2024 (12) TMI 72 - AT - Income Tax

Foreign Tax Credit (FTC) denied - Form No. 67 was filed belatedly - exparte assessment order challanged - HELD THAT - Since the appeal against exparte assessment order is still pending before NAFC. Without expressing anything on merits of the case, the present appellate order passed by CIT A is hereby set-aside with a direction to decide the same along with the other appeal within a period of four months.

Issues:
1. Denial of Foreign Tax Credit (FTC) due to late filing of Form No. 67.
2. Rectification order demanding additional tax payment.
3. Applicability of Double Taxation Avoidance Agreement (DTAA) provisions.
4. Mandatory vs. directory nature of filing Form No. 67 for claiming FTC.
5. Validity of rectification order issued without a Document Identification Number (DIN).

Issue 1: Denial of Foreign Tax Credit (FTC) due to late filing of Form No. 67:
The appeal was filed against the appellate order passed by the Commissioner of Income Tax (Appeals) denying the claim of Foreign Tax Credit (FTC) relief under section 90 of the Income Tax Act. The Assessing Officer had disallowed the FTC relief due to the non-filing of Form No. 67 along with the Return of Income. The Appellate Tribunal considered the submission that filing Form No. 67 is only directory and not mandatory. However, the Tribunal upheld the denial of FTC, emphasizing the importance of verification provided in Form No. 67 and the mandatory nature of filing it before the deadline under Rule 128. The Tribunal concluded that the failure to file Form No. 67 within the prescribed time justified the denial of the credit of FTC paid abroad.

Issue 2: Rectification order demanding additional tax payment:
The Assessing Officer passed a rectification order demanding a sum of Rs. 30,90,458 after adjusting the refund already issued, based on the disallowed FTC relief. The Appellate Tribunal noted that the rectification order was issued without a Document Identification Number (DIN). The Tribunal directed that the appeal against the rectification order be decided along with the pending appeal against the ex-parte assessment order, emphasizing the need for a thorough review within a specified timeframe.

Issue 3: Applicability of Double Taxation Avoidance Agreement (DTAA) provisions:
The Appellant argued that the provisions of the DTAA should prevail over domestic laws to the extent that they are more beneficial. The Appellate Tribunal did not provide a specific ruling on this issue, as the focus was on the procedural aspects related to the denial of FTC based on the non-filing of Form No. 67.

Issue 4: Mandatory vs. directory nature of filing Form No. 67 for claiming FTC:
The Appellant contended that the filing of Form No. 67 is directory and not mandatory for claiming FTC. Various judicial decisions were cited to support this argument. However, the Tribunal upheld the mandatory nature of filing Form No. 67 within the prescribed time limit, as per Rule 128, for claiming the benefit of FTC. The Tribunal emphasized the verification requirement in Form No. 67 as crucial for ensuring the accuracy of FTC claims.

Issue 5: Validity of rectification order issued without a Document Identification Number (DIN):
The Tribunal noted that the rectification order was issued without a Document Identification Number (DIN), which raised concerns about compliance with procedural guidelines. The Appellate Tribunal directed that the rectification order be reviewed along with the pending appeal against the ex-parte assessment order, emphasizing the importance of adherence to prescribed guidelines and timelines in tax proceedings.

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