2023 (1) TMI 1282 - AT - Income Tax

Disallowing relief u/s 90 - non-filing of Form No. 67 on time - assessee filed Form No. 67 within the end of the relevant AY whereas the assessee has not filed the same within the due time specified - HELD THAT - As noted that during the impugned AY the assessee is a resident and he is a software professional and earned salary and professional income from India and Germany and covered under DTAA on these overseas income. The assessee filed return of income but did not file Form No. 67 within due date as per the Rules. The assessee filed Form No. 67 on 02.04.2021 which is much before the CIT (A) s order. As decided in Vinodkumar Lakshmipathi 2022 (10) TMI 87 - ITAT BANGALORE rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing of Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. We direct the AO to give credit for foreign tax as per Form No. 67 filed on 02.04.2021 after due verification as per law. Thus we direct the AO to give credit for foreign tax as per Form No. 67 filed on 02.04.2021 after due verification as per law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:

1. Validity of intimation under section 143(1).
2. Denial of relief under section 90 due to non-filing of Form No. 67.
3. Affirmation of the denial by CIT(A) despite subsequent filing of Form No. 67.
4. Entitlement to relief under section 90.

Issue-wise Detailed Analysis:

1. Validity of Intimation under Section 143(1):

The appellant challenged the intimation under section 143(1) as being "bad in law as well as on facts." The brief facts indicate that the assessee filed a return of income on 13.07.2019, claiming relief under section 90 of the Income Tax Act, 1961. However, Form No. 67, required for claiming foreign tax credit (FTC), was not filed within the due date, leading to the denial of relief during the processing of the return. The Tribunal did not specifically address the validity of the intimation under section 143(1), focusing instead on the procedural aspects of filing Form No. 67.

2. Denial of Relief under Section 90 Due to Non-filing of Form No. 67:

The appellant contended that the denial of relief under section 90 for non-filing of Form No. 67 was merely a procedural error. The learned AR argued that the form was eventually filed on 02.04.2021, and relied on various judgments and Circular No. XIV/1955 dated 11.04.1956 issued by the CBDT. The learned DR, representing the Revenue, maintained that specific rules (128(8) and 128(9)) govern the filing of Form No. 67, and the assessee did not comply within the stipulated time, thus making them ineligible for relief.

3. Affirmation of the Denial by CIT(A) Despite Subsequent Filing of Form No. 67:

The CIT(A) upheld the denial of relief, stating that Form No. 67 was filed beyond the due date prescribed under Rule 128(9) of the Income Tax Rules, 1962. The Tribunal noted that the assessee relied on several judgments before the CIT(A), which were not accepted. However, the Tribunal referenced similar cases, including Vinodkumar Lakshmipathi Vs. CIT(A), NFAC, Delhi, and Ms. Brinda Ramakrishna v. ITO, where it was held that Rule 128(9) does not provide for disallowance of FTC due to delay in filing Form No. 67. The Tribunal emphasized that filing Form No. 67 is a directory requirement, not mandatory, and that the DTAA provisions override the Act and Rules.

4. Entitlement to Relief under Section 90:

The Tribunal agreed with the appellant's contention that the denial of FTC for procedural delays in filing Form No. 67 is not justified. It was observed that neither Section 90 nor the DTAA stipulates that FTC should be disallowed for non-compliance with procedural requirements. The Tribunal cited various cases and legal principles to support the view that procedural requirements should not override substantive rights. It directed the AO to give credit for the foreign tax as per Form No. 67 filed on 02.04.2021 after due verification.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, directing the AO to give credit for the foreign tax as per the subsequently filed Form No. 67. The judgment underscores the principle that procedural lapses should not defeat substantive rights, especially when the DTAA provisions are more beneficial to the taxpayer.