2023 (3) TMI 1467 - AT - Income Tax

FTC allowed under Section 90 despite delayed Form 67 filing under Rule 128

Keval Niraj Hutheesing Versus ITO, Ward-3 (3) (1), Ahmedabad

Keval Niraj Hutheesing Versus ITO, Ward-3 (3) (1), Ahmedabad - TMI Issues involved:The appeal challenges the order passed by the Ld. CIT(Appeals) at the National Faceless Appeal Centre (NFAC), Delhi for A.Y. 2019-20 regarding the disallowance of foreign tax credit. The issues raised by the assessee include lack of opportunity to be heard, failure to follow principles of natural justice, errors in adjudicating grounds, and non-compliance with Income Tax Rules.Details of the Judgment:1. Lack of Opportunity and Natural Justice:The assessee, an individual working in the United Kingdom, claimed relief for taxes paid in the UK as per Section 90 of the Act and Article 24 of the DTAA between India and UK. The Assessing Officer did not grant foreign tax credit, and the CIT(A) dismissed the appeal without providing an opportunity to be heard. The Ld. A.R. argued that the failure to grant the credit disregarded the fact that foreign income had already been taxed in the UK and should not be taxed again in India.2. Compliance with Income Tax Rules:The CIT(A) cited non-compliance with Rule 128(8)(ii) and 128(9) of the Income Tax Rules as grounds for disallowing the foreign tax credit. However, the Ld. A.R. contended that these rules should not override the right to claim the credit under the tax treaty, emphasizing that procedural laws should not control the claim of FTC.3. Precedents and Legal Interpretations:The Ld. A.R. referenced various decisions to support the claim for foreign tax credit, highlighting cases such as Sanjay Patil v. The Assessing Officer and Vinodkumar Lakshmipathi v. CIT(A) NFAC. The Tribunal considered the overriding nature of the DTAA provisions and the principle that procedural laws should be subservient to justice.4. Tribunal's Decision:After considering the arguments, the Tribunal held that the issue was not debatable, and there was only one view possible regarding the disallowance of FTC. It emphasized that the DTAA supersedes the Act and rules, directing the Assessing Officer to grant credit for foreign tax as per Form 67 filed by the assessee before the appeal to the CIT(A).5. Outcome:The appeal was partly allowed for statistical purposes, with the Tribunal ruling in favor of the assessee's right to claim the foreign tax credit based on the provisions of the DTAA and the non-mandatory nature of certain procedural requirements under the Income Tax Rules.This judgment highlights the importance of procedural compliance, principles of natural justice, and the overriding effect of tax treaties in determining the eligibility for foreign tax credit under the Income Tax Act.