2022 (2) TMI 279 - AT - Income Tax

Disallowance of Foreign Tax Credit (FTC) - assessee did not comply with Rule 128 of filing the necessary evidence in Form 67 along with original return of income - As Before us ITAT the assessee has submitted that all the details necessary to consider the claim is available - HELD THAT - Now that assessee has filed all the details, we deem it fit and proper in the interest of justice to remit this issue to the Ld. CIT(A) to examine the same and to consider the claim of assessee in accordance with law. The Ld. CIT(A) is directed to pass detailed order on merits. Appeal filed by assessee stands allowed for statistical purposes.

Summary

Issues Involved:
1. Disallowance of Foreign Tax Credit (FTC) by Ld. CIT(A) based on non-compliance with Rule 128.
2. Consideration of the delay in filing the appeal due to the COVID-19 second wave.

Issue 1: Disallowance of Foreign Tax Credit (FTC) by Ld. CIT(A) based on non-compliance with Rule 128:

The appellant, a Green Card Holder of USA, initially filed a return of income claiming credit for taxes paid in the US under India-US DTAA. Subsequently, a revised return was filed with an increased claim for FTC. The Ld. AO completed the assessment but did not allow the relief claimed under section 90 of the Act for the tax already paid by the appellant. The Ld. CIT(A) dismissed the appeal, stating that the appellant failed to furnish Form No. 67 and relevant documents before filing the original return as required by Rule 128 of the Income Tax Rule. The Ld. CIT(A) emphasized that the appellant's failure to comply with Rule 128 rendered them ineligible for the FTC claimed. The appellant contended that all necessary details were available and requested a remand for reconsideration. The Tribunal noted that the disallowance was due to non-availability of evidence as per Rule 128. As the appellant had now submitted all required details, the Tribunal remitted the issue back to the Ld. CIT(A) for a detailed reconsideration and directed a fresh order to be passed on merits, ensuring the appellant is given a proper opportunity to be heard.

Issue 2: Consideration of the delay in filing the appeal due to the COVID-19 second wave:

The appellant raised a concern regarding a 31-day delay in filing the appeal, attributing it to the withdrawal of the limitation period extension due to the COVID-19 second wave by the Hon'ble Supreme Court. The Ld. AR argued that the limitation period should start from the date of withdrawal, i.e., 03.10.2021. The Ld. DR did not contest this submission. The Tribunal, considering the Supreme Court's order excluding the limitation period expiring between 15.03.2021 and 02.10.2021, concluded that the appeal was not belatedly filed. Therefore, the appeal was deemed to be within the limitation period.

In conclusion, the Tribunal allowed the appeal for statistical purposes, remanding the issue of FTC disallowance back to the Ld. CIT(A) for a detailed reconsideration in light of the appellant's submission of all necessary details. The Tribunal also clarified the treatment of the appeal filing timeline in response to the COVID-19 second wave-related limitation period extension withdrawal.