2024 (4) TMI 1186 - AT - Income Tax

Denial of foreign tax credit - assessee has filed Form 67 beyond the due date in respect of claim - mandatory v/s directory requirement - HELD THAT - DR could not controvert the fact that the issue in question is squarely covered in favour of the assessee by earlier decisions of the Tribunal in the cases referred to by the learned counsel for the assessee. As decided in Vikas Daga 2023 (6) TMI 1387 - ITAT DELHI filing of form 67 is a procedural / directory requirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantive right of claiming the credit of FTC -direct the AO to allow the credit of FTC and hold that rule 128(9) of the Rules does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Thus restore the matter to the file of AO with direction to verify the assessee s claim in respect of foreign tax credit as per the provisions of the law after admitting / accepting form-67 and decide the issue in accordance with law. Grounds are allowed for statistical purposes. Assessee-appeal is allowed for statistical purposes.

Summary

Issues:
Appeal against disallowance of foreign tax credit, Late filing of Form-67, Denial of Indian TDS tax credit, Procedural requirement vs. substantive right, Precedents favoring the assessee.

Analysis:
The appeal pertains to the disallowance of foreign tax credit by the CPC due to the late filing of Form-67 beyond the due date for filing the return under section 139(1) of the Income-tax Act, 1961. The assessee contested this disallowance before the CIT(A) and subsequently appealed to the Tribunal, arguing that the filing of Form-67 was a procedural requirement and not a mandatory one. The assessee raised multiple grounds challenging the decisions of the authorities below, including the denial of Indian TDS tax credit without reasons provided. The Tribunal focused on the primary issue of disallowance of foreign tax credit amounting to Rs. 6,64,166/-.

The counsel for the assessee contended that earlier decisions of the Tribunal supported the assessee's position. Specifically, references were made to cases such as Vikas Daga vs. ACIT and Eastman Industries Ltd. vs. ACIT, where the Tribunal ruled in favor of the assessee regarding the allowance of foreign tax credit despite procedural discrepancies. The Tribunal noted that the issue at hand was conclusively settled in favor of the assessee by the precedents cited, emphasizing that the filing of Form-67 should not extinguish the substantive right of claiming the foreign tax credit.

In alignment with the precedents and the arguments presented, the Tribunal overturned the decisions of the authorities below and remanded the matter to the Assessing Officer. The Tribunal directed the AO to verify the assessee's claim for foreign tax credit in accordance with the law after accepting Form-67, emphasizing the importance of considering the substantive right of claiming the credit. The appeal of the assessee was allowed for statistical purposes, indicating a favorable outcome for the assessee based on the legal principles and precedents cited.

In conclusion, the Tribunal's judgment highlights the distinction between procedural requirements and substantive rights in claiming foreign tax credit. By relying on established precedents and legal principles, the Tribunal emphasized the importance of upholding the assessee's entitlement to the credit, notwithstanding procedural lapses. The decision underscores the significance of adhering to statutory provisions while ensuring that substantive rights are not unduly compromised due to technicalities.