2023 (3) TMI 146 - AT - Income Tax

Tribunal allows appeal, grants Foreign Tax Credit of Rs. 36,25,781, emphasizing defense opportunity in tax proceedings

Jerry Nirmal Francis Versus Assistant Director of Income Tax, Centralized Processing Centre, Bengaluru.

Jerry Nirmal Francis Versus Assistant Director of Income Tax, Centralized Processing Centre, Bengaluru. - TMI Issues Involved:1. Condonation of delay in filing the appeal.2. Non-grant of Foreign Tax Credit (FTC) of Rs. 36,25,781.3. Relevance of the ITAT Bangalore decision in the appellant's case.4. Permissibility of adjustments under Section 143(1) of the Income-tax Act.5. Validity of proceedings under Section 143(1) of the Income-tax Act.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The appellant filed the appeal with a delay of 94 days. The appellant's counsel argued that the delay was due to the appellant's unawareness of the possibility of appealing the CIT(A) order before the ITAT. The delay was not intentional and was caused by the need for consultation regarding the demand raised by the Assessing Officer. The tribunal found the reasons for the delay reasonable and condoned the delay, admitting the appeal for adjudication.2. Non-grant of Foreign Tax Credit (FTC) of Rs. 36,25,781:The appellant, a resident individual employed with Shell India Market Private Limited and BG Exploration and Production India Limited, was on an international assignment to the Philippines. The salary earned in the Philippines was taxed there, and the appellant also received dividend income in the Netherlands, which was taxed in both the Netherlands and India. The appellant filed the return of income and Form 67 for claiming FTC, but the AO denied the credit for foreign tax due to the late submission of Form 67. The CIT(A) upheld the AO's decision, citing the requirement to file Form 67 on or before the due date.3. Relevance of the ITAT Bangalore Decision:The appellant argued that the case was similar to the ITAT Bangalore decision in Ms. Brinda Ramakrishna vs. ITO, where the tribunal allowed the FTC despite the late filing of Form 67, considering it a directory requirement rather than mandatory. The tribunal, in this case, found the appellant's argument valid and referenced the ITAT Chennai decision in Shri. Govindarajan Roopkumar vs. ADIT, which also supported the view that filing Form 67 by the extended due date under Section 139(4) should be acceptable.4. Permissibility of Adjustments under Section 143(1) of the Income-tax Act:The appellant contended that the non-grant of FTC was not a permissible adjustment under Section 143(1) as it was a debatable issue. The tribunal agreed, referencing the ITAT decision in City Manager Association vs. DCIT and the Supreme Court decision in ACIT vs. Rajesh Jhaveri Stock Brokers (P.) Ltd, which supported the appellant's claim that debatable issues should not be adjusted under Section 143(1).5. Validity of Proceedings under Section 143(1) of the Income-tax Act:The appellant argued that the proceedings under Section 143(1) were invalid as the AO did not provide an opportunity to defend the case, violating the provisos to Section 143(1)(a). The tribunal found merit in this argument, referencing the ITAT decision in Arham Pumps vs. DCIT, which emphasized the need for due process and opportunity for defense.Conclusion:The tribunal found in favor of the appellant on all grounds. It directed the AO to allow the credit for foreign tax paid in other countries as per Form 67 filed by the appellant, considering the filing of Form 67 by the extended due date as sufficient compliance. The appeal was allowed, and the order was pronounced on 28th February 2023 at Chennai.