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2024 (10) TMI 429 - HC - Income TaxDenial of Foreign Tax Credit claim - belated filling of Form No.67 - mandatory v/s directory provision - HELD THAT - It is an admitted fact that the petitioner has filed his income tax return along with Form No.67. The petitioner was working in a foreign country and paid the income tax. While passing the intimation under Section 143 (1) of the Act, the aspect of payment of foreign tax has not at all been considered, though it was filed along with the income tax return. After receipt of the intimation, the petitioner filed rectification application to rectify the same and to consider the Form No.67. Though the application was submitted once again, without considering the vital aspects, simply it was rejected, which is not proper and the same is not in accordance with law. This Court has already held in Duraiswamy Kumaraswamy's case 2023 (11) TMI 1000 - MADRAS HIGH COURT that filing of Form No.67 is not mandatory or directory. Even by following the law laid down by the Hon'ble Supreme Court of India in CIT Vs. G.M.Knitting Industries (P) Ltd. 2015 (11) TMI 397 - SC ORDER this Court had held that filing of Foreign Tax Credit in terms of Rule 128 is only directory in nature. Assessee appeal allowed.
Issues:
Challenge to impugned order under Section 154 read with section 143(1) of the Income Tax Act for Assessment Year 2022-2023 regarding Foreign Tax Credit claim filed under Form No.67. Analysis: 1. Filing of Income Tax Return and Foreign Tax Credit Claim: The petitioner filed the income tax return for the assessment year 2022-2023 on 31.12.2022, declaring taxable income and claiming Foreign Tax Credit of Rs. 10,78,563 under Article 25 of the Double Taxation Avoidance Agreement with the USA. However, the petitioner received an intimation on 20.06.2023, denying the Foreign Tax Credit benefit and demanding Rs. 13,58,070 along with interest. 2. Rectification Request and Respondent's Stand: The petitioner filed a rectification request on 12.07.2023 through the income tax web portal, but the 1st respondent, in the impugned order under Section 143(1) of the Act, did not provide credit for the foreign tax paid as per Form No.67. The Senior Standing Counsel for the respondents argued that Form No.67 should have been filed before the due date of filing the return, as per Rule 128 of the Income Tax Rules, 1962. 3. Court's Evaluation and Precedents: The Court noted that the petitioner had filed the income tax return along with Form No.67 on time, and the payment of foreign tax was not considered in the intimation under Section 143(1). Referring to a previous judgment, the Court emphasized that filing Form No.67 was not mandatory but directory. Citing the law laid down by the Supreme Court in CIT Vs. G.M.Knitting Industries, the Court held that the Foreign Tax Credit filing under Rule 128 is only directory. 4. Judgment and Directions: The Court set aside the impugned order dated 02.01.2024 and remitted the matter back to the 1st respondent for reassessment, emphasizing the consideration of the Foreign Tax Credit filed by the petitioner under Form No.67. The 1st respondent was directed to give due credit for the petitioner's foreign income and pass a final assessment order within four weeks. The Court clarified that the setting aside of the order pertained only to the rejection of the Foreign Tax Credit claim. 5. Conclusion: The Writ Petition was disposed of with no order as to costs, and the connected miscellaneous petition was closed. The judgment highlighted the importance of considering Foreign Tax Credit claims and reiterated the non-mandatory nature of filing Form No.67, providing relief to the petitioner in this case.
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