2023 (1) TMI 370 - AT - Income Tax

Denial of foreign tax credit u/s 90/90A - delay in filing Form no.67 - Form No. 67 was filed by the assessee after the due date of filing the return of income u/s 139(1) as per the provisions of Rule 128(9) and thus claim of the assessee was rejected - HELD THAT - 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 u/s 139(1) of the Act, as per the provisions of Rule 128(9). 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 . 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). We find that in another decision in Anuj Bhagwati 2022 (9) TMI 1397 - ITAT MUMBAI the coordinate bench of the Tribunal 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. We are of the considered opinion that mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as it 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. Levy of interest u/s 234A - HELD THAT - We deem it appropriate to remand the issue to the file of the AO for de novo adjudication after the necessary examination of facts as to whether or not the return of income filed by the assessee is within the prescribed time limit under the Act. With regard to the levy of interest u/s 234B and 234C same are consequential in nature. Accordingly, ground raised in assessee s appeal is allowed for statistical purposes.

Summary

Issues:
1. Denial of Foreign Tax Credit under section 90/90A due to delay in filing Form no.67

Analysis:
The appeal was filed challenging the order passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals). The assessee raised grounds against the denial of Foreign Tax Credit amount and the subsequent demand raised under section 143(1) of the Act. The primary contention was the denial of the credit due to the delay in filing Form no.67. The assessee argued that the provisions of Rule 128 cannot override the substantive provisions of section 90/90A of the Act. The learned CIT(A) dismissed the appeal based on the non-filing of Form no.67 before the due date of furnishing the return of income under section 139(1) of the Act.

The Tribunal considered the submissions and found that the assessee belatedly filed the return of income, claiming foreign tax credit of Rs. 14,86,291 under section 90/90A of the Act. The intimation issued under section 143(1) denied this credit based on the late filing of Form no.67. The Tribunal noted that Rule 128(9) required the form to be filed before the due date of the return of income under section 139(1) during the relevant year. However, Rule 128(9) was subsequently amended, extending the deadline to the end of the assessment year. The Tribunal referred to previous decisions where it was held that the filing of Form no.67 before completion of assessment, though not in accordance with Rule 128(9), still allows for the eligibility of foreign tax credit.

In line with the precedent set by the coordinate bench decisions, the Tribunal allowed the grounds raised by the assessee for statistical purposes. It directed the Assessing Officer to decide the claim of foreign tax credit on merits after accepting the Form no.67 and related documents. Grounds related to the levy of interest under section 234A were remanded for de novo adjudication, while those under sections 234B and 234C were allowed for statistical purposes. The appeal by the assessee was partly allowed for statistical purposes, with the order pronounced on 06/01/2023.