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TMI Blog2024 (12) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... FAC, Delhi (hereinafter referred to as the Ld. CIT(A) ] dated 02.07.2024 for the AY 2020-21. 2. Brief facts of the case of the assessee is that the assessee being an individual filed its return of income u/s 139 of the act for AY 2020-21 declaring total income of Rs. Nil. The aforesaid return was processed by CPC and made adjustment u/s 143(1) disallowing the claim of exemption under Article 23(4) and raised additional demand of Rs. 28,16,120/-. 3. The said order has been challenged before the Ld. CIT(A) wherein the appeal of the assessee has been dismissed by observing that the assessee filed Form No. 67 on 12.7.2018 which is beyond the time allowed in terms of Rule 128(9) of the IT Rules. Being aggrieved and dissatisfied, the present appeal has been preferred by the assessee before us. 4. The Ld. Counsel for the assessee challenges the impugned order of AO confirmed by the Ld. CIT(A) by stating that the Ld. CIT(A) has erred in not granting credit of foreign taxation paid and should have been duly allowed under Article 23 of the India-Netherland Double Taxation Avoidance Agreement (DTAA) read with Section 90 of the Act. He has also challenged the levying of additional interest u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules. So, the appellant has not confirmed to the conditions laid down by the provisions of Rule 128(8) and 128(9) of the IT Rules in order to be eligible to get foreign tax credit. 8. We find that the assessee has filed its original income tax return on 31.07.2017 u/s 139(1) of the act and Form no. 67 has been filed on 12.07.2018. The Ld. CIT(A) has dismissed the case of the assessee only on this ground that there was a delay in filing of form no. 67. We have perused the decision of Co-ordinate bench of Kolkata in the case of Anindya Sarka vs. ACIT, CPC in ITA No. 1345/Kol/2024 for AY 2020-21 dated 26.07.2024. The operative part is reproduced as under: 7. The Ld. DR supported the order of the Ld. CIT(A). We have gone through the rival contention and also examined the facts. It was submitted before the Ld. CIT(A) by the assessee that the rerun of income was filed on 25.12.2020 and on 26.12.2020 he had submitted the Form No. 67 after receiving the communication from the e-filing team, Income Tax Department on 25.12.2020 that the return of income was not accompanied by Form No. 67 as mandated by law. Subsequently, since the credit was not allowed, he filed rectification application an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Act. Therefore, non-furnishing of Form No.67 before the due date u/s 139(1) of the Act is not fatal to the claim for FTC. The findings of this Tribunal are reproduced below: 2. The Assessee is an individual and during the previous year relevant to AY 2018- 19 an ordinary resident in India. The Assessee worked with Ernst Young Australia from 20.11.2017 till 16.05.2019. Since her global income was taxable in India, the Assessee offered to tax salary income earned for services rendered in Australia for the period from December 2017 to March 2018 to tax in India. The Assessee claimed foreign tax credit ( FTC ) for taxes paid in Australia. 3. There is no dispute that the Assessee is entitled to claim FTC. Rule 128 of the Income Tax Rules, 1962 (Rules) provides for giving 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctification order dated 10.03.2021, the AO upheld the action on the ground that the Assessee has failed to furnish Form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act which is mandatory according to Rule 128(9) of the Rules. 6. On appeal by the Assessee, the CIT(A) vide Order dated 03.09.2021 confirmed the Order of AO. The CIT(A) held that the Assessee has not filed Form 67 before the time allowed under section 139(5) of the Act, and therefore Form 67 is nonest in law. The CIT(A) also held that provisions of Rule 128 are mandatory in nature. The CIT(A)rejected the contention of the Assessee that filing of Form 67 is a procedural requirement and noncompliance thereof does not disentitle the Assessee of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not, however, exceed that part of the income-tax (as computed before the deduction is given) which is attributable to the income which may be taxed in the United States 9. Thus, Section 90 of the Act read with Article 25(2)(a) of the DTAA provides that tax paid in USA 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 25[2](a) of the DNA road wat Section 90 and same cannot be disallowed for noncompliance with procedural requirement that is prescribed in the rules. 10. 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 foreign tax credit, either the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 Hertz Software 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 FTU 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. Brindu Kumar Krishna us. 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 im (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 suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident of India derives income which, in accordance with the provision of 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 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 Vankıreddy (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 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. 16. We have also gone through the decision of the Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy us. PCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the PTC 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 wade only to the extent of disallowing of FTC clam made by the petitioner und hence, the first respondent is directed to consider only on the aspect of rejection of FTC clam within a period of 8 weeks from the date of receipt of copy of this order 17. 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 bec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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