2023 (1) TMI 534 - AT - Income Tax

Disallowance of foreign tax credit in case of delay in filing Form 67 - due date of filing of return - HELD THAT - No doubt, as per the extant Rule, Form 67 in support of claim of foreign tax credit is to be filed within the due date of filing of return of income u/s 139(1) - The due date of filing of return for the impugned assessment year was 31.10.2020. It is a fact that the assessee filed the original return of income before the due date. However, Form 67 was filed along with the revised return of income was filed on 3105.2021. To prevent spread of COIVD-19 Pandemic, the Government imposed various restrictions. Taking note of the difficulties faced by litigants in complying with the legal requirement of filing petitions/suites/applications/appeals/other proceedings due to COVID-19, Hon'ble Supreme Court took suo motu cognizance and vide order dated 20.03.2020 extended the period of limitation in filing petitions/suites/applications/appeals etc. till 08.03.2021. On 08.03.2021, Hon'ble Supreme Court passed an order bringing to end the extension of limitation. However, due to recurrence of COVID-19 and drastic surge in number of COVID cases across the country, the Hon'ble Supreme Court again, vide order dated 10.01.2022, restored its earlier order extending the period of limitation and observed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purpose of limitation and all persons shall have a limitation period of 90 days from 01.03.2022 to comply with legal requirements. Thus, in view of the aforesaid decision of Hon'ble Supreme Court, it has to be concluded that the assessee has filed Form 67 within the extended period of limitation as per the order of Hon'ble Supreme Court. That being the case, assessee s claim of foreign tax credit has to be allowed. Thus assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income Tax Rules, which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground of the appeal of the assessee is allowed.

Summary

Issues:
1. Disallowance of foreign tax credit due to late filing of Form 67.
2. Interpretation of Rule 128 and CBDT Notification regarding the filing of Form 67.
3. Impact of COVID-19 on the limitation period for filing forms.
4. Judicial precedents on the mandatory nature of filing Form 67 for foreign tax credit.
5. Dispute resolution on the eligibility of foreign tax credit.

Detailed Analysis:
1. The primary issue in this case revolves around the disallowance of foreign tax credit due to the late filing of Form 67. The assessee filed the return of income within the due date but submitted Form 67 after the prescribed deadline. Both the Centralized Processing Centre (CPC) and the first appellate authority rejected the claim based on this delay.

2. The interpretation of Rule 128 and a CBDT Notification dated 19.09.2017 played a crucial role in the decision. The learned Commissioner (Appeals) emphasized the mandatory nature of filing Form 67 within the prescribed time frame. Referring to judicial precedents, the disallowance of foreign tax credit was upheld based on the strict adherence to the rules.

3. The impact of COVID-19 on the limitation period for filing forms was also a significant aspect of the case. The Hon'ble Supreme Court extended the period of limitation due to the pandemic, allowing for flexibility in meeting legal requirements. The assessee argued that the extended period should apply to the filing of Form 67, considering the exceptional circumstances.

4. Various judicial precedents were cited to support the argument that filing Form 67 is not mandatory but a directory requirement. Decisions in cases like M/s. Brinda Ramakrishnan vs. ITO and Sonakshi Sinha vs. CIT highlighted the interpretation of Rule 128 and the flexibility in adhering to procedural requirements.

5. Ultimately, the Tribunal sided with the assessee, emphasizing the logical and just interpretation of the statutory provisions. Despite a contrary view in a previous case, the Tribunal agreed with the decisions cited by the assessee's counsel. As a result, the Assessing Officer was directed to allow foreign tax credit to the assessee, resolving the dispute in favor of the appellant.

In conclusion, the judgment addressed the complexities of filing Form 67 for foreign tax credit, the impact of COVID-19 on legal timelines, and the interpretation of rules and notifications governing such procedures. The decision provided clarity on the eligibility of the assessee for foreign tax credit, emphasizing a balanced approach to statutory compliance and exceptional circumstances.