2022 (5) TMI 953 - AT - Income Tax

Eligibility of Foreign tax credit - delay in compliance of a procedural provision, that is delay in filing Form No.67 - Assessee has not filed Form 67 within the due date of filing original return of income u/s 139(1) - HELD THAT - Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision, that is delay in filing Form No.67 . Therefore, respectfully following the judgment in the case of Ms. Brinda Rama Krishna 2022 (2) TMI 752 - ITAT BANGALORE we direct the Assessing Officer to examine the quantum of Foreign Tax Credit claimed by the assessee and allow the Foreign Tax Credit in accordance with law - Appeal of the assessee is treated to be allowed.

Summary

Issues Involved:

1. Adjustment in the Intimation under Section 143(1) regarding Foreign Tax Credit (FTC).
2. Permissibility of non-grant of FTC as an adjustment under Section 143(1).

Issue-Wise Detailed Analysis:

1. Adjustment in the Intimation under Section 143(1) regarding Foreign Tax Credit (FTC):

The primary issue revolves around the denial of FTC of Rs. 3,93,063 claimed by the assessee for taxes paid in Iraq. The assessee, an individual taxpayer, was employed with Shell India Markets Private Limited and later with Shell Gas Iraq B.V during the assessment year 2018-19. The assessee filed his original return of income under Section 139(1) and later a revised return under Section 139(5), claiming the FTC. However, the Centralized Processing Centre (CPC) did not grant the FTC in the intimation under Section 143(1).

2. Permissibility of non-grant of FTC as an adjustment under Section 143(1):

The assessee appealed against the denial of FTC, arguing that the non-filing of Form 67 within the due date for filing the original return should not disallow the FTC. The NFAC upheld the denial based on Rule 128 of the Income Tax Rules, which mandates filing Form 67 by the due date. The Tribunal examined the issue, noting that the Coordinate Bench of ITAT, Bangalore, in the case of Brinda Rama Krishna, had held that Rule 128(9) does not provide for disallowance of FTC due to delayed filing of Form 67. The Tribunal emphasized that filing Form 67 is directory, not mandatory, and that the DTAA overrides the provisions of the Act and Rules. Therefore, non-furnishing of Form 67 by the due date is not fatal to the FTC claim.

Conclusion:

The Tribunal, following the precedent set by the Coordinate Bench of ITAT, Bangalore, directed the Assessing Officer to examine the quantum of FTC claimed by the assessee and allow the FTC in accordance with the law. The appeal was allowed for statistical purposes, emphasizing that procedural delays should not extinguish substantive rights under the tax treaty. The order was pronounced on 18/05/2022, allowing the assessee's appeal for statistical purposes.