2024 (5) TMI 1441 - AT - Income Tax

Foreign tax credit u/s 90 - denying the relief merely on the ground that Form 67 was not filed before filing the original tax return u/s 139 (1) - as argued assessee is entitled to claim foreign tax credit as per the DTAA between India and the host jurisdiction even if a Form 67 is filed along with revised return of income - HELD THAT - CIT (A) has primarily taken adverse inference on the ground that necessary claim was not pressed before the AO but the claim was very much before the AO. In the interest of justice and exercising our discretion as spelt out by Hon ble Supreme Court in the case of Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT we admit this claim of the assessee in the light of the submissions above and case laws cited. We remit the issue to the file of AO. AO shall duly consider the claim of the assessee in the light of the documents already submitted and decide as per law on this claim duly admitted. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Denial of claim of Foreign tax credit under section 90 of the Income Tax Act, 1961.
2. Excessive interest levied under sections 234B and 234C of the Act.

Analysis:

Issue 1: Denial of claim of Foreign tax credit under section 90 of the Income Tax Act, 1961:
The appeal was against the order of the ld. CIT (Appeals)/National Faceless Appeal Centre (NFAC) dated 12.10.2023 for the assessment year 2018-19. The appellant objected to the denial of foreign tax credit (FTC) under section 90 of the Act. The appellant argued that the denial was contrary to law and that the filing of Form 67 should not control the claim of FTC, which is otherwise allowed under the Act. The appellant contended that the intimation under section 143(1) merged with the scrutiny assessment order under section 143(3), allowing the CIT(A) to consider and grant relief. However, the CIT(A) held that the appeal was not maintainable as the issue of disallowance of FTC arose from the intimation under section 143(1) and was not part of the assessment order. The appeal was dismissed on this ground.

Issue 2: Excessive interest levied under sections 234B and 234C of the Act:
The appellant also raised the issue of excessive interest levied under sections 234B and 234C of the Act. The appellant argued that the NFAC/CPC erred in levying excessive interest. However, the judgment did not provide detailed analysis or resolution of this issue, and it was not a primary focus of the decision.

In the detailed analysis of the first issue, the appellant had filed Form 67 along with the original return and revised return, but the necessary proof of tax payment in the US was not attached initially. The appellant later submitted an updated Form 67 with proper attachments showing tax payment in the US. The lower authorities denied the FTC benefit based on the belated filing of the updated Form 67. The appellant argued that Rule 128's requirement of filing Form 67 before the due date for the return of income is directory, not mandatory. The appellant cited legal precedents supporting this argument. The Tribunal found merit in the appellant's submissions, admitting the claim and remitting the issue to the AO for consideration in accordance with the law and documents submitted.

The judgment highlights the importance of timely compliance with procedural requirements and the distinction between mandatory and directory provisions in tax law. The decision also underscores the significance of legal precedents in supporting arguments before tax authorities and tribunals.