2023 (9) TMI 1401 - AT - Income Tax

Foreign tax credits u/s 90/90A - non compliance of procedural requirement - claim denied as form 67 was filed after the due date of filing the return of income - HELD THAT - As decided in SHRI RITESH KUMAR GARG case 2022 (9) TMI 926 - ITAT JAIPUR neither section 90 nor DTAA provides that FTC shall be disallowed for non compliance with any procedural requirements. Since FTC is assessee s vested right as per Article 22(2) of the DTAA read with section 90 and thus same cannot be disallowed for non compliance of procedural requirement that is prescribed in the Rules. The procedural law is always subservient to and is in aid to justice. Even otherwise, since there are no conditions prescribed in DTAA that FTC can be disallowed for non compliance of any procedural provision, therefore, the provisions of DTAA override the provisions of the Act. As the assessee has vested right to claim the FTC under the tax treaty and the same cannot be disallowed for mere delay in compliance of a procedural provision. Even otherwise, the said Form 67 filed by the assessee before the tax authorities was available before the AO when the intimation under section 143(1) of the Act was passed. Therefore, in such circumstances, in my view, there were no reasons with the tax authorities for making disallowance when the said Form 67 was very much available with the AO at the time of framing the assessment - assessee is entitled for the credit of FTC under section 90 - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of foreign tax credit (FTC) under section 90/90A of the IT Act, 1961.
2. Requirement of filing Form 67 before the due date for claiming FTC.
3. Procedural versus substantive requirements for claiming FTC.

Summary:

1. Disallowance of FTC under Section 90/90A:
The assessee, a foreign national and non-ordinarily resident, received salary income in Spain and India. The tax paid in Spain was not credited in India due to non-filing of Form 67 before the due date. The assessee appealed against the disallowance of Rs. 37,41,228/- claimed under section 90/90A, arguing that the tax relief was acknowledged in the Annexure-TR but not reflected in the final order.

2. Requirement of Filing Form 67:
The lower authorities held that the claim for FTC cannot be allowed if Form 67 is not filed before the due date specified for furnishing the return. The assessee contended that this requirement is procedural and should not result in the denial of FTC. Various tribunal decisions were cited, emphasizing that neither Section 90 nor DTAA provides for disallowance of FTC for non-compliance with procedural requirements.

3. Procedural versus Substantive Requirements:
The tribunal referenced multiple cases where it was held that filing Form 67 is a directory, not a mandatory requirement. It was argued that procedural norms should not extinguish substantive rights. The tribunal cited decisions from various benches, including the Hon'ble Supreme Court, which support the view that procedural requirements should aid justice and not obstruct it. The tribunal concluded that the assessee is entitled to FTC despite the delay in filing Form 67.

Conclusion:
The tribunal allowed the appeal, directing the AO to grant the FTC of Rs. 37,41,228/- to the assessee, setting aside the order of the CIT (A). The decision was based on the principle that procedural requirements should not override substantive rights, and the assessee's vested right to claim FTC under the tax treaty cannot be denied for mere procedural delays.