2022 (12) TMI 395 - AT - Income Tax

Denial of foreign tax credit u/s 91 - delay in filing Form no.67 - HELD THAT - As in Anuj Bhagwati 2022 (9) TMI 1397 - ITAT MUMBAI 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. 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 AO 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.

Summary

Issues:
1. Denial of foreign tax credit under section 91 of the Income Tax Act due to delay in filing Form no.67.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) denying the claim of tax credit under section 91 of the Income Tax Act amounting to Rs. 11,79,796 claimed by the appellant via filing of Form 67. The appellant contended that the denial of tax credit was erroneous as the form was filed within the extended due date for filing the original/revised return for the assessment year 2019-20. The appellant argued that filing Form 67 is a procedural compliance, making them eligible to take credit under section 91 of the Act. The appellant also highlighted a perceived discrimination between provisions of the Act and the Rules, emphasizing that the Act should prevail over the Rules in case of contradiction.

The Tribunal considered the facts where the assessee, an individual, filed the original return of income and a revised return claiming foreign tax credit of Rs. 11,79,796. The denial of the credit was based on the late filing of Form no.67. The appellant explained that due to circumstances beyond her control, including paperwork delays related to income from foreign sources, the form was filed after the due date. The appellant argued that the provisions of section 90/91 of the Act are substantive and should override Rule 128 of the Income Tax Rules, which was the basis for the denial of the credit.

The Tribunal analyzed Rule 128(9) in effect during the relevant year, which required the filing of Form no.67 before the due date of filing the return of income under section 139(1) of the Act. However, subsequent amendments extended the deadline for filing the form. Citing precedents, the Tribunal held that the delay in filing the form should not preclude the assessee from claiming foreign tax credit, as the Rules should not override the Act. The Tribunal directed the Assessing Officer to decide the claim on merits after accepting the late-filed Form no.67 and related documents, allowing the appeal for statistical purposes. The decision was based on the principle that the filing of the form was directory, not mandatory, and the Act's provisions should prevail over the Rules.

In conclusion, the Tribunal allowed the appeal, emphasizing that the delay in filing Form no.67 should not bar the assessee from claiming foreign tax credit under section 91 of the Act, directing a reconsideration of the claim on its merits.