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2025 (2) TMI 1040 - AT - Income TaxNon grant of Foreign Tax Credit ( FTC ) - Form 67 was filed beyond the date of furnishing the Return of Income u/s 139(1) - Scope of DTAA between India and Denmark - HELD THAT - Undisputedly the Double Taxation Avoidance Agreement between India and Denmark provides for relief in respect of payment of taxes in one jurisdiction and paid in other jurisdiction as well. Assessing Officer ought to have verified the correct position whether the assessee had claimed such benefit at source country i.e. Denmark but no exercise has been carried out by the lower authorities. The claim of the assessee is declined purely on the ground that Form No. 67 was filed belatedly. We therefore set aside the orders of the lower authorities and restore the issue to the file of the AO with the direction that he would verify whether the assessee has paid taxes in Denmark and also offered same income for taxation in India but no credit was claimed at Denmark. If he finds that no such relief has been claimed at Denmark he would decide the issue in the light of the aforesaid decisions and the Circular of CBDT (supra). All the grounds raised in this appeal are allowed for statistical purposes.
ISSUES PRESENTED and CONSIDERED
The core legal issue in this case is whether the appellant is entitled to the Foreign Tax Credit (FTC) despite filing Form No. 67 beyond the prescribed deadline under Section 139(1) of the Income Tax Act, 1961. The Tribunal also considered whether the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Denmark, along with relevant CBDT Circulars and previous Tribunal decisions, allow for the granting of FTC in such circumstances. ISSUE-WISE DETAILED ANALYSIS Relevant legal framework and precedents: The legal framework revolves around Section 90 of the Income Tax Act, 1961, which deals with relief from double taxation, and Rule 128 of the Income Tax Rules, which prescribes the procedure for claiming FTC. The DTAA between India and Denmark, particularly Article 23, is also relevant. The Tribunal considered several precedents, including decisions in the cases of Ms. Brinda Ramakrishna, Bhaskar Dutta, and Sonakshi Sinha, which have interpreted Rule 128 and the requirement of filing Form No. 67. Court's interpretation and reasoning: The Tribunal noted that Rule 128(9) requires Form No. 67 to be filed on or before the due date for furnishing the return of income under Section 139(1). However, it observed that Rule 128(9) does not explicitly provide for the disallowance of FTC for delayed filing of Form No. 67. The Tribunal emphasized that the DTAA provisions override the Income Tax Act and Rules, and therefore, the requirement to file Form No. 67 should be considered directory rather than mandatory. Key evidence and findings: The Tribunal considered the appellant's contention that the denial of FTC was solely based on the late filing of Form No. 67. It also reviewed the CBDT Circular No. 333, which clarifies that DTAA provisions prevail over the Income Tax Act. The Tribunal found that the lower authorities did not verify whether the appellant had claimed tax relief in Denmark, which was a crucial factor in determining FTC eligibility. Application of law to facts: The Tribunal applied the legal principles from the DTAA and relevant case law to conclude that the appellant's failure to file Form No. 67 on time should not automatically disqualify them from claiming FTC. The Tribunal emphasized the need for the Assessing Officer to verify whether the appellant had paid taxes in Denmark and offered the same income for taxation in India without claiming relief in Denmark. Treatment of competing arguments: The Tribunal considered the Revenue's argument that the provisions are clear and mandatory, requiring Form No. 67 to be filed within the prescribed time. However, it found the appellant's reliance on DTAA provisions and supporting case law more persuasive, as these authorities have consistently held that procedural requirements should not override substantive relief under the DTAA. Conclusions: The Tribunal concluded that the appellant should be given an opportunity to substantiate their claim for FTC. It directed the Assessing Officer to verify the appellant's tax payments in Denmark and ensure no double relief was claimed. The Tribunal set aside the lower authorities' orders and restored the matter for reconsideration. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "The discretion to condone delay in filing of Form 67 does not vest with the AO or CPC or any other subordinate authority except to the extent as provided for by the CBDT in exercise of its powers conferred under the Act." "Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.67; filing of Form No.67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act." Core principles established: The Tribunal reinforced the principle that DTAA provisions take precedence over domestic tax laws and rules. It established that procedural requirements, such as filing deadlines for forms, should not negate substantive relief provided under international agreements. The Tribunal also highlighted the importance of verifying factual circumstances, such as tax payments in the source country, before denying FTC. Final determinations on each issue: The Tribunal determined that the appellant's appeal should be allowed for statistical purposes. It directed the Assessing Officer to verify the appellant's tax situation in Denmark and grant FTC if no double relief was claimed. The Tribunal emphasized that the mere late filing of Form No. 67 should not be grounds for denying FTC if the substantive conditions for relief under the DTAA are met.
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