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TMI Blog2025 (3) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for not allowing the credit for FTC. Assessee appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... e showing total income of Rs. 75, 54, 930/- on 29.03.2019 which was processed on 11.06.2020 with due demand. The credit for foreign tax (FTC) paid in USA was not allowed against which the assessee filed a rectification application on 03.10.2020 which was rejected on 05.10.2020. Aggrieved with the demand of Rs. 20, 48, 260/-, the assessee filed an appeal before the Ld. CIT(A). It was stated that the Ld. AO sent a communication of proposed adjustment u/s 143(1)(a) of the Act on 13.03.2020 which related to Schedule VI-A and disallowance of carry forward of current year's losses and there was no intimation of any other disallowance of TDS credit of Rs. 14, 35, 797/- paid in USA as per DTAA u/s 90/90A, but on 11.06.2020, the Ld. AO raised demand of Rs. 20, 48, 260/- by not providing credit of Rs. 14, 35, 797/- paid in USA. It was submitted that the Ld. AO could not bring any material on record to hold why TDS credit of Rs. 14, 35, 797/- paid in USA was not allowed and it was stated that the CBDT had also issued an office memorandum on 17.11.2014 stating that frivolous additions or high-pitched assessments without proper basis should not be made. The assessee also filed written submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 order dated 02.12.2024 and M/s. 42 Hertz Software India Pvt. Ltd. vs ACIT in ITA No. 29/BANG/2021 order dated 07.03.2022 in support of the claim that the credit for FTC was to be allowed. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld. 5. We have gone through the submissions made and also considered the facts of the case. Similar issue arose in the case of Jaspal Singh Bindra vs. DCIT in ITA No. 1826/KOL/2024 order dated 19.11.2024 in which the Coordinate Bench (in which one of us was a member) has held as under: "7. Similar issue arose in the case of Sukhdev Sen Vs. ACIT, Circle -1, Kolkata (ITA No. 78/Kol/2014, dated 26.03.2024). The relevant extract of the aforesaid order is as under: "7. 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 assessee, being a resident shall be allowed 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 lax has been offered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit would be disallowed if the assessee does not file Form No. 67 within the due date prescribed under section 139(1) of the Act. We further note that Filing of Form No. 67 is a procedural/directory requirement and is not a mandatory requirement and violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC. In support of the claim, the assessee has relied upon several decisions including the following decision: i. CIT vs. G.M. Knitting Industries (P) Ltd. 71 Tuxmann.com 35(SC) ii. Brinda Ramakrishna us. IPO 193 ITD 840 (Bang) iii. 42 Hertz Software India Pvt. Ltd vs Asst. CIT. Ita No. 29. Hang/2001 iv. Duraiswamy Kumaraswamy vs. PCIT, W.P No.5834 of 2022 11. Hon'ble Supreme Court, in the case of Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, [1992 Supp (1) Supreme Court Cases 21) in respect of compliance with the procedural requirements have observed that: "The mere fact that it is statutory does not matter one way of that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e back to the Ld.AO to consider the claim of assessee in accordance with law, based on the verification carried out in respect of the supporting documents filed by assessee. 14. In Vikash Daga Vs ACIT Circle-3 (1) Gurgaon ITA No.2536/Del/2022, the ITAT DELHI BENCH 'H', NEW DELHI vide order dated 14/06/2023 have held that: 8. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assessee holds a foreign tax credit certificate for Rs. 1887114/- In our considered opinion filing of form 67 is a procedural / directory requirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantive right of claiming the credit of FTC. We accordingly direct the AO to allow the credit of FTC and hold that rule 128(9) of the Rules 3 does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory het directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. 9. In the result, the appeal filed by the assessee is allowed. 15. Similarly, in the case of Ashish Agrawal Vs. Income Tax Officer, Ward-12(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical to the facts of the case of the assessee and the decision is squarely applicable to the facts of the case of the assessee. In that case, the petitioner was resident of India and had filed Indian ITR and claimed benefit of FTC u/s 90/91 of the Act row. Article 24 of the India-Kenya DTAA. During the year, he had income of both Kenya and India but while filing the Indian ITR for the impugned assessment year 2019-20, the Form No. 67 prescribed in rule 128 of the rules for claiming FTC was inadvertently not uploaded along with the ITK which was uploaded on 02.02.2021 The return was processed on 26.03.2021, however, the credit of FTC was not given effect to and the request made to the CPC to give effect to the FTC was not accepted and intimation along with notices of demand was received. The assessee also could not succeed with the rectification application filed and approached the CIT u/s 264 of the Act and at the same time filed a writ petition before the Hon'ble Madras High Court. It was stated by the respondent- department that rule 128 is mandatory and cannot be considered as directory in nature. The petitioner referred to the judgment of the Hon'ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file Form No. 67 within the prescribed time limit as per the provisions of rule 128(9) of the Income-tax rules, 1962, as it stood during the year under consideration, will not preclude the assessee from claiming the benefit of the foreign tax credit in respect of taxes paid outside India. Therefore, the claim of the assessee is allowed and the Assessing Officer is directed to give benefit of foreign tax credit in respect of tax paid outside India by the assessee in accordance with law and the DTAA between India and the USA. Accordingly, grounds no. 2, 3, 4 of the appeal are allowed." 6. Thus, the claim of FTC is allowable to the assessee on the facts of the case as Form No. 67 was filed along with the return of income and the filing of the Form is held to be directory and not mandatory in nature and the provisions of DTAA override the provisions of the Income Tax Act, 1961. Further, the relevant extract of Article 25 of the AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION OF INCOME WITH USA (DTAA) issued vide Notification: No. GSR 992(E), dated 20-12-1990, which is also discussed in the case of Sukhdev Sen Vs. ACIT, Circle-1, Kolkata (ITA No. 78/Kol/2014, dated 26.03.2024) relied upon i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be deemed to arise in the first-mentioned State. Notwithstanding the preceding sentence, the determination of the source of income for purposes of this article shall be subject to such source rules in the domestic laws of the Contracting States as apply for the purpose of limiting the foreign tax credit. The preceding sentence shall not apply with respect to income dealt with in article 12 (Royalties and Fees for Included Services). The rules of this paragraph shall not apply in determining credits against United States tax for foreign taxes other than the taxes referred to in paragraphs 1(b) and 2 of article 2 (Taxes Covered)." 7. Since the provision of DTAA override the provision of Section 90 of the Act as they are more beneficial to the assessee, in view of judicial pronouncements in this regard and since Rule 128(a) does not preclude the assessee from claiming credit for FTC in case of delay in filing the required Form No. 67 as the credit for FTC is a vested right of the assessee and since Form No. 67 was filed along with the return of income and was available at the time of processing the return of income u/s 143(1)(a) of the Act as contended by the assessee, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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