2022 (12) TMI 357 - AT - Income Tax

Tribunal emphasizes merit over technicalities in foreign tax credit claim

Bhagwandas Tikamdas Khinani Versus Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Dehli

The Tribunal allowed the appeal, holding that the delay in filing Form no.67 should not bar the assessee from claiming foreign tax credit. Emphasizing the ... Denial of foreign tax credit u/s 90/90A due to delay in filing Form no.67 - taxpayer filed Form No.67, after the due date for filing the return of income u/s139(1) - HELD THAT:- We find that under Rule 128(9), as it stood during the year under consideration, provided that the statement in Form No.67, referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. Thus, during the year under consideration, the assessee was required to furnish Form No. 67 on or before the due date of filing the return of income under section 139(1) of the Act, as per the provisions of Rule 128(9). With effect from 01/04/2022, the time period for furnishing statement in Form No. 67 has been extended till the end of the assessment year in which the corresponding income has been offered/assessed to tax and the return of such assessment year has been furnished within the time specified under 139(1) or 139(4) of the Act. As in Anuj Bhagwati [2022 (9) TMI 1397 - ITAT MUMBAI] while deciding a similar issue held that section 90/91 of the Act has not been amended insofar as grant of foreign tax credit is concerned and Rules cannot override the Act and therefore filing of Form No. 67 is not mandatory but it is directory. Thus mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as they stood during the year under consideration, will not preclude the assessee from claiming the benefit of foreign tax credit in respect of tax paid outside India. Since in the present case, the claim of the assessee was denied on this technical aspect without going into the merits, therefore, we deem it appropriate to direct the jurisdictional Assessing Officer to decide the claim of the foreign tax credit on merits, after accepting the Form No. 67 and other related documents filed by the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes. Issues:1. Denial of foreign tax credit under section 90/90A of the Income Tax Act due to delay in filing Form no.67.Analysis:The appellant filed an appeal against the order passed by the Commissioner of Income Tax (Appeals) regarding the denial of foreign tax credit under section 90/90A of the Act due to a delay in filing Form no.67. The appellant claimed credit for foreign tax paid in the USA amounting to Rs. 1,82,192 for the assessment year 2020-21. The appellant filed the return of income after the extended due date and submitted Form no.67 along with relevant certificates on the same date. The Commissioner dismissed the appeal based on the late filing of Form no.67. The appellant contended that the provisions of section 90/91 are substantive and override Rule 128. The Tribunal noted that Rule 128(9) required filing Form no.67 before the due date of the return, but recent amendments extended the deadline to the end of the assessment year. The Tribunal referred to a similar case where the Tribunal held that a delay in filing Form no.67 does not preclude the assessee from claiming foreign tax credit. The Tribunal emphasized that Rules cannot override the Act and filing Form no.67 is directory, not mandatory. The Tribunal directed the Assessing Officer to decide the claim of foreign tax credit on merits after accepting the Form no.67 and related documents. The Tribunal allowed the appeal for statistical purposes, emphasizing that the denial of the claim based on a technicality without considering the merits was not appropriate.In conclusion, the Tribunal allowed the appeal, stating that the delay in filing Form no.67 should not prevent the assessee from claiming foreign tax credit. The Tribunal highlighted the importance of assessing the claim on its merits rather than dismissing it based on technicalities. The decision emphasized that Rules should not override substantive provisions of the Act and directed the Assessing Officer to reconsider the claim based on the documents submitted by the assessee.