2024 (2) TMI 1490 - AT - Income Tax

Denial of Foreign Tax Credit - appellant had not filed Form No.67 read with Rule 28 of the IT Rules i.e. the statement of income from a country or specified territory outside India - HELD THAT - As relying on case of Mangalore Chemicals Fertilizers Ltd. 1991 (8) TMI 83 - SUPREME COURT Rule 128(9) of the IT Rules does not provide for disallowance of FTC in the case of delay in filing Form No.67. Filing of such Form 67 is not mandatory but a directory requirement. Moreso, when DTAA overrides the provision of the Act, the Rules cannot be contrary to the Act and hence, this right to claim of FTC is a vested right of the appellant, cannot be denied. We find sufficient case has been made out by the appellant. Hence, respectfully relying upon the same, we allow the appeal on this aspect of filing of Form No. 67. We condone the delay, if any. We, thus, direct the Ld. CIT(A) to pass orders on merit strictly in accordance with law.

Summary

Issues:
1. Disallowance of Foreign Tax Credit (FTC) claim due to delay in filing Form No.67 under Section 139(1) of the Act.
2. Interpretation of Rule 128(9) of the IT Rules regarding disallowance of FTC.
3. Application of Double Taxation Avoidance Agreement (DTAA) provisions overriding domestic laws.
4. Judicial precedent and interpretation of procedural requirements in tax matters.

Analysis:

The judgment dealt with an appeal against the disallowance of Foreign Tax Credit (FTC) claimed by the appellant due to a delay in filing Form No.67 under Section 139(1) of the Act. The appellant, a salaried individual working in Australia, claimed FTC for taxes paid in Australia to avoid double taxation. The Assessing Officer disallowed the claim citing non-compliance with the filing deadline for Form No.67 (para 3).

The appellant argued that the delay in filing Form No.67 was not fatal to the claim and relied on judicial precedents emphasizing the directory nature of procedural requirements. The Tribunal agreed, stating that the Rule 128(9) of the IT Rules did not mandate disallowance for such delay and that the DTAA provisions prevail over domestic laws (para 6, 16).

The Tribunal referenced a Co-ordinate Bench judgment and a Supreme Court decision to support the appellant's position. It emphasized that the right to claim FTC under a tax treaty is a vested right that cannot be denied due to procedural delays (para 6, 7).

Additionally, the Tribunal highlighted that DTAA provisions should be given precedence where they are more beneficial to the taxpayer, citing relevant case laws and circulars. It rejected the revenue's argument that the rule was mandatory, holding that the issue was not debatable and only one view was possible (para 13, 16).

Ultimately, the Tribunal allowed the appeal, directing the Assessing Officer to credit the foreign tax as per the filed Form No.67. It emphasized that the appellant's right to claim FTC should not be denied based on procedural technicalities and instructed the CIT(A) to decide the matter on merit (para 8, 9).

In conclusion, the judgment upheld the appellant's claim for FTC, highlighting the importance of honoring tax treaty provisions and the non-mandatory nature of certain procedural requirements under domestic laws.