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2024 (12) TMI 700 - AT - Income TaxDisallowing the benefit of foreign tax credit (FTC) - claim was not made in the original return of income - HELD THAT - Tribunal, in the case of Basavalinga Sadasivaiah Ajaikumar 2024 (11) TMI 852 - ITAT BANGALORE dealt with identical facts and circumstances and decided the issue in favor of the assessee stating in admittedly, the assessee has revised the return of income claiming the foreign tax credit much before the intimation generated u/s 143(1). Thus, in our considered view, the Revenue should have allowed the benefit of foreign tax credit to the assessee. Assessee has filed Form 67 for claiming the benefit of foreign tax credit, which is directory in nature. Thus, even there was no Form 67 filed by the assessee with the original return of income, yet the Revenue should have accepted the claim made by the assessee in the revised return of income - Assessee appeal allowed.
Issues Involved:
1. Disallowance of Foreign Tax Credit (FTC) due to non-claim in the original return of income. 2. Legality of filing Form 67 after the due date for claiming FTC. 3. Interpretation of Rule 128(9) of the Income-tax Rules, 1962, regarding the mandatory nature of filing Form 67. 4. The interplay between Double Taxation Avoidance Agreement (DTAA) provisions and the Income-tax Act. Detailed Analysis: 1. Disallowance of Foreign Tax Credit (FTC) due to non-claim in the original return of income: The primary issue in this case was the disallowance of FTC amounting to Rs. 37,04,667/- claimed by the assessee in the revised return of income. The Centralized Processing Center (CPC) disallowed the claim during the processing of the return under Section 143(1) of the Income-tax Act, 1961, as it was not claimed in the original return. The CIT(A) upheld this disallowance, leading to the present appeal. The Tribunal noted that the assessee had filed Form 67 for claiming FTC in the revised return, which was available for consideration during the processing of the return. The Tribunal emphasized that the Revenue should have allowed the FTC claim as the revised return was filed before the intimation under Section 143(1). 2. Legality of filing Form 67 after the due date for claiming FTC: The Tribunal examined whether the delay in filing Form 67 could justify the disallowance of FTC. It was noted that various judicial precedents, including the case of Ms. Brinda Ramakrishna, have held that Rule 128(9) does not provide for disallowance of FTC due to delay in filing Form 67. The Tribunal reiterated that filing Form 67 is a directory requirement rather than a mandatory one, and non-furnishing of Form 67 before the due date under Section 139(1) is not fatal to the FTC claim. 3. Interpretation of Rule 128(9) of the Income-tax Rules, 1962, regarding the mandatory nature of filing Form 67: The Tribunal analyzed Rule 128(9), which stipulates that Form 67 should be filed on or before the due date for furnishing the return of income. However, it was highlighted that neither the Income-tax Act nor the DTAA explicitly mandates disallowance of FTC for procedural non-compliance, such as filing Form 67 after the due date. The Tribunal supported the view that procedural requirements should not override substantive rights, as articulated in various judicial decisions, including those by the Hon'ble Supreme Court. 4. The interplay between Double Taxation Avoidance Agreement (DTAA) provisions and the Income-tax Act: The Tribunal underscored the principle that DTAA provisions override the Income-tax Act when they are more beneficial to the taxpayer. It was argued that the DTAA between India and Australia, under Article 24, provides for FTC without imposing procedural conditions like timely filing of Form 67. The Tribunal emphasized that the right to FTC under DTAA is a vested right and cannot be denied due to procedural lapses, aligning with Section 90 of the Act, which allows for relief in respect of foreign taxes paid. Conclusion: The Tribunal, following the precedent set in similar cases, directed the Assessing Officer to allow the FTC claim after due verification, setting aside the CIT(A)'s order. The appeal filed by the assessee was allowed, reinforcing the view that procedural delays should not negate substantive tax reliefs under the DTAA. The judgment highlights the importance of interpreting procedural rules in a manner that does not undermine substantive rights provided under tax treaties.
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