2023 (4) TMI 633 - AT - Income Tax

Foreign Tax Credit (FTC) u/s 90/90A - Judicial precedent - denial of relief as in intimation processed u/s 143(1) and rectification order u/s 154 - assessee had not filed the Form 67 before filing the return of income - HELD THAT - As decided in case of Brinda Rama Krishna 2022 (2) TMI 752 - ITAT BANGALORE has observed that filing of Form 67 is not mandatory but directory requirement. CIT(A) in the case in hand however, has not followed the aforesaid judgment. The Bench is of considered opinion that Ld. first Appellate Authority being Subordinate to the Tribunal was supposed to follow the principles of law set down and without citing any proposition of law of binding nature contradictory could not have ignored the judgment on observation that it is not known as to whether the aforesaid decision has attained finality or not. Appeal of assessee is allowed.

Summary

Issues involved:
The appeal against the order of CIT(A) regarding the disallowance of relief u/s.90/90A for AY 2019-20, the legality of amending the return of income filed by the assessee u/s 143(1), and the denial of relief claimed u/s 90/90A of Foreign Tax Credit.

Issue 1: Disallowance of relief u/s.90/90A for AY 2019-20

The ADIT (CPC), Bengaluru did not allow relief u/s.90/90A amounting to Rs.4,40,901/- for AY 2019-20, which was claimed by the assessee in the return of income. The assessee filed a rectification request against the intimation order, but the rectification order by ADIT-CPC did not provide the relief. The appellant filed an appeal against this decision. During the appellate proceedings, the appellant argued that the filing of Form 67 in support of the claim of foreign tax credit was not mandatory but a directory requirement, citing a judgment by the Bangaluru Bench in a similar case. The Ld. CIT(A) upheld the assessment, citing a CBDT Circular dated 19.09.2017.

Issue 2: Legality of amending the return of income

The appellant raised grounds in the appeal concerning the illegal action of the ADIT-CPC in amending the return of income filed by the assessee while processing it u/s 143(1). The appellant also challenged the action of ADIT-CPC in not giving the relief claimed u/s 90/90A of Foreign Tax Credit in the intimation processed under Section 143(1) and rectification order u/s 154 of the Income-tax Act, 1961. The appellant further denied its liability to tax as determined by the ADIT-CPC and sought permission to file additional evidence if required. The appellant also requested leave to add or alter any grounds of appeal during the appeal process.

Issue 3: Interpretation of legal provisions

The judgment in a similar case by the Bangalore Bench was considered, where it was held that Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.67, and that filing of Form No.67 is a directory requirement, not mandatory. The DTAA was emphasized to override the provisions of the Act, and it was concluded that the issue was not debatable. However, the Ld. CIT(A) in the present case did not follow this judgment, citing Rule 128(8) which specifies the documents required for allowing credit of any foreign tax. The Tribunal held that the CIT(A) should have followed the principles of law set down and decided in favor of the assessee, allowing the appeal.

This judgment highlights the importance of following legal principles and judgments in deciding tax matters, emphasizing the interpretation of relevant legal provisions and the application of precedents in similar cases.