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TMI Blog2024 (7) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... ided the due credit to the FTC of the petitioner. However, the FTC was rejected by the Respondent, which is not proper and the same is not in accordance with law. Decided in favour of assessee. - Shri Waseem Ahmed, Accountant Member And Shri Soundararajan K, Judicial Member For the Assessee : Shri. B. R. Sudheendra, CA For the Revenue : Shri. Subramanian S, JCIT(DR)(ITAT), Bengaluru ORDER PER SOUNDARARAJAN K, JUDICIAL MEMBER : This appeal by the assessee is directed against the order passed by the NFAC under section 250 of the Income Tax Act, 1961 (hereinafter called the Act ) dated 30.12.2023, in respect of Assessment Year 2021-22. 2. Brief facts of the case are that assessee is a company engaged in the business of Semiconductor Test Engineering solutions. During the Assessment Year 2021-22, assessee filed its original return of income on 10.03.2022. Thereafter, the assessee filed revised return on 28.03.2022 and claimed the Foreign Tax Credit (FTC) earned for the income earned by them outside India. The return was processed under section 143(1) of the Act and intimation was sent on 13.11.2022 in which the CPC had not granted the FTC claimed by the assessee for the reason that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(1) is bad in law and liable to be deleted. 3. Ground relating to denial of foreign tax credit under section 90/90A 3.1 The learned CPC and the CIT(A) have erred in denying the appellant the foreign tax credit of Rs. 50,11,531 claimed under section 90/90A of the Act merely on delay in filing of Form 67. 3.2 The learned CPC and the CIT(A) have erred in not appreciating the time limit prescribed under Rule 128 of the Income Tax Rules, 1962 is directory in nature and not mandatory. 3.3 The learned CPC and the CIT(A) have erred in not appreciating that rule 128 does not provide for disallowance of foreign tax credit on account of non filing or late filing of prescribed form i.e., Form No 67 3.4 The learned CPC and the CIT(A) have erred in not following the judgment of the Madras High Court in the case of Duraiswamy Kumaraswamy in WP No. 5834 of 2022 and WMP No. 5925 and 5927 of 2022. The learned CPC and CIT(A) also erred in not following the judgements of the ITAT, Bangalore bench in several cases. 3.5 On facts and circumstances of the case and law applicable, the foreign tax credit claimed in the revised return is to be accepted and the variations thereto is to be deleted fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, 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 specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein; (ii) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before the Tribunal. The learned counsel for the Assessee submitted that disallowance of FTC is bad in law. He submitted that Section 90 of the Act provides that Government of India can enter into Agreement with other countries for granting relief in respect of income on which taxes are paid in country outside India and such income is also taxable in India. Article 24 of India Australia DTAA provides for credit for foreign taxes. Article 24(4)(a) is relevant in the present context. Same is extracted below: 4. In the case of India, double taxation shall be avoided as follows: (a) the amount of Australian tax paid under the laws of Australia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India in respect of income from sources within Australia which has been subjected to tax both in India and Australia shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax; It was submitted by him that section 90 of the Act read with Article 24(4)(a) provides that Australian tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that Filing of Form 67 is a procedural/directory requirement and is not a mandatory requirement. It was submitted that violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC. Reliance was placed on the decision of the Hon ble Supreme Court, in the case of Mangalore Chemicals Fertilizers Ltd. v. Deputy Commissioner, (1992 Supp (1) Supreme Court Cases 21) wherein it observed that: The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve. Further reliance was placed on the decision of the Hon ble Supreme Court, in the case of Sambhaji and Others v. Gangabai and Others, reported in (2008) 17 SCC 117, wherein it has been held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the issue was debatable and cannot be subject matter of decision in Sec.154 proceedings which are restricted in scope to mistakes apparent on the face of the record. 15. In his rejoinder, the learned counsel for the Assessee submitted that Form No.67 was available before the AO when the intimation u/s. 143(1) of the Act dated 28.5.2020 was passed. He pointed out that the AO or the CIT(A) did not dismiss the Assessee application for rectification u/s. 154 of the Act on the ground that the issue was debatable but rather the decision was given that the relevant rule was mandatory and hence non-furnishing of Form No.67 before the due date u/s. 139(1) of the Act was fatal to the claim for FTC. 16. I have given a careful consideration to the rival submissions. I 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. I am of the view that the issue was not debatable and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before passing of the final assessment order. The filing of FTC in terms of Rule 128 is only directory in nature. The rule is only for implementation of the provisions of the Act and it will always be directory in nature. This is what the Hon ble Supreme Court had held in the above case when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of the assessment order. 12. Further, in the present case, the intimation under section 143 (1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC was rejected by the Respondent, which is not proper and the same is not in accordance with law. Therefore the impugned order is liable to be set aside. 7. In view of the above Judgement of the Hon ble Madras High Court cited supra and the order of the Co-ordinate Bench of the Tribunal, which are identical to the facts of the present case, we set aside the orders of the authorities below and allow the appeal filed by the assessee. 8. In the result, appeal filed by the assessee is allowed. Pronounced in the open court on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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