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2023 (4) TMI 729 - AT - Income TaxDenial of foreign tax credit u/s 90/90A due to delay in filing Form no.67 - taxpayer filed Form No.67, after the due date for filing the return of income u/s 139(1) - rectification application u/s 154 for claiming the foreign tax credit was disposed off without granting any relief to the assessee - HELD THAT - As decided in SONAKSHI SINHA case 2022 (10) TMI 107 - ITAT MUMBAI 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 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.
Issues Involved:
1. Denial of Foreign Tax Credit (FTC) due to delay in filing Form 67 under Rule 128. 2. Whether the procedural lapse in filing Form 67 can disentitle the assessee from claiming FTC. 3. The interplay between substantive provisions of the Income Tax Act and procedural requirements under Rule 128. 4. The impact of amendments to Rule 128 on the filing timeline for Form 67. Issue-wise Detailed Analysis: 1. Denial of Foreign Tax Credit (FTC) due to delay in filing Form 67 under Rule 128: The primary grievance of the assessee was the denial of FTC under section 90/90A of the Income Tax Act due to the delay in filing Form 67. The assessee, an individual working for a multinational company, filed her return of income on 01/08/2019, including income earned in India and the Netherlands. She claimed FTC of Rs. 3,29,929 for the tax paid in the Netherlands. However, her claim was denied because Form 67 was filed on 09/02/2021, after the due date for filing the return of income under section 139(1). 2. Whether the procedural lapse in filing Form 67 can disentitle the assessee from claiming FTC: The learned CIT(A) upheld the denial of FTC solely based on the late filing of Form 67, as per Rule 128(9). However, the assessee argued that this procedural lapse should not disentitle her from claiming FTC. The Tribunal noted that Rule 128(9) did not explicitly state that a delay in filing Form 67 would result in the denial of FTC. Citing previous decisions, the Tribunal emphasized that procedural requirements should not override substantive rights granted under the Act. 3. The interplay between substantive provisions of the Income Tax Act and procedural requirements under Rule 128: The Tribunal examined whether the procedural requirements under Rule 128 could override the substantive provisions of sections 90 and 91 of the Act. The Tribunal referenced several decisions, including Sonakshi Sinha vs CIT and Anuj Bhagwati vs DCIT, which held that the requirements under Rule 128 are directory, not mandatory. It was observed that neither section 90 nor section 91 prescribed a timeline for filing Form 67, and Rule 128 did not provide for the disallowance of FTC due to a delay in filing the form. 4. The impact of amendments to Rule 128 on the filing timeline for Form 67: The Tribunal noted that Rule 128(9) was amended with effect from 01/04/2022, extending the deadline for filing Form 67 to the end of the assessment year. This amendment indicated a legislative intent to provide more flexibility in the filing timeline. The Tribunal concluded that the delay in filing Form 67 during the year under consideration should not preclude the assessee from claiming FTC. Conclusion: The Tribunal held that the mere delay in filing Form 67 should not result in the denial of FTC. The jurisdictional Assessing Officer was directed to decide the claim of FTC on merits after accepting Form 67 and other related documents filed by the assessee. The appeal was allowed for statistical purposes.
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