2022 (9) TMI 694 - AT - Income Tax

ITAT Chennai Partially Allows Appeals, Directs Tax Credit Verification

The Appellate Tribunal ITAT Chennai partially allowed the appeals filed by the assessees against the orders of the Commissioner of Income Tax (Appeals). ... Foreign tax credit - Form No. 67 - directory requirement - Rule 128(9) - filing requirement for foreign tax credit - double taxation avoidance agreement overriding domestic rules - entitlement to credit where income offered to tax and tax paidForeign tax credit - Form No. 67 - directory requirement - Rule 128(9) - filing requirement for foreign tax credit - Whether belated filing of Form No. 67 disentitles the assessee to foreign tax credit - HELD THAT: - The Tribunal examined whether denial of foreign tax credit (FTC) on account of belated filing of Form No. 67 is permissible. The Tribunal observed that the assessee had offered the relevant foreign income to tax in India and tax in respect thereof had been paid. Relying on co ordinate decisions, the Tribunal held that Rule 128(9) does not mandate denial of FTC where Form No. 67 is filed belatedly and that filing of Form No. 67 is a directory requirement. The Tribunal further noted that DTAA provisions operate to allow credit and cannot be negated by contrary rule level requirements. Applying these principles to the facts, the Tribunal concluded that FTC is available to the assessee despite delayed filing of Form No. 67 and that the CPC/CIT(A) should not have denied credit solely on that ground. [Paras 7, 8]Belated filing of Form No. 67 does not automatically disentitle the assessee to foreign tax credit; FTC is allowable where the income was offered to tax and tax paid, and Rule 128(9) is directory.Entitlement to credit where income offered to tax and tax paid - verification of supporting documents - Whether the assessee should be granted FTC immediately or after verification of filed Form No. 67 - HELD THAT: - Although the Tribunal held that FTC is legally available despite belated filing, it recognized the need for administrative verification of the belatedly filed Form No. 67 and related documents. The Tribunal directed the learned CIT(A) to verify the forms submitted by the assessees and, if found in order, to allow the foreign tax credit. This direction requires the lower authority to examine the authenticity and sufficiency of the documentation before giving effect to the credit determined to be allowable in law. [Paras 9]Matter remanded to the CIT(A) to verify Form No. 67 and supporting documents and to allow FTC if the forms are found in order.Final Conclusion: Both appeals are partly allowed: Tribunal holds that FTC is not to be denied merely for belated filing of Form No. 67 where the income was offered to tax and tax paid; the matter is remanded to the CIT(A) to verify the belatedly filed Form No. 67 and related documents and to grant credit if the verification is satisfactory. Issues:- Appeal against orders of Commissioner of Income Tax (Appeals)- Disallowance of relief claimed under section 90/90A of the Income Tax Act- Denial of foreign tax credit (FTC) by the Assessing Officer- Non-filing of mandatory Form 67- Dispute regarding payment of FTC by the assessee or employerAnalysis:1. Appeal against Commissioner of Income Tax (Appeals) Orders:The appeals before the Appellate Tribunal ITAT Chennai arose from orders of the Commissioner of Income Tax (Appeals) for different assessment years. The Tribunal consolidated the appeals as the facts and issues were common for the sake of convenience.2. Disallowance of Relief Claimed under Section 90/90A:The appellant assessees raised various grounds of appeal, challenging the orders of the Commissioner of Income Tax (Appeals). They contended that the orders were bad, erroneous in law, and against the principles of natural justice. Specifically, they disputed the confirmation of penalties for 'concealment of income' instead of 'furnishing inaccurate particulars of income.' The Tribunal considered these grounds during the hearing.3. Denial of Foreign Tax Credit (FTC):In one case, the appellant's claim for foreign tax credit (FTC) was denied by the Assessing Officer due to non-compliance with Rule 128 of the Income Tax Rules. The Commissioner of Income Tax (Appeals) upheld this denial, stating that the necessary evidence for claiming FTC was not filed within the specified timeline. The Tribunal reviewed this decision during the hearing.4. Non-filing of Mandatory Form 67:Another issue involved the non-filing of mandatory Form 67 by the appellants within the due date for filing returns under section 139(1) of the Income Tax Act. The Commissioner of Income Tax (Appeals) disallowed the claim for tax credit based on this non-compliance. The Tribunal examined this aspect during the proceedings.5. Dispute Regarding Payment of FTC by Assessee or Employer:Regarding the dispute over the payment of FTC by the assessee or the employer, the Tribunal noted that the FTC had been offered by the assessee as perquisites in the gross total income, and tax had been paid accordingly. The Tribunal held that once the income had been included in the tax return and tax paid on it, the corresponding credit should be available. Additionally, the Tribunal considered the filing of Form 67 as a directory requirement rather than mandatory, citing precedents from other Tribunals.6. Decision and Order:After hearing the arguments and reviewing the facts of the cases, the Tribunal partially allowed the appeals filed by the assessees. It directed the Commissioner of Income Tax (Appeals) to verify the belatedly filed Form 67 and allow tax credit if found in order. The order was pronounced in court on 26th August 2022 at Chennai.This detailed analysis covers the key issues raised in the legal judgment delivered by the Appellate Tribunal ITAT Chennai, providing a comprehensive overview of the facts, arguments, and decisions made in each case.