2024 (11) TMI 23 - AT - Income Tax

Denial of Foreign tax credit - Form 67 was filed beyond due date - HELD THAT -Similar issue has been decided by coordinate Bench of the Tribunal 2024 (3) TMI 468 - ITAT BANGALORE we agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing of Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. The issue was not debatable and there was only one view possible on the issue which is the view set out above. The issue in the proceedings u/s. 154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s. 154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee's application u/s. 154 of the Act was not on the ground that the issue was debatable but on merits - We direct the AO to give credit for foreign tax as per Form 67 dated 05.04.2021 filed by the assessee prior to the filing of the appeal before the CIT(A) after due verification.

Summary

Issues:
Disallowance of foreign tax credit under section 143(1) of the Income Tax Act 1961 for non-filing of Form 67 within the due date.

Analysis:
The appeal was filed against the order of the CIT(Appeals) upholding the disallowance of foreign tax credit (FTC) by the Centralized Processing Centre (CPC) under section 143(1) of the Income Tax Act 1961. The appellant claimed FTC of INR 7,05,587 against the federal taxes paid in the USA on doubly taxed USA sourced income of INR 40,86,983 under section 90(2) of the Act, read with Article 25 of the India-USA Double Taxation Avoidance Agreement (DTAA).

The appellant, a resident as per the Act and DTAA provisions, filed the return of income late and submitted Form 67 after the due date. The FAA dismissed the appeal noting the delay in filing Form 67. The appellant argued that the filing of Form 67 is a procedural requirement and relied on previous Tribunal decisions to support their case.

The Tribunal considered the arguments and cited previous decisions where it was held that the requirement of filing Form 67 within the due date is directory, not mandatory. The Tribunal emphasized that procedural laws should not control the claim of FTC and that the DTAA provisions override the Act to benefit the taxpayer. The Tribunal directed the AO to grant FTC after verifying Form 67, allowing the appeal for statistical purposes.

In conclusion, the Tribunal ruled in favor of the appellant, directing the AO to grant the foreign tax credit after verifying Form 67, based on the principles that procedural laws are subservient to justice and DTAA provisions take precedence over domestic laws for the benefit of the taxpayer.