2023 (2) TMI 522 - AT - Income Tax

Tribunal orders Foreign Tax Credit despite late filing, emphasizes procedural vs. substantive rights

The Tribunal directed the Assessing Officer to grant the Foreign Tax Credit (FTC) to the assessee despite the late filing of Form 67, emphasizing that the ... Foreign tax credit - claim disallowed on the grounds that filing of form 67 within due date is a pre-condition for claiming foreign tax credit - HELD THAT:- After going through the entire submissions from the both the sides, as noticed that a similar issue has been decided by the coordinate bench of this Tribunal in the case of Vinodkumar Lakshmipathi [2022 (10) TMI 87 - ITAT BANGALORE] direct the AO to give foreign tax credit as per Form No.67 filed on 20.8.2020 before the ld. CIT after due verification and appeal is accordingly allowed for statistical purposes. Issues Involved:1. Disallowance of Foreign Tax Credit (FTC) due to late filing of Form 67.2. Whether filing of Form 67 is mandatory or directory.3. Applicability of Double Taxation Avoidance Agreement (DTAA) over the Income Tax Act and Rules.Detailed Analysis:1. Disallowance of Foreign Tax Credit (FTC) due to late filing of Form 67:The primary issue in these appeals was the disallowance of FTC claimed by the assessee due to the late filing of Form 67. The assessee filed the return of income on 28.09.2018 but did not submit Form 67 within the due date. Consequently, the Central Processing Centre (CPC) did not grant the FTC, raising a demand of Rs.2,49,030/-. The assessee's subsequent application for rectification under section 154 of the Income-tax Act, 1961 was also rejected. The appeal to the Commissioner of Income Tax (Appeals) [CIT(A)] was dismissed on the same grounds. The assessee then appealed to the Tribunal.2. Whether filing of Form 67 is mandatory or directory:The assessee argued that filing Form 67 is not mandatory but a directory requirement, citing the Tribunal's decision in the case of Ms. Brinda Ramakrishna (ITA No.454/Bang/2021). The Tribunal in that case held that Rule 128(9) does not mandate disallowance of FTC for delay in filing Form 67. It was further argued that procedural requirements should not override substantive rights, supported by various judicial precedents including the Supreme Court's decision in Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner. The Tribunal agreed with this interpretation, stating that the filing of Form 67 is a procedural requirement and non-compliance should not result in the disallowance of FTC.3. Applicability of Double Taxation Avoidance Agreement (DTAA) over the Income Tax Act and Rules:The Tribunal also considered the provisions of the DTAA between India and Australia, which provides relief from double taxation. It was emphasized that neither Section 90 of the Income-tax Act nor the DTAA stipulates that FTC should be disallowed for non-compliance with procedural requirements such as the filing of Form 67. The Tribunal reiterated that the DTAA provisions override the Income-tax Act and Rules to the extent they are more beneficial to the assessee. This principle was supported by several judicial precedents, including the Supreme Court's decision in Union of India v. Azadi Bachao Andolan.Conclusion:The Tribunal directed the Assessing Officer to grant the FTC as per Form 67 filed by the assessee after due verification, following the precedent set in the cases of Vinodkumar Lakshmipathi and Ms. Brinda Ramakrishna. Both appeals were allowed for statistical purposes, signifying that the substantive right to FTC should not be denied due to procedural lapses in filing Form 67.Order Pronounced:The appeals were allowed for statistical purposes, with the order pronounced in the open court on 13th Feb 2023.