2023 (10) TMI 86 - AT - Income Tax

Condonation of delay - delay of 710 days in preferring the appeal before the learned CIT(A) and the reason attributed for the delay in filing the appeal to the pandemic - HELD THAT - As a matter of fact, though the learned DR does not concede to condone the delay, there is no denial of the fact that the Hon'ble Supreme Court in the Suo Motu proceedings in the case of 2022 (1) TMI 385 - SC ORDER held that in cases, where the limitation would have expired during the period between 15/03/2020 and 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022, and in the event of actual balance period of limitation remaining with effect from 01/03/2022 is greater than 90 days, that longer period shall apply. Since the limitation period is applicable to this appeal also, following the direction of Hon'ble Hon'ble Apex Court, we condone the delay. Disallowance of Foreign Tax Credit (FTC) - delay in filing Form 67 - HELD THAT - As decided in Union of India Vs. Azadi Bachao Andolan 2003 (10) TMI 5 - SUPREME COURT as reached a conclusion that since Rule 128(9) of the Rules does not provide for disallowance of FTC in the case of delay in filing Form 67 and such filing within the time allowed for filing the return of income under section 139(1) of the Act is only directory, since DTAA over rides the Act, and the Rules cannot be contrary to the Act. We find from Article 25(2)(a) of the DTAA that where a resident of India derives income which, in accordance with the provisions of the convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of the resident an amount equal to the income tax paid, paid in the United States, whether directly or by deduction. In view of this provision over riding the provisions of the Act, according to us, Rule 128(9) of the Rules has to be read down in conformity thereof. Rule 128(9) of the Rules cannot be read in isolation. Rules must be read in the context of the Act and the DTAA impacting the rights, liabilities and disabilities of the parties. In the case of Purushothama Reddy Vankireddy 2022 (12) TMI 742 - ITAT HYDERABAD also the Co-ordinate Bench of the Tribunal, in the similar circumstances, allowed the appeal of assessee for FTC claim. Decided in favour of assessee.

Summary

Issues:
1. Delay of 710 days in filing the appeal against the intimation under section 143(1) of the Income Tax Act, 1961.
2. Delay of 604 days in filing the rectification application and disallowance of Foreign Tax Credit (FTC) of Rs. 1,94,384/- paid by the assessee.

Delay in Filing Appeal:
The appellant, an Indian National employed with a company in the USA, filed the return of income claiming Foreign Tax Credit (FTC) for income taxed in both India and the USA. The Assessing Officer denied the FTC claimed, leading to a belated appeal by the appellant. The CIT(A) dismissed the appeal due to the delay of 710 days, citing lack of sufficient cause for the delay. However, the Tribunal, considering the pandemic-related limitations, condoned the delay and proceeded to adjudicate the appeal on its merits.

Foreign Tax Credit Disallowance:
The appellant's claim for FTC was denied by the Assessing Officer, leading to an appeal before the Tribunal. The appellant argued that filing Form 67 for FTC was a directory requirement, not mandatory, and relied on various precedents to support the condonation of the delay and allowance of the FTC claim. The Tribunal, in line with previous decisions, held that Rule 128(9) of the Rules cannot disallow FTC due to a delay in filing Form 67. The Tribunal emphasized that the DTAA provisions override the Act, allowing the deduction of income tax paid in the USA. Therefore, the Tribunal allowed the appeal, granting the FTC claim to the appellant.

Conclusion:
The Tribunal allowed the appeal of the appellant, condoning the delay in filing the appeal and granting the Foreign Tax Credit (FTC) claim of Rs. 1,94,384/-, emphasizing the precedence of DTAA provisions over domestic rules.