Foreign tax credit and late-filing levy issues turned on timely original return filing and Form 67 submission before ITAT Mumbai.
Foreign tax credit under Article 24(2) of the India-UK DTAA read with section 90 and Rule 128 could not be denied where the original return and Form 67 were filed within the prescribed time; treating a later revised return as the operative filing was incorrect, so the denial was unsustainable. Depreciation claimed in the wrong schedule was rejected because the claim was improperly made and the underlying eligibility was not established, so the disallowance was upheld. Interest under section 234A could not be levied once the return was accepted as timely filed, and fee under section 234F was deleted on the same basis. Interest under sections 234B and 234C was left for recomputation in accordance with law.
Issues: (i) Whether foreign tax credit was wrongly denied on the ground that Form 67 was not filed within the due date despite the original return and Form 67 having been filed in time; (ii) Whether the depreciation claim was correctly disallowed as an incorrect claim in the wrong schedule of the return; (iii) Whether interest under section 234A was leviable when the return was filed within time; (iv) Whether interest under sections 234B and 234C and fee under section 234F were sustainable.
Issue (i): Whether foreign tax credit was wrongly denied on the ground that Form 67 was not filed within the due date despite the original return and Form 67 having been filed in time.
Analysis: The claim for foreign tax credit arose under Article 24(2) of the India-UK Double Taxation Avoidance Agreement read with section 90 of the Income-tax Act, 1961 and Rule 128 of the Income-tax Rules, 1962. The decisive fact was that the original return had been filed before the due date and Form 67 had also been filed along with that return. The lower authorities proceeded on the mistaken premise that only the revised return was relevant and ignored the original return and the accompanying Form 67.
Conclusion: The denial of foreign tax credit was unsustainable and relief was allowed in favour of the assessee.
Issue (ii): Whether the depreciation claim was correctly disallowed as an incorrect claim in the wrong schedule of the return.
Analysis: The depreciation amount was claimed in an incorrect column relating to business profits, while the claim itself related to a business condition not satisfied by the assessee. The return filing process requires correct disclosure in the proper field, and an incorrect claim made in the return can be rejected where the underlying eligibility is absent or the claim is improperly made.
Conclusion: The disallowance of depreciation was upheld and this issue was decided against the assessee.
Issue (iii): Whether interest under section 234A was leviable when the return was filed within time.
Analysis: Once the original return was accepted as having been filed within the prescribed time, the premise for charging interest for delay in filing did not survive. The levy under section 234A depended on late filing, which was not established on the correct factual matrix.
Conclusion: Interest under section 234A was deleted and the issue was decided in favour of the assessee.
Issue (iv): Whether interest under sections 234B and 234C and fee under section 234F were sustainable.
Analysis: The charging under sections 234B and 234C was treated as consequential and required recomputation in accordance with the correct outcome on the return filing position. The fee under section 234F could not survive once the return was found to have been filed within the due date.
Conclusion: The interest under sections 234B and 234C was left to be recomputed in accordance with law, and the fee under section 234F was deleted in favour of the assessee.
Final Conclusion: The appeal succeeded on the foreign tax credit, interest under section 234A, and fee under section 234F, while the depreciation disallowance was sustained and the issue of interest under sections 234B and 234C remained consequential.
Ratio Decidendi: Where an original return and Form 67 are filed within the prescribed time, foreign tax credit cannot be denied by treating a later revised return as the operative return; late-filing consequences do not arise on an incorrect factual assumption about the filing date.
TaxTMI 
AI Drafter ✕
TaxTMI 
