2022 (9) TMI 926 - AT - Income Tax

Tribunal Grants Relief for Foreign Tax Credit, Overrides Procedural Delay in Filing, Upholds Taxpayer's Substantive Rights.

Shri Ritesh Kumar Garg Versus The Income Tax Officer, Ward 4 (2), Jaipur

Shri Ritesh Kumar Garg Versus The Income Tax Officer, Ward 4 (2), Jaipur - TMI Issues Involved:1. Disallowance of Foreign Tax Credit (FTC) under section 90 of the Income Tax Act, 1961.2. Procedural compliance regarding the filing of Form 67 within the stipulated time.Issue-wise Detailed Analysis:1. Disallowance of Foreign Tax Credit (FTC) under section 90 of the Income Tax Act, 1961:The main issue in this appeal is the disallowance of FTC amounting to Rs. 1,67,300/- under section 90 of the Income Tax Act, 1961. The assessee, a salaried individual employed with M/s. Infosys Limited, was posted in Finland and paid taxes there. The assessee filed Form 67 online on 01.01.2020 to claim relief under section 90, but the claim was denied by the Assessing Officer (AO) and subsequently upheld by the CIT (A) on the grounds that Form 67 was not filed within the due date stipulated under Rule 128(9).2. Procedural compliance regarding the filing of Form 67 within the stipulated time:The CIT (A) confirmed the disallowance based on the failure to submit Form 67 within the prescribed time limit. The CIT (A) stated: 'Since the appellant has failed to submit Form 67 within the stipulated time limit, the AO while passing the intimation order disallowed the claim of Foreign Tax Credit u/s. 90 of the Act.'The assessee argued that the disallowance of FTC is bad in law, emphasizing that neither section 90 nor the Double Taxation Avoidance Agreement (DTAA) with Finland mandates disallowance for non-compliance with procedural requirements. The assessee cited that FTC is a vested right under Article 22(2) of the DTAA read with section 90, which cannot be disallowed for procedural lapses.Key Arguments and Legal Precedents:- The assessee contended that Rule 128 is procedural and not mandatory. The rule requires Form 67 to be filed on or before the due date of filing the return of income under section 139(1). However, the rule does not explicitly state that FTC would be denied if Form 67 is filed late.- The assessee relied on the Supreme Court decisions in Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner and Sambhaji & Ors. v. Gangabai & Ors., which held that procedural requirements should not override substantive rights.- The Bangalore Tribunal in Brinda Rama Krishna vs. ITO and 42 Hertz Software India (P) Ltd vs. ACIT allowed FTC relief even when Form 67 was filed late, emphasizing that procedural requirements should not negate substantive rights.Tribunal's Findings:The Tribunal noted that the assessee is entitled to claim relief under section 90, but the disallowance was confirmed solely due to the late filing of Form 67. The Tribunal highlighted that neither section 90 nor the DTAA specifies that FTC should be disallowed for procedural non-compliance. The Tribunal emphasized that procedural rules should aid in justice and not act as a barrier.The Tribunal also observed that Form 67 was available with the AO at the time of passing the intimation order under section 143(1). The Tribunal disagreed with the Visakhapatnam Bench's decision in Muralikrishna Vaddi vs. ACIT/DCIT, instead aligning with the Bangalore Tribunal's decisions in Brinda Rama Krishna and 42 Hertz Software India Pvt. Ltd.Conclusion:The Tribunal concluded that the assessee is entitled to FTC relief under section 90 of the Act. The AO was directed to allow the relief of Rs. 1,67,300/- towards FTC. The appeal of the assessee was allowed, and the order was pronounced in the open court on 15/09/2022.