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2023 (4) TMI 933 - AT - Income TaxClaim of foreign tax credit (FTC) u/s 90 - belated filling of Form 67 for claiming FTC - Credit for taxes paid in USA on the income earned in USA which is again taxed in India - claim was rejected by the AO in intimation passed u/s 143(1) on the ground that in terms of Rule 128 of the Income Tax Rules 1962 the assessee was required to file Form 67 for claiming FTC on or before the due date of furnishing return of income u/s 139(1) - assessee filed Form 67 on 26.10.2019 after the due date of filing the return of income mentioned u/s 139(1) of the Act but before the intimation u/s 143(1) of the Act dated 23.03.2021 HELD THAT - Rule 128 of the Rules cannot override the provisions of DTAA and impose an additional condition that credit will not be given if Form 67 is not filed on or before the due date of filing the return of income as prescribed under section 139(1) Form 67 for claiming FTC -filing of Form No.67 is only a procedural and directory requirement and not mandatory requirement for claiming credit for foreign taxes paid. Thus as undisputed fact that Form 67 was filed by the assessee prior to the intimation under section 143(1) of the Act issued by the AO on 23.03.2021 the assessee is entitled to credit for foreign taxes paid and the AO is directed to allow the claim of the assessee in this regard. Appeal of the assessee is allowed.
Issues: Appeal against order rejecting foreign tax credit claim for Assessment Year 2019-20.
Analysis: 1. Issue of Foreign Tax Credit Claim: The assessee, an individual, filed a return claiming foreign tax credit of Rs.3,30,000 for income earned in the USA and taxes paid there. The Assessing Officer (AO) rejected the claim citing non-filing of Form 67 before the due date under section 139(1) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) upheld the AO's decision. 2. Judicial Precedents: The assessee appealed to the Tribunal, citing relevant cases where it was held that credit for foreign taxes paid should be allowed as per Double Taxation Avoidance Agreement (DTAA) provisions, irrespective of Rule 128 of the Income Tax Rules. The Tribunal emphasized that Rule 128 cannot override DTAA provisions and that filing Form 67 is a procedural, not mandatory, requirement for claiming foreign tax credit. 3. Tribunal's Decision: Considering the Tribunal's previous decisions and the timely filing of Form 67 before the intimation under section 143(1) of the Act, the Tribunal allowed the appeal. It directed the AO to grant the assessee credit for foreign taxes paid, emphasizing that the filing of Form 67 is not a prerequisite to claim such credit under section 90 of the Act. 4. Outcome: The Tribunal allowed the appeal, ruling in favor of the assessee and directing the AO to permit the claim for foreign tax credit. The judgment highlights the primacy of DTAA provisions over domestic rules and the procedural nature of filing Form 67 for claiming foreign tax credit. 5. Conclusion: The judgment sets a precedent by clarifying the importance of adhering to DTAA provisions for allowing foreign tax credit claims and emphasizes the procedural nature of filing Form 67. It upholds the assessee's entitlement to credit for foreign taxes paid, ensuring a fair application of tax laws in cross-border income scenarios.
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