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TMI Blog2023 (6) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... ned AO has erred both on facts and in law in making the disallowance of Rs. 35,02,850/- on account of foreign tax credit claimed by the assessee in respect of taxes paid in the USA and availed the relief from the double taxation as per the treaty between India and USA. (ii) That the above said disallowance has been made despite the submissions and explanation along with the evidences brought on record justifying the claims made by the assessee. (iii) That the above disallowance has been made ignoring the settled position of law that the foreign taxes paid by the assessee, shall be allowed as a credit against the Indian Tax, payable by a resident Indian to give him relief from double taxation on the same income. 4. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in charging the interest under section 234A, 2348 and 234C of the Income Tax Act. 5. That the appellant craves leave to add, amend or alter any of the grounds of appeal." 3. Facts giving rise to the present appeal are that in this case, the assessee filed its return of income electronically in ITR-3 on 31.08.2018, disclosing total income of INR 1,08,66,510/-. The case wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n filing of Form 67 by the assessee as required under Rule 128 of the Income Tax Rules, 1962. We would like to reproduce the Rule 128 of the Income Tax Rules, 1962 (Rules) which provides the provisions related with FTC and reads thus: "Foreign Tax Credit. 128. (1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule: Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India." One of the requirements of Rule 128 for claiming FTC is provided by Rule 128 (8) & (9) of the Rules and the same reads thus: "(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:-- (i) a statement of income from the country or spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to furnish the certificates of statements referred to in rules 128(8)(ii). Thus, the assessee failed to fulfill both the conditions as stated above for allowance of his foreign tax credit.". On the basis of above observation, the Ld A.O/NF AC has made decision in the impugned order at page No.10 in last para that:- "Thus, the provisions of Rule-128 of the Rule can not be ignored or relaxed in the case of the assessee relating to his claim of foreign tax credit. Since the assessee failed to fulfill the conditions as laid down in Rule-128 of I.T. Rules, 1962 for allowance of foreign tax credit, the credit of foreign tax claimed by the assessee u/s 90 of the Act of Rs. 35,02,850/- is hereby disallowed". Aggrieved by the order of Ld. A.O/NFAC, the assessee filed an appeal before Honorable NFAC/CIT(A), who upheld the order of Ld. NFAC/A.O vide their order dated 17.06.2022 and passed the impugned order and made decision at page no. 15 in para 3 which is reproduced as under:- "After considering the facts and evidence on record, it is seen that the appellant did not dispute the facts that he failed to satisfy the conditions laid down in Rule- 128 of IT. Rules, 1962 for foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters :- (ha) the procedure for granting of relief or deduction, as the case may be, of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, against the income-tax payable under this Act; " The Board has power to prescribe procedure to granting FTC. However, the Board does not have power to prescribe a condition or provide for disallowance of FTC. The procedure prescribed in Rule 128 should therefore be interpreted in this context. Rule 128 is therefore a procedural provision and not a mandatory provision. Further, we would like to submit that, Rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed u/s 139(1) of the Act. However, the Rule nowhere provides that if the said Form 67 is not filed within the above stated time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. It is therefore clear that in case the intention is to deny the FTC, either the Act or the Rules would have specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43 (Delhi) - PCIT, Kanpur vs Surya Merchants Ltd [2016] 72 taxmann.com 16 (Allahabad) - CIT, Central Circle vs American Data Solutions India (P) Ltd [2014] 45 taxmann.com 379 (Karnataka) - CIT-II vs Mantee Consultants (P.) Ltd [2009] 178 Taxman 429 (Delhi) - CIT vs ACE Multitaxes Systems (p.) Ltd [2009] 317 ITR 207 (Karnataka). We submit that as per the provisions of section 90(2) of the Act, where the Central Government of India has entered into a DTAA, the provisions of the Act would apply to the extent they are more beneficial to a taxpayer. Therefore, the provisions of DTAA override the provisions of the Act, to the extent they are beneficial to the assessee. Reliance in this regard is placed on the following cases and circulars: - Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) - CIT v Eli Lily & Co (India) P Ltd (2009) 178 Taxman 505 (SC) - GE India Technology Centre P Ltd v CIT (2010) 193 Taxman 234 (SC) - Engineering Analysis Centre of Excellence P Ltd v CIT (2021) 125 taxmann.com 42 (SC) (Pg 106-109 of PB 2-Para 25 & 26) - CBDT Circular No 333 dated 2/4/82 137 ITR (St.) We submit that when there is no condition prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner (1992 Supp (1) Supreme Court 21) & Sambhaji and Others vs. Gangabai and others [2008] 17 SCC 117 (SC):- "The Hon'ble Apex Court had laid down the proposition that procedural law should not be construed as mandatory and should only aid the claim of substantive right". Prayer:- Therefore, when once the authenticity, veracity and genuineness of the claim of the assessee, in respect of his foreign tax credit, has been established by him, by production of the corresponding documentary evidences in the form of tax payment certificates, and Articles 25 in the applicable DTAA between India and USA, read with section 90 of the Act, compulsorily mandates for the providing of benefit of such foreign tax credit, while filing return of Income in India, then merely due to a procedural lapse of filing of belated form 67, the assessee must not be denied and deprived of his lawful and substantive claim of his foreign tax credit. It is prayed before your honorable bench to allow the Foreign Tax Credit relief u/s 90 of the Act available to the assessee or as may feel fit in the natural justice." 7. On the other hand, Ld. CIT DR opposed the submissions of the assessee and supported ..... X X X X Extracts X X X X X X X X Extracts X X X X
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