2024 (3) TMI 37 - AT - Income Tax

Disallowance of claim u/s. 90 of Foreign tax credit - Form-67 was filed belatedly - non-filing of Form-67 before the due date of filing of the return of income u/s. 139(1) - AR argued that debatable disallowances cannot be made through intimation u/s. 143(1) - mandatory or directory provisions - CIT(A) allowed claim - HELD THAT - In the instant case, admittedly the return of income for the AY 2019-20 was filed on 31/10/2019 being the extended due date for filing of the return of income for that assessment year. In the impugned Intimation U/s. 143(1) of the Act passed on 13/3/2021 and the written submissions filed by the Ld. AR, we find that Form-67 was submitted on 17/2/2021. There is no dispute on the fact that Form-67 has been filed before the generation of Intimation U/s. 143(1) of the Act. In the instant case, Form-67 was filed on 17/2/2021 while the intimation U/s. 143(1) was passed on 13/3/2021. The facts of the case decided in Duraiswamy Kumaraswamy 2023 (11) TMI 1000 - MADRAS HIGH COURT are squarely applicable to the facts of the instant case wherein held returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature. We therefore find no infirmity in the order of the Ld. CIT(A)-NFAC and accordingly the grounds raised by the Revenue deserves to be dismissed.

Summary

Issues involved:
The judgment involves the appeal filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the disallowance of Foreign Tax Credit claimed by the assessee for the Assessment Year 2019-20 due to the non-filing of Form-67 as prescribed under Rule 128(9) of the IT Rules, 1962.

Details of the Judgment:

Issue 1: Disallowance of Foreign Tax Credit

The Revenue challenged the order of the Ld. CIT(A)-NFAC, arguing that the disallowance of the Foreign Tax Credit amounting to Rs. 2,83,87,928/- for AY 2019-20 was erroneous as the assessee had not filed Form-67. The Ld. AR contended that the filing of Form-67, though belated, was done before the passing of the intimation under Section 143(1) of the Act. The Ld. AR emphasized that the filing of Form-67 should be considered as directory and not mandatory for claiming the Foreign Tax Credit. The Tribunal noted that Form-67 was filed before the generation of the intimation under Section 143(1) of the Act, and referred to a similar decision by the Hon'ble Madras High Court, which held that such filing was only directory and not mandatory. The Tribunal upheld the order of the Ld. CIT(A)-NFAC, dismissing the Revenue's appeal.

Separate Judgment:
The Hon'ble Madras High Court's decision was cited to support the argument that the filing of Form-67 for claiming Foreign Tax Credit is directory and not mandatory, as long as it is done before the final assessment order is passed. The Court set aside the impugned order disallowing the Foreign Tax Credit claim and directed reassessment by considering the Form-67 filed by the petitioner. The Court emphasized that the rule regarding Form-67 is for the implementation of the provisions of the Act and is directory in nature.

This judgment clarifies the importance of timely filing of necessary forms for claiming tax credits and highlights the distinction between mandatory and directory provisions in tax law.