2022 (9) TMI 1397 - AT - Income Tax

Tribunal grants appeal on Foreign Tax Credit denial, emphasizes DTAA provisions

Anuj Bhagwati Versus Deputy Commissioner of Income Tax-Circle – 1 (1) (1), Mumbai

Anuj Bhagwati Versus Deputy Commissioner of Income Tax-Circle – 1 (1) (1), Mumbai - TMI Issues involved:Appeal against denial of Foreign Tax Credit under Section 90 of the Income Tax Act due to procedural non-compliance.Detailed Analysis:Issue 1: Denial of Foreign Tax Credit under Section 90The appellant raised grounds challenging the denial of relief under Section 90 of the Act amounting to Rs. 14,22,129 due to a procedural error in filing Form No. 67. The Assessing Officer (A.O.) and CIT(A) upheld the denial citing non-compliance with Rule 128 of the Income Tax Rules. The appellant contended that the DTAA should take precedence over domestic laws and that the delay in filing Form No. 67 should not result in denial of Foreign Tax Credit. The Tribunal referred to a previous decision where it was held that the requirement of filing Form No. 67 is directory, not mandatory, and that the DTAA overrides domestic laws. The Tribunal directed the AO to reconsider the claim based on supporting documents filed by the appellant.Issue 2: Application of Judicial PrecedentsThe Tribunal cited judicial precedents where it was established that the provisions of DTAA override domestic laws, emphasizing the right of the assessee to claim Foreign Tax Credit under the tax treaty. The Tribunal further clarified that the filing of Form No. 67 is not mandatory but a directory requirement. It rejected the Revenue's argument that the issue was debatable and confirmed that the DTAA prevails over domestic rules. The Tribunal allowed the appeal based on these interpretations and directed the CIT(A) to re-examine the issue.Issue 3: Restoration of Disputed IssueConsidering the facts, circumstances, and legal principles, the Tribunal concluded that there is no amendment in Section 90 of the Act regarding the claim of Foreign Tax Credit. It emphasized that the Rules cannot override the Act and reinstated the disputed issue to the CIT(A) for fresh adjudication. The Tribunal instructed the CIT(A) to consider the observations and judicial decisions, providing the appellant with a fair hearing and an opportunity to submit necessary information for the timely resolution of the appeal.Conclusion:The Tribunal allowed the appeals filed by the assessee for statistical purposes, emphasizing the importance of adhering to DTAA provisions and considering the procedural requirements for claiming Foreign Tax Credit under Section 90 of the Income Tax Act. The judgments highlighted the primacy of international agreements in tax matters and clarified the nature of procedural rules in such cases.