of income vide intimation issued under section 143(1) of the Act denied the foreign tax credit of Rs. 11,79,796, claimed by the assessee under section 91 of the Act. In the impugned order it has been held that Form no.67 was filed by the assessee after the due date of filing the return of income under section 139(1) of the Act and thus the assessee is not entitled to the claim of the foreign tax credit.
8. We find that under Rule 128(9), as it stood during the year under consideration, provided that the statement in Form No.67, referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub- rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub- section (1) of section 139, in the manner specified for furnishing such return of income. Thus, during the year under consideration, the assessee was required to furnish Form No. 67 on or before the due date of filing the return of income under section 139(1) of the Act, as per the provisions of Rule 128(9). In the present case, the assessee though filed her original return of income within the extended time granted vide order dated 23/07/2019, passed by the CBDT 5 I.T.A. No. 2337/Del/2023 under section 119 of the Act, however, furnished Form No.67 along with her revised return of income on 26/08/2020. We further find that Rule 128(9) has recently been substituted by the Income-tax (Twenty-seventh Amendment) Rules, 2022, w.r.e.f. 01/04/2022 and the same reads as under: “(9) The statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) 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:”
9. Thus with effect from 01/04/2022, the time period for furnishing statement in Form No. 67 has been extended till the end of the assessment year in which the corresponding income has been offered/assessed to tax and the return of such assessment year has been furnished within the time specified under 139(1) or 139(4) of the Act.
We find that the coordinate bench of the Tribunal in Sonakshi Sinha vs CIT, in ITA No. 1704/Mum./2022, vide order dated 08/09/2022, while dealing with a similar issue wherein the taxpayer filed Form No.67, after the due date for filing the return of income under section 139(1), observed as under: “012. We have carefully considered the rival contention and perused the orders of the lower authorities. Short question In this appeal is whether assessee is entitled to foreign tax credit even when form number 67 required to be filed according to the provisions of rule 128 (9) of the Income Tax Rules on or before the due date of filing of the return of income, not complied by the assessee, but same was filed before the completion of the assessment proceedings. Precisely, the fact shows that assessee filed return of 6 I.T.A. No. 2337/Del/2023 income u/s 139 (1) of the income tax act. In such a return of income, she claimed the foreign tax credit. However, form number 67 was filed during the course of assessment proceedings and not before the due date of filing return. Rule 128 (9) of the Income Tax Rules 1962 provides that the statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. We find that coordinate bench in 42 Hertz Software India (P.) Ltd v. ACIT [2022] 139 taxmann.com 448 (Bangalore - Trib.) wherein following its earlier order in the case of Ms. Brinda Rama Krishna v.ITO [2022] 135 taxmann.com 358 (Bang Trib) it was held that "one of the requirements of Rule128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns and that 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.
Same view is also taken by a coordinate division bench in Vinodkumar Lakshmipathi V CIT(A) NFAC ITA No.680/Bang./2022 06.09.2022. It is well settled that while laying down a particular procedure, if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Admittedly, Rule 128 does not prescribe denial of credit of FTC. Further the Act i.e. section 90 or 91 also do not prescribe timeline for filing of such declaration on or before due date of filing of ROI. Further rule 128 (4) clearly provides the condition where the foreign tax credit would not be allowed. Rule 128 (9) does not say that if prescribed form would not be filed on or before the due date of filing of the return no such credit would be allowed. Further by the amendment to the rule with effect from 1 April 2022, the assessee can file such I.T.A. No. 2337/Del/2023 form number 67 on or before the end of the assessment year. Therefore, legislature in its own wisdom has extended such date which is beyond the due date of filing of the return of income. Further, the fact in the present case is quite distinct then the issue involved in the decision of the honourable Supreme Court in case of Wipro Ltd (supra). Here it 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. Therefore, respectfully following the decisions of the coordinate bench on this issue, we hold the assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income Tax Rules, which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground number 2 of the appeal of the assessee is allowed.”
We further find that in another decision in Anuj Bhagwati vs DCIT, in ITAs No.1844 and 1845/Mum./2022, the coordinate bench of the Tribunal vide order dated 20/09/2022, while deciding a similar issue held that section 90/91 of the Act has not been amended insofar as grant of foreign tax credit is concerned and Rules cannot override the Act and therefore filing of Form No. 67 is not mandatory but it is directory. The relevant findings of the coordinate bench of the Tribunal in the aforesaid decision are as under: “8. We considering the facts, circumstances provisions of the Act and judicial decisions are of the opinion that there is no amendment on these aspects in the Section 90 of the Act and the Rules cannot override the Act and therefore the filing of Form No 67 is not mandatory but it is directory. Accordingly, We restore the disputed issue to the file of the CIT(A) to adjudicate afresh on merits considering the observations in above paragraphs and the ratio of judicial decisions. Further the assessee should be 8 provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal and allow the grounds of appeal of the assessee for statistical purposes.”
12. Thus, respectfully following the aforesaid decisions of the coordinate bench of the Tribunal, we are of the considered opinion that mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as they stood during the year under consideration, will not preclude the assessee from claiming the benefit of foreign tax credit in respect of tax paid outside India. Since in the present case, the claim of the assessee was denied on this technical aspect without going into the merits, therefore, we deem it appropriate to direct the jurisdictional Assessing Officer to decide the claim of the foreign tax credit on merits, after accepting the Form No. 67 and other related documents filed by the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes.”
Facts being identical respectfully following the said decision I hold that the assessee is entitled for foreign tax credit. However, since the claim of the assessee was denied on the technical aspect i.e. for not filing Form 67 along with the original return and without going into the merits of the claim, I deem it proper to direct the Assessing Officer to decide the claim for foreign tax credit on merits after accepting Form 67 and other related documents filed by the assessee. Needless to say the Assessing Officer shall provide adequate opportunity of being heard to the assessee.
In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on : 11/10/2023.