2024 (1) TMI 787 - AT - Income Tax

Denial of foreign tax credit (FTC) - rule is directory or mandatory? - assessee has filed the Form No. 67 beyond the due date and after processing of return of income U/sec 143(1) - Assessee has filed Form No 67 online on the portal of the Income Tax Department on 6.07.2022 in order to comply with Rule 128 of Income Tax Rules - HELD THAT - We find under Section 90 of the income tax Act allows double taxation relief in respect of agreements with foreign countries or specified territories and also Section 91 o the I T Act deals with the taxability of income where the countries which don t have agreements. Further there is no amendment in the Section 90 of the Act with regard to claim of FTC and in such cases Rule procedures are directory and not mandatory. As decided in the case of Ms. Brindra Rama Krishna, 2022 (2) TMI 752 - ITAT BANGALORE Hon'ble Tribunal has observed that the filling of Form No.67 is not mandatory but directory There is no amendment on these aspects in the Section 90 of the Act and the Rules cannot override the Act and therefore the filing of Form.No 67 is not mandatory but it is directory. Accordingly, we considering the facts, circumstances and ratio of the judicial decisions restore the disputed issue for limited purpose to the file of the assessing officer to grant Foreign Tax Credit after verification and in accordance with the law. Further the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information and allow the grounds of appeal of the assessee for statistical purposes.

Summary

Issues Involved:
The appeal challenges the denial of relief of foreign Tax Credit due to late filing of Form.No.67 before the due date of income tax return. The main issue revolves around the eligibility of the assessee to claim Tax Relief under Section 90 of the Income Tax Act based on the Double Taxation Avoidance Agreement (DTAA) with a foreign country.

Issue 1: Condonation of Delay in Filing Appeal
The delay of 6 days in filing the appeal before the Tribunal was condoned after considering the reasonable grounds presented by the assessee's representative and the absence of specific objections from the Departmental Representative.

Issue 2: Denial of Foreign Tax Credit (FTC)
The assessee, deriving income from various sources including salary from a foreign country, filed for Foreign Tax Credit (FTC) under Section 90 of the Act based on the DTAA with Maynmar. The CIT(A) denied the FTC claim due to the late filing of Form No.67, which the assessee submitted online after the processing of the return under section 143(1) of the Act.

Issue 3: Appeal Against CIT(A) Order
The appeal challenges the CIT(A)'s confirmation of the Assessing Officer's decision to deny the FTC claim, emphasizing that the provisions of the Act should be considered over procedural requirements like the timely filing of Form No.67.

Issue 4: Interpretation of Rules and DTAA
The Tribunal considered the mandatory nature of filing Form No.67 for claiming FTC under Rule 128 of the Income Tax Rules, juxtaposed against the provisions of Section 90 and 91 of the Act regarding double taxation relief and agreements with foreign countries.

Issue 5: Judicial Precedents and Decision
Relying on judicial decisions, including Tribunal rulings in similar cases, the Tribunal concluded that the DTAA provisions override domestic laws, and the filing of Form No.67 is directory, not mandatory. The Tribunal directed the assessing officer to reevaluate the FTC claim in light of the DTAA and judicial interpretations.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the primacy of DTAA provisions in determining the eligibility for Foreign Tax Credit and directing a reassessment of the claim by the assessing officer in accordance with the law and judicial precedents.