2024 (10) TMI 1483 - HC - Income Tax

Foreign Tax Credit FTC claim r/w Article 24 of India-UK Tax Treaty ( DTAA ) - HELD THAT - This Court, by following the judgment of G.M. Knitting Industries (P.) Ltd. 2015 (11) TMI 397 - SC ORDER held that filing of foreign tax credit in terms of Rule 128 is only directory in nature and not mandatory. In the present case the petitioner was working in United Kingdom. The petitioner filed return of income in India for the assessment year 2020-2021 on 21.09.2020 showing the income earned in the foreign country, in which he claimed being TDS credit before United Kingdom, as FTC u/s 90. But the petitioner uploaded Form 67 with delay, which he suppose to upload while filing the return of income. As noted that Section 90, Section 90A and Section 91 of the Income Tax Act of 1961 have been drafted specifically to avoid the burden of double taxation. In the present case, even though the petitioner had not uploaded Form-67 while filing return of tax, later he uploaded the same with delay and that too due to Covid out break he was not able to get necessary documents from the foreign country, which appears to be genuine. Therefore this Court is inclined to condone the delay in filing Form 67 and the impugned order is liable to be set aside.

Summary

Issues:
1. Disallowance of Foreign Tax Credit claim under Section 90 of the Income Tax Act r/w India-UK Tax Treaty.
2. Rejection of revision petition under Section 264 of the Income Tax Act.
3. Filing of Form-67 for claiming Foreign Tax Credit.

Analysis:
The petitioner filed a writ petition to challenge the order disallowing the Foreign Tax Credit (FTC) claim under Section 90 of the Income Tax Act and Article 24 of the India-UK Tax Treaty. The petitioner, working in the UK, filed the return of income in India but faced difficulties in filing Form-67 due to the Covid outbreak. The revision petition under Section 264 was rejected as not maintainable due to being beyond the limitation period. The respondents argued that Form-67 should have been filed along with the return, which the petitioner did after a delay of two years. However, the court considered the petitioner's reasons reasonable and genuine, citing a similar case where filing Form-67 before the final assessment order was deemed sufficient compliance with the Act.

The court referred to the mandatory vs. directory nature of Rule 128 for claiming foreign tax credit. It highlighted a Supreme Court judgment stating that filing Form-67 before the final assessment order is sufficient compliance. The court found that the petitioner's delay in filing Form-67 was justified due to the Covid outbreak and set aside the impugned order, directing the reassessment to consider the foreign tax credit claim. The court emphasized that Sections 90, 90A, and 91 of the Income Tax Act aim to prevent double taxation and condoned the delay in filing Form-67.

The court set aside the impugned order subject to a payment condition and directed the respondent to give due credit to the petitioner's UK income for reassessment. The order clarified that it pertained only to the rejection of the foreign tax credit claim. The court allowed the writ petition, with no costs, and closed the connected miscellaneous petitions. The judgment emphasized the importance of considering genuine reasons for delays in filing tax-related documents and highlighted the specific provisions in the Income Tax Act to prevent double taxation and ensure fair treatment for taxpayers claiming foreign tax credits.