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2024 (7) TMI 1564 - AT - Income TaxDelay of foreign tax credit due to delay in submission of Form 67 - submission made before the Ld. CIT (A) in support of the claim that the provision of DTAA override the provision of the Act and therefore, the credit for foreign tax paid in Singapore should be allowed - HELD THAT - Since the provision of DTAA override the provision of Section 90 of the Act as they are more beneficial to the assessee, in view of judicial pronouncements in this regard and since Rule 128(a) does not preclude the assessee from the claiming credit for FTC in case of delay in filing the return of income as the credit for FTC is a vested right of the assessee and since form 67 was filed in response to the query received from CPC as contended by the assessee, therefore, there was no justification for not allowing the credit for FTC. Hence, Ground Nos. 1 and 2 of the appeal are allowed and the AO is directed to allow the FTC in accordance with DTAA between India Singapore and as per law. Appeal of the assessee is allowed.
Issues Involved:
1. Disallowance of Foreign Tax Credit (FTC) due to delayed submission of Form 67. 2. The impact of Double Taxation Avoidance Agreement (DTAA) provisions on the Income Tax Act, 1961. 3. Procedural versus substantive requirements in claiming FTC. Issue-wise Detailed Analysis: 1. Disallowance of Foreign Tax Credit (FTC) due to delayed submission of Form 67: The primary issue in this case was the disallowance of FTC due to the late filing of Form 67 by the appellant. The appellant, an individual with income from Singapore, claimed FTC under Section 90 of the Income Tax Act, 1961, as per the DTAA between India and Singapore. The claim was initially denied because Form 67, required under Rule 128 of the Income Tax Rules, was not submitted by the due date for filing the return of income under Section 139(1). The appellant argued that the procedural delay in filing Form 67 should not negate the right to FTC, as this right is established under the DTAA, which is an agreement between sovereign nations. 2. The impact of Double Taxation Avoidance Agreement (DTAA) provisions on the Income Tax Act, 1961: The appellant contended that the provisions of the DTAA override the Income Tax Act, 1961, when they are more beneficial to the taxpayer. The Tribunal examined precedents, including the cases of Mahua Bagchi and Deepak Shimoga Padmaraju, which supported the view that DTAA provisions take precedence over domestic tax laws. These cases established that the failure to file Form 67 on time does not automatically disqualify a taxpayer from claiming FTC, as the DTAA provisions should be honored to avoid double taxation. 3. Procedural versus substantive requirements in claiming FTC: The Tribunal considered whether the requirement to file Form 67 is procedural or substantive. It was noted that Rule 128(9) does not explicitly state that FTC should be denied if Form 67 is filed late. The Tribunal referenced several judicial decisions, including those of the Hon'ble Supreme Court, which have held that procedural requirements should not override substantive rights. Filing Form 67 is deemed a procedural requirement, and its delay should not result in the denial of FTC, which is a substantive right under the DTAA. Conclusion: The Tribunal concluded that the appellant's right to FTC should not be denied merely due to the late filing of Form 67. The DTAA provisions between India and Singapore, which allow for FTC, override the procedural requirement of timely filing Form 67. The Tribunal directed the Assessing Officer to allow the FTC in accordance with the DTAA and relevant laws, thus allowing the appeal in favor of the appellant. Ground Nos. 1 and 2 were allowed, while Ground No. 3 was deemed general and required no separate adjudication. The appeal was pronounced allowed on 26th July, 2024.
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