2024 (5) TMI 815 - AT - Income Tax

Foreign Tax Credit (FTC) u/s 90 r.w. Article 25 India US Treaty (DTAA) - Claim denied as Assessee could not file Form 67 online along with return - HELD THAT - Section 90 of the Act provides that Govt. of India can enter into Agreement with other countries for granting relief in respect of Income on which taxes are paid in country outside India and such income is also taxable in India. Neither Section 90 nor DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirements. FTC is Assessee s vested right as per Article 25 of the DTAA read with Section 90 and same cannot be disallowed for non-compliance of procedural requirement that is prescribed in the Income Tax Rules. Since the Form 67 has been filed the same could be verified by the AO and to give relief accordingly. As decided in case of Sambhaji and others vs. Gangabai and others 2008 (11) TMI 393 - SUPREME COURT that procedural law should not ordinarily be construed as mandatory; the procedural is always subservient to and is in aid to justice. Therefore filing of Form 67 as per provision of Section 90 r.w. Rule 128(9) of the Act is a procedural law and should not control the claim of FTC. Section 90(2) of Income Tax Act where the Central Govt. of India entered into a DTAA the provisions of the Act would apply to the extent they are more beneficial to a taxpayer. Therefore the provisions of DTAA override the provisions of the Act to the extent they are beneficial to the assessee. Such contentions of the assessee however could not be controverted seriously by the Learned DR. We dispose of this appeal by setting aside the issue to the file of the Learned AO with a direction upon him to verify the details of Form 67 as claimed to have been filed by the assessee in regard to claim of FTC for A.Y. 2018-19 and to give relief to the assessee in accordance with law. Assessee s appeal is therefore allowed for statistical purposes.

Summary

Issues Involved:
The judgment involves the delay in filing an appeal, the claim of Foreign Tax Credit (FTC) under section 90 of the Income Tax Act, 1961, and the procedural requirement of filing Form 67.

Delay in Filing Appeal:
The appeal was filed within the statutory time limit, but physical documents were submitted late due to the counsel's medical condition. The delay was condoned by the tribunal based on the "reasonable cause" explained by the counsel, which was not contested by the opposing party.

Claim of Foreign Tax Credit (FTC):
The assessee earned salary outside India and claimed FTC in the income tax return. The Income Tax Department raised a demand without giving credit against FTC due to the late filing of Form 67. The tribunal held that the assessee is entitled to claim FTC under section 90 of the Act read with the India US Treaty (DTAA). It was emphasized that the procedural requirement of filing Form 67 should not control the claim of FTC, as it is the assessee's vested right. The tribunal directed the AO to verify the details of Form 67 and provide relief to the assessee in accordance with the law.

Procedural Requirement of Form 67:
The assessee filed Form 67 late as it was a new requirement introduced from A.Y. 2018-19, of which the assessee was not aware. The tribunal held that the provisions of the DTAA override the provisions of the Act to the extent they are beneficial to the assessee. Therefore, the filing of Form 67 should not disallow the claim of FTC. The tribunal allowed the appeal for statistical purposes and set aside the issue to be verified by the AO.