2023 (5) TMI 705 - AT - Income Tax

Disallowance of claim of Foreign Tax Credit (FTC) - assessee filed rectification u/s 154 as passed not granting the claim of the assessee - CIT(A) confirmed the order of rectification and held that the assessee has not filed Form No.67 before the prescribed time limit after the due date of filing of the return u/s 139(1) - HELD THAT - The assessee had filed Form No.67 along with documentary evidence and acknowledgement for the same dated 30.03.2021 is on record (Exhibit B4 before the CIT(A). From the income tax return filed along with the computation of income, it is evident that the foreign salary has been included in the total income and tax on the said income has been paid. The assessee has claimed FTC for the taxes paid abroad . The Bangalore Bench of the Tribunal on identical facts in the case of Ms.Brinda Ramakrishna v. ITO 2022 (2) TMI 752 - ITAT BANGALORE had held that filing of Form 67 is a procedural / directory requirement and not a mandatory requirement. It was held that violation of the procedural norm does not extinguish the substantive right of claiming the credit of FTC. Thus we hold that the assessee is entitled to the benefit of FTC. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves the issue of disallowance of claim of Foreign Tax Credit (FTC) by the CIT(A) and the justification of the same.

Comprehensive Details:

Issue 1: Disallowance of Foreign Tax Credit (FTC) Claim
The assessee, an individual employed with Qualcomm India Private Limited, disclosed income from various sources for the assessment year 2020-2021, including salary earned abroad. The assessee claimed Foreign Tax Credit (FTC) of Rs.14,02,442 under sections 90/91 of the Income-tax Act, 1961. However, the FTC was not granted in the intimation under section 143(1) of the Act, leading to a rectification request by the assessee.

Issue 2: CIT(A)'s Decision and Tribunal's Analysis
The CIT(A) upheld the denial of FTC, citing the non-filing of Form No.67 within the prescribed time limit as per Rule 128 of the I.T.Rules. The assessee contended that the denial of credit for foreign tax paid overseas was incorrect, arguing that Rule 128 is directory, not mandatory. The Tribunal, referring to a Bangalore Bench order, agreed that the filing of Form 67 is procedural and not mandatory, emphasizing that violation of procedural norms does not negate the substantive right of claiming FTC.

Tribunal's Decision and Rationale
Based on the Bangalore Bench's precedent, the Tribunal ruled in favor of the assessee, holding that the assessee is entitled to the benefit of FTC. The Tribunal emphasized that the filing of Form No.67 is not a mandatory requirement, and the denial of FTC solely based on the belated filing of the form was unjustified. Therefore, the appeal filed by the assessee was allowed, granting the benefit of FTC claimed.

Conclusion
The Tribunal's decision overturned the CIT(A)'s confirmation of disallowance of FTC, emphasizing the procedural nature of filing Form No.67 and upholding the assessee's right to claim Foreign Tax Credit.