9911796707
TMI Blog2024 (11) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... he Form 67 during rectification process suffices as a procedural compliance to the claim of FTC. Moreover, the objective of the Article 23 of the DTAA and section 90 to mitigate double taxation which should not be compromised by procedural technicalities when substantive compliance is evident. We find that the assessee is entitled to FTC on foreign tax paid. Appeal of the assessee is allowed. - Shri Rajesh Kumar, Accountant Member and Shri Sonjoy Sarma, Judicial Member For the Appellant : Shri Puja Agarwal, A.R. For the Respondent : Shri Pradip Biswas, Addl. CIT- Sr. DR ORDER PER SONJOY SARMA, JUDICIAL MEMBER: The present appeal is filed by the assessee against the order dated 11.07.2024 of the National Faceless Appeal Centre [hereinafter referred to as CIT(A) ] passed u/s 250 of the Income Tax Act (hereinafter referred to as the Act ). 2. The assessee is a resident individual, who filed her return of income on 29.12.2021 for the financial year 2020-21 relevant to assessment year 2021-22 reporting a total income of Rs. 25,58,440/-. The assessee discharged her tax liability by way of tax deducted at source amounting to Rs. 2,80,028/-, self-assessment tax of Rs. 22,740/- and foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 09.01.2021 and she had submitted the Form No. 67 after receiving the communication from the e-filing team, Income Tax Department that the return of income was not accompanied by Form No. 67 as mandated by law. Subsequently, since the credit was not allowed, she filed a rectification application and Form No. 67 on 14.01.2022. The credit was not allowed since Form No. 67 was filed beyond the date for filing the return of income under section 139(1) of the Act. Two orders u/s 154 of the Act were passed on 11.07.2022 and 05.08.2022 but the credit for the claim of foreign taxes was not allowed. Similar issue also came up for consideration before the coordinate Bench of the Tribunal in the case of Ramakrishna Rao Chintalapudi Vs Income Tax Officer, Ward-2(3), Alipurduar in ITA No. 541/KOL/2024, Assessment Year: 2020-21, order dated 02.06.2024, C Bench, ITAT, Kolkata wherein it has been held as under: 9. The only issue in this case is non-allowance of the credit for the foreign tax paid in Bhutan. Before proceeding further, we would like to reproduce rule 128 of the Income-tax Rules, 1962 (the Rules) which relates with foreign tax credit as under: Foreign Tax Credit. 128. (1) An asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived by a resident of Bhutan is exempt from tax in Bhutan, Bhutan may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. 11. Thus, Section 90 of the Act read with Article 22(2) of the DTAA provides that tax paid in Bhutan shall be allowed as a credit against the tax payable in India but limited to the proportion of Indian tax. Neither section 90 nor the DTAA provides that FTC shall be disallowed for noncompliance with any procedural requirement. Foreign Tax Credit is an assessee s vested right as per Article 22(2) of the DTAA read with Section 90 and the same cannot be disallowed for non-compliance with procedural requirement that is prescribed in the rules. 12. Further, we would like to mention that rule 128(9) provides that Form No. 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 No. 67 is not filed within the required time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. It is therefore evident that if the intention of the legislature were to deny the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re India Pvt. Ltd. Vs the Assistant Commissioner of Income Tax, Circle 3 (1)(1), Bangalore, ITA No. 29/Bang/2021 ITAT, BANGALORE it is held that: 6. There is no dispute that the Assessee is entitled to claim FTC. On perusal of provisions of Rule 128 (8) (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view, this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms. Brinda Kumar Krishna vs.ITO in ITA no.454/Bang/2021 by order dated 17/11/2021. 7. It s a trite law that DTAA overrides the provisions of the Act and the Rules, as held by various High Courts, which has also been approved by Hon ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471. 8. We accordingly, hold that FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/evidences in support of its claim. We t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. In the case of Purushothama Reddy Vankireddy (supra) also the Co-ordinate Bench of the Tribunal, in the similar circumstances, allowed the appeal of assessee for FTC claim. Respectfully following the same, we are of the considered Page 6 of 8 ITA No. 337/Hyd/2023 opinion that the decisions relied upon by the assessee are applicable to the facts of the case and the grounds raised by the assessee are accordingly allowed. 14. In the result, appeal of the assessee is allowed. 18. We have also gone through the decision of the Hon ble Madras High Court in the case of Duraiswamy Kumaraswamy vs. PCIT (supra) and find that the facts are ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided 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. 13. Accordingly, the impugned order dated 25.01.2022 is set aside. While setting aside the impugned order, this Court remits the matter back to the respondent to make reassessment by taking into consideration of the FTC filed by the petitioner on 02.02.2021. The respondent is directed to give due credit to the Kenya income of the petitioner and pass the final assessment order. Further, it is made clear that the impugned order is set aside only to the extent of disallowing of FTC claim made by the petitioner and hence, the first respondent is directed to consider only on the aspect of rejection of FTC claim within a period of 8 weeks from the date of receipt of copy of this order. 19. Respectfully following the order of the Hon ble Madras High Court in the case of Duraiswamy Kumaraswamy vs. PCIT (supra) and concurring with the views held by the coordinate Benches of the Tribunal (supra), we hold that merely because the assessee could not file Form No. 67 within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed in the first instance against income-tax payable by the company in India, and as to the balance if any against surtax payable by it in India. 3. For the purposes of paragraph (2) of this article, the term Sri Lanka tax payable shall be deemed to include any amount which would have been payable as Sri Lanka tax for any year but for an exemption or reduction of tax granted for that year or any part thereof under : (a) any of the following provisions, that is to say sections 11, 16, 17, 18, 19, 20, 21, 22 and 85 of the Sri Lanka Inland Revenue Act No. 28 of 1979 so far as they were in force on, and have not been modified since, the date of the signature of this Convention, or have been modified only in minor respects so as not to affect their general character; or (b) any agreement entered into under section 17 of the Greater Colombo Economic Commission Law No. 4 of 1978; or (c) any other provisions which may subsequently be made granting an exemption or reduction of tax which is agreed by the competent authorities to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision of the Income-tax Act if the same are more beneficial to the assessee and there is no justification for not allowing the credit. Respectfully following the judicial pronouncements (supra), the AO is directed to allow the FTC in accordance with Article 24 of the DTAA between India Sri Lanka and as per law. Hence, Ground No. 7 is allowed. 6. On the other hand, the ld. DR argued that the assessee did not initially submit Form 67 with her return of income which is an essential condition for FTC claim. Therefore, the department acted correctly in disallowing the FTC to the assessee. 7. We, after reviewing the submissions made from both the parties and examining the facts on record, find that Article 23 of the India-Sri Lanka DTAA mandates that reliefs should be provided to avoid double taxation and FTCs should be granted when tax is paid in both the countries. Denying of FTC due to procedural delay in filing Form 67 goes against the DTAA s objectives. Section 90 allows relief in cases of double taxation. Although Rule 128(9) requires Form 67, the assessee s compliance within this rule during the rectification stage demonstrated a good faith or effort to fulfil procedural requir ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
