2023 (1) TMI 1070 - AT - Income Tax

Non-grant of Foreign tax Credit - delay in filing of Form No. 67 - assessee is an individual who is a Resident and Ordinary Resident (ROR) of India - HELD THAT - As per Rule 128 of the I. T. Rules it is evident that the assessee has to file Form 67 on or before the due date of furnishing the return of income as per section 139(1) of the Act, which the statement specifies as mandatory and not directory as per the word shall used in the said provisions. It is evident that the assessee has filed Form 67 belatedly after the due date for filing of return u/s. 139(1) and, hence, the lower authority have rejected the claim of the assessee. We are inclined to peruse the decisions of the tribunal cited by the assessee in the case of Ms. Brinda Ramakrishna 2022 (2) TMI 752 - ITAT BANGALORE . On similar facts, the co-ordinate bench has considered the delay in filing of Form No. 67 as only a procedural defects and has also considered the decision of Mangalore Chemicals Fertilizers Ltd. 1991 (8) TMI 83 - SUPREME COURT and Sambhaji and Others vs. Gangabai and others 2008 (11) TMI 393 - SUPREME COURT which laid down the proposition that procedural law should not be construed as mandatory and should only aid the claim of substantive right. The said decision of the tribunal has also relied on various decisions, which held that provisions of DTAA override the provisions of the Act, as far as it is beneficial to the assessee. The Tribunal has held that delay in filing Form No. 67 should not by, in anyway, deny the claim of FTC enumerated in the DTAA and the intention of the legislation in the said case has to be construed in a manner which benefits the assessee. The A.O. is hereby directed to allow the FTC claim of the assessee and to grant refund in accordance with the law. Appeal of the assessee is allowed.

Summary

Issues:
1. Non-grant of Foreign tax relief
2. Interest under section 244A and refund
3. Confirmation of demand by the Learned AO

Analysis:

Issue 1: Non-grant of Foreign tax relief
The appellant challenged the order of the learned Commissioner of Income Tax (Appeals) regarding the non-granting of foreign tax relief amounting to Rs.26,718 as claimed in the revised Return of Income for A.Y. 2020-21. The appellant contended that the income of Rs.4,12,835 was doubly taxed, and taxes paid in Sri Lanka on this income should be allowed as relief under Article 23(2) of the India-Sri Lanka Tax Treaty. The Appellate Tribunal noted that the appellant filed Form No. 67 for claiming foreign tax relief after the due date for filing the return of income, which led to the rejection of the claim by the lower authorities. However, the Tribunal considered the delay in filing Form No. 67 as a procedural defect and held that provisions of Double Taxation Avoidance Agreement (DTAA) should override procedural requirements to benefit the assessee. Relying on previous decisions and the intention of legislation to benefit the assessee, the Tribunal directed the Assessing Officer to allow the foreign tax credit claim and grant the refund as per the law.

Issue 2: Interest under section 244A and refund
The appellant also raised concerns regarding the direction to grant a refund of Rs.21,250 along with interest under section 244A, which was not followed by the learned NFAC. The Tribunal observed discrepancies in the refund issued to the appellant and the total demand raised, which included the refund granted. The appellant had submitted Form No. 67 and a certificate of taxes paid in Sri Lanka to rectify the mistake of non-grant of foreign tax credit. The Tribunal, after considering the relevant rules and precedents, directed the Assessing Officer to grant the refund and interest under section 244A as claimed by the appellant.

Issue 3: Confirmation of demand by the Learned AO
The learned NFAC confirmed a demand of Rs.7,850 raised by the Learned AO on processing the revised return of the appellant. The Tribunal found that the rejection of the foreign tax credit claim by the lower authorities was based on the delayed filing of Form No. 67. However, the Tribunal held that the delay in filing the form should not disentitle the appellant from claiming foreign tax credit under the DTAA provisions. By following previous decisions and considering the legislative intent to benefit the assessee, the Tribunal allowed the appeal filed by the appellant, directing the Assessing Officer to allow the foreign tax credit claim and grant the refund accordingly.

In conclusion, the Appellate Tribunal allowed the appeal of the assessee, directing the Assessing Officer to grant the foreign tax credit claim, refund, and interest under section 244A as per the law and relevant provisions.