2022 (5) TMI 953 - AT - Income Tax

Tribunal orders Assessing Officer to review Foreign Tax Credit claim, emphasizing preservation of substantive rights

Sanjay Patil Versus The Assessing Officer, Circle-3 (2), Surat.

Sanjay Patil Versus The Assessing Officer, Circle-3 (2), Surat. - TMI Issues Involved:1. Adjustment in the Intimation under Section 143(1) regarding Foreign Tax Credit (FTC).2. Permissibility of non-grant of FTC as an adjustment under Section 143(1).Issue-Wise Detailed Analysis:1. Adjustment in the Intimation under Section 143(1) regarding Foreign Tax Credit (FTC):The primary issue revolves around the denial of FTC of Rs. 3,93,063 claimed by the assessee for taxes paid in Iraq. The assessee, an individual taxpayer, was employed with Shell India Markets Private Limited and later with Shell Gas Iraq B.V during the assessment year 2018-19. The assessee filed his original return of income under Section 139(1) and later a revised return under Section 139(5), claiming the FTC. However, the Centralized Processing Centre (CPC) did not grant the FTC in the intimation under Section 143(1).2. Permissibility of non-grant of FTC as an adjustment under Section 143(1):The assessee appealed against the denial of FTC, arguing that the non-filing of Form 67 within the due date for filing the original return should not disallow the FTC. The NFAC upheld the denial based on Rule 128 of the Income Tax Rules, which mandates filing Form 67 by the due date. The Tribunal examined the issue, noting that the Coordinate Bench of ITAT, Bangalore, in the case of Brinda Rama Krishna, had held that Rule 128(9) does not provide for disallowance of FTC due to delayed filing of Form 67. The Tribunal emphasized that filing Form 67 is directory, not mandatory, and that the DTAA overrides the provisions of the Act and Rules. Therefore, non-furnishing of Form 67 by the due date is not fatal to the FTC claim.Conclusion:The Tribunal, following the precedent set by the Coordinate Bench of ITAT, Bangalore, directed the Assessing Officer to examine the quantum of FTC claimed by the assessee and allow the FTC in accordance with the law. The appeal was allowed for statistical purposes, emphasizing that procedural delays should not extinguish substantive rights under the tax treaty. The order was pronounced on 18/05/2022, allowing the assessee's appeal for statistical purposes.