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2023 (3) TMI 719 - AT - Income TaxForeign Tax Credit (FTC) u/s 90 - Denial of due to late filing of Form 67 prescribed for eligibility of such credit under Rule 128 of the Income Tax Rules, 1962 - assessee contends that a combined reading of Section 90 of the Act read with Article 24(3)(a) of DTAA provides in no uncertain terms that Italian tax paid shall be allowed as credit against Indian Tax - HELD THAT - Co-ordinate Bench of Tribunal in the case of Ms. Brinda Ramakrishna 2022 (2) TMI 752 - ITAT BANGALORE clearly held that filing of Form 67 is a directory requirement and having regard to the position that DTAA overrides the provisions of the Act and Rule cannot be contrary to the Act, the assessee is fully entitled to the FTC. The Tribunal also observed that issue of allowability of FTC is not a debatable issue and only one view is possible and thus seeking rectification under Section 154 could be resorted by the assessee. We hold that claim of FTC does not get controlled solely by the delay in filing of Form 67 prescribed under Rule 128(9) of the Income Tax Rules. Hence, we set aside the action of the CIT(A) and direct the Assessing Officer to take cognizance of Form 67 so filed and grant FTC as may be entitled to the assessee in accordance with law. Appeal of the assessee is allowed.
Issues Involved:
The denial of Foreign Tax Credit (FTC) under Section 90 of the Income Tax Act due to late filing of Form 67 prescribed for eligibility of such credit under Rule 128 of the Income Tax Rules, 1962. Issue 1: Denial of Foreign Tax Credit (FTC) due to late filing of Form 67: The appeal was filed against the denial of FTC of Rs.1,52,602/- under Section 90 of the Act due to late filing of Form 67 as required by Rule 128 of the Income Tax Rules. The assessee, an individual and an ordinary resident of India, worked in Italy during the Assessment Year 2019-20. The salary earned in Italy was included in the return of income, and FTC was claimed through the Income Tax Return filed on 23.07.2019. However, Form 67 was not filed before the return of income as required. The prescribed Form 67 was later filed on 15.07.2021. Despite seeking rectification under Section 154 of the Act, the FTC was denied. The assessee argued that the denial of FTC based on non-compliance with procedural requirements is not justified as per Section 90 of the Act and Article 24 of the India-Italy Tax Treaty. Issue 2: Entitlement to Foreign Tax Credit despite belated compliance: The controversy revolved around whether the assessee is entitled to FTC against the salary earned in a foreign country even after belatedly meeting the requirements of Rule 128 of the Income Tax Rules. The assessee claimed that under Section 90 of the Act and Article 24 of the India-Italy Tax Treaty, she had a vested right to claim FTC. The provisions of the Act and the DTAA allow for credit towards foreign taxes paid on income earned abroad. The assessee contended that the denial of FTC based on procedural non-compliance is against the spirit of the tax treaty and the Act. The Tribunal, considering previous decisions, held that the delay in filing Form 67 should not solely control the claim of FTC, and directed the Assessing Officer to grant the FTC entitled to the assessee in accordance with the law. Separate Judgement: No separate judgment was delivered by the judges in this case.
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