2023 (10) TMI 255 - AT - Income Tax

Relief u/s. 90 / 90A - foreign tax credit denied stating the return of income was not filed before the due date of filing of the return of income U/s. 139(1) - HELD THAT - Assessee has filed Form-67 on 28/10/2019 by claiming relief as per section 90 / 90A of the Act and as per DTAA with USA. It is also found that the return of income was filed for the AY 2019-20 on 29/10/2019. We also find force in the argument of the Ld. AR that the CBDT Notification dated 18/8/2022 can also be applied retrospectively which is stated by way of Explanatory Memorandum to the above said Notification. There is also no express provision in the India and USA DTAA that the foreign tax credit shall be denied on failure of submission of statement in Form-67 within the due date prescribed U/s. 139(1) - in the instant case, the assessee has filed Form-67 on or before the due date prescribed U/s. 139(4) of the Act and also before the filing of the return of income on 29/10/2019. Further, we also find that the Form-67 was filed before processing the return of income by the CPC U/s. 143(1) of the Act. We also find that the Ld. AO has also rejected the rectification petition filed by the assessee U/s. 154 of the Act citing the same reason that the assessee has not complied with the provisions of Rule 128(9) of the Rules in submission of Form-67 - We also noted that the due date for filing of original return of income u/s. 139(1) for the AY 2019- 20 is 31/8/2019 whereas the belated return U/s. 139(4) of the Act can also be filed on or before 31/3/2020. CBDT Notification also in its Explanatory Memorandum states that the amendment even though has come into force on 1/4/2022, it can also be applied retrospectively if any person is being adversely affected. In the instant case, the assessee has paid foreign tax credit in USA and has filed his return of income U/s. 139(4) - we consider it deemed to be fit that the CBDT Notification can be applied retrospectively which is being a beneficial provision to the assessee. In support of this view, we rely on the decision of the Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd 1973 (1) TMI 1 - SUPREME COURT wherein their Lordships have held that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted . Revenue appeal dismissed.

Summary

Issues:
The main issue in this case is the denial of foreign tax credit by the Ld. CIT(A)-NFAC due to the non-adherence to the filing of Form-67 as per Rule 128(9) by the assessee.

Facts:
The individual Non-Resident Indian assessee filed a return of income admitting a total income. The CPC disallowed the claim of relief U/s. 90/90A of the Act regarding foreign tax credit, leading to an addition under income from other sources. The Ld. AO disallowed the foreign tax credit, citing non-filing of the return before the due date. The Ld. CIT(A)-NFAC allowed the appeal based on a CBDT Notification and judicial decisions. The Revenue appealed against this order.

Arguments:
The Revenue argued that filing Form-67 is mandatory, not procedural, and relief should not be granted without it. The Ld. AR contended that Form-67 filing is procedural, not mandatory, and cited the CBDT Notification allowing for retrospective application. The AR also relied on the DTAA between India and the USA for relief on Double Taxation, emphasizing that failure to file Form-67 should not deny foreign tax credit.

Judgment:
The Tribunal found that the assessee filed Form-67 before the due date prescribed under the Act and the return of income, as well as before processing by the CPC. The CBDT Notification was considered applicable retrospectively, benefiting the assessee. Referring to the principle of construing tax provisions favoring the assessee, the Tribunal dismissed the Revenue's appeal, upholding the order of the Ld. CIT(A)-NFAC. The appeal filed by the Revenue was dismissed, following the principles favoring the assessee.