2024 (5) TMI 29 - AT - Income Tax

Foreign Tax Credit u/s. 90 - denial of taxes paid by the assessee outside India merely on the ground that the assessee did not file Form 67 at the time of filing of her return of income - directory/procedural or mandatory default - HELD THAT - Revenue would hardly dispute the clinching fact that the assessee had indeed submitted the Form 67 before the CPC s processing dated 09.01.2023 i.e. on 05.02.2021. This being the clinching fact herein it is of the considered opinion that both the learned lower authorities could not have rejected the assessee s impugned Foreign Tax Credit claim for the above stated sole ground. Case law Duraiswamy Kumaraswamy 2023 (11) TMI 1000 - MADRAS HIGH COURT had already settled the issue that Rule 128 of the Income Tax Rules prescribing Form 67 hereinabove is directory and not mandatory in nature. Faced with this situation hereby accept the assessee s instant sole substantive grievance in principle and direct the CPC Bangalore to finalize assessee s afresh computation in above terms as per law. Assessee appeal allowed.

Summary

Issues involved: Appeal against National Faceless Appeal Centre's order u/s. 154 of the Income Tax Act, 1961 for assessment year 2020-21.

Summary:

Issue 1: Claim of relief u/s. 90 of the Act for taxes paid outside India

The assessee contended that the CIT(A) erred in not allowing the claim of relief u/s. 90 of the Act for taxes paid outside India due to a technical default of not filing Form 67 at the time of filing the return of income. The assessee argued that filing Form 67 is procedural and not mandatory. The Tribunal agreed with the assessee, citing a relevant case law and held that the Form 67 requirement is directory, not mandatory. As the assessee had submitted Form 67 before the processing date, the Tribunal allowed the claim of relief and directed the CPC to recalculate the assessee's tax liability accordingly.

Issue 2: Disallowance of Foreign Tax Credit (FTC) due to belated filing of Form 67

The main grievance of the assessee was the disallowance of Foreign Tax Credit (FTC) because Form 67 was filed after the due date of filing the return of income u/s. 139(1) of the Act. The Tribunal noted that the assessee had submitted Form 67 before the processing date and ruled that the disallowance was not justified. Referring to a relevant case law, the Tribunal emphasized that Rule 128 prescribing Form 67 is directory, not mandatory. Consequently, the Tribunal accepted the assessee's grievance and directed the CPC to recompute the tax liability accordingly.

Final Decision:

The Tribunal allowed the assessee's appeal and directed the CPC to recalculate the tax liability based on the acceptance of the claim of relief u/s. 90 of the Act and the disallowance of Foreign Tax Credit was deemed unjustified due to the belated filing of Form 67. The order was pronounced in open court on 25.04.2024.