2024 (11) TMI 1104 - HC - Income Tax

Denial of Foreign Tax Credit - delay in filing Form- 67 - mandatory or directory formality - HELD THAT - In the present case, the petitioner, who was working in foreign country, had filed his return of income for the assessment years 2019-20, 2020-21 and 2021-22 in India showing the income earned in the foreign country. But due to Covid out break, he inadvertently had not uploaded the Form-67. However, later the petitioner uploaded the Form-67 for all the Assessment Years. The reasons stated by the petitioner appears to be reasonable and further this Court in a similar case reported in Duraiswamy Kumaraswamy 2023 (11) TMI 1000 - MADRAS HIGH COURT held that filing of foreign tax credit in terms of Rule 128 is only directory in nature and not mandatory. In the present cases the petitioner was working in United Kingdom and earned income there. The petitioner filed return of income in India for the assessment years 2019-20, 2020-21 and 2021-22 showing the income earned in the foreign country, in which he claimed TDS credit before United Kingdom, as FTC u/s 90 of the Income Tax Act. But the petitioner uploaded Form 67 with delay, which he suppose to upload while filing the return of income. It is to be 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, which appears to be genuine. Therefore this Court is inclined to condone the delay in filing Form 67 and the impugned orders are liable to be set aside.

Summary

Issues:
1. Delay in filing Form-67 for claiming Foreign Tax Credit.
2. Rejection of Foreign Tax Credit claimed by the petitioner.
3. Maintainability of revision petitions under Section 264 of the Income Tax Act.
4. Whether the filing of Form-67 is mandatory or directory.
5. Applicability of previous judgments in similar cases.

Analysis:

1. Delay in filing Form-67 for claiming Foreign Tax Credit:
The petitioner, working in the UK, filed returns of income for the Assessment Years 2019-20, 2020-21, and 2021-22 in India but failed to upload Form-67 along with the returns due to the Covid outbreak. Later, the Form-67 was uploaded. The court considered the reasons for the delay reasonable, especially in light of a similar case where the petitioner was allowed to file Form 67 after the assessment year had commenced.

2. Rejection of Foreign Tax Credit claimed by the petitioner:
The respondent disallowed the Foreign Tax Credit claimed by the petitioner due to the delayed filing of Form-67. However, the court held that the rejection was not in accordance with law. The court set aside the impugned order and directed the reassessment, considering the foreign tax credit filed by the petitioner.

3. Maintainability of revision petitions under Section 264 of the Income Tax Act:
The petitioner had filed revision petitions under Section 264 of the Income Tax Act to revise the assessment orders, but they were rejected as not maintainable due to being beyond the period of limitation. Subsequently, the petitioner filed writ petitions challenging the rejection of the revision petitions.

4. Whether the filing of Form-67 is mandatory or directory:
The court held that the filing of Form-67 for claiming Foreign Tax Credit under Section 90 of the Income Tax Act is directory and not mandatory. Citing a Supreme Court judgment, the court emphasized that the rule regarding Form-67 is for the implementation of provisions and can be filed even after the assessment order is passed.

5. Applicability of previous judgments in similar cases:
The court relied on a previous judgment in a similar case to support its decision to set aside the impugned orders and allow the petitioner to claim the Foreign Tax Credit. The court emphasized the importance of considering the circumstances leading to the delay in filing Form-67 and the genuine nature of the petitioner's claim.

In conclusion, the court allowed the writ petitions, set aside the impugned orders, and directed the reassessment by considering the Foreign Tax Credit filed by the petitioner. The court emphasized the importance of granting due credit to the petitioner and following the principles laid down in previous judgments regarding the filing of Form-67 for claiming Foreign Tax Credit.