2023 (3) TMI 264 - AT - Income Tax

Appellate tribunal grants foreign tax credit, emphasizing relief for assessee per legal provisions

The appellate tribunal allowed the appeals, directing the AO to grant the foreign tax credit as per the revised claim, considering taxes paid and the ... Allowance of revised foreign tax credit claimed during assessment proceedings - Requirement of claim being made in the original return - Failure of deductor to file revised TDS return not a bar to assessee's foreign tax credit - Appellate authority empowered to grant relief under Goetze (India) Ltd.Allowance of revised foreign tax credit claimed during assessment proceedings - Requirement of claim being made in the original return - Revised claim for foreign tax credit furnished during assessment proceedings is admissible and the excess credit claimed must be considered. - HELD THAT: - The Tribunal found that the assessee voluntarily offered omitted overseas salary income during assessment proceedings and filed a revised computation claiming enhanced foreign tax credit. The Assessing Officer had added the additional income but granted only part of the foreign tax credit, omitting the excess credit claimed in the revised computation. The Tribunal held that the excess foreign tax credit amounting to the difference between the revised claim and the credit allowed was due to the assessee and directed the AO to allow the foreign tax credit as per the revised claim filed during assessment proceedings. The determinative reasoning is that a bona fide modification or supplementation of the return's computation during assessment, supported by proof of taxes paid abroad, can be considered for granting relief. [Paras 8, 10, 11]The Tribunal allowed the revised foreign tax credit claimed during assessment and directed the AO to grant credit as per the revised claim.Failure of deductor to file revised TDS return not a bar to assessee's foreign tax credit - Appellate authority empowered to grant relief under Goetze (India) Ltd. - Denial of foreign tax credit on the ground that the employer/deductor did not file a revised TDS return is not a valid basis to refuse credit to the assessee. - HELD THAT: - The Tribunal noted that the ld. CIT(A) affirmed the AO's order on the sole ground that the employer had not revised its TDS return. The Tribunal rejected this as a ground to deny relief to the assessee, holding that the assessee cannot be penalised for the deductor's failure to file a revised TDS return which is beyond the assessee's control. Relying on the principle in Goetze (India) Ltd., the Tribunal affirmed that appellate authorities are empowered to grant the relief due to the assessee and directed the AO to consider taxes evidenced in Form 26AS and other documents and to allow the credit accordingly. [Paras 9, 10, 11]The Tribunal held that non-filing of a revised TDS return by the deductor does not preclude granting foreign tax credit to the assessee and directed the AO to allow the credit.Final Conclusion: Appeals allowed; AO directed to grant foreign tax credit as per the revised computation filed during assessment and to give credit for taxes evidenced in the records, notwithstanding the employer's failure to file a revised TDS return. Issues Involved:Appeal against CIT(A) orders dated 25.06.2018; Consideration of revised computation of income during assessment proceedings; Non-applicability of Goetze (India) Ltd. case; Principles of natural justice; Foreign Tax Credit; Double Tax Avoidance Agreement between India and Kenya; Denial of Foreign Tax Credit by AO; Non-revised TDS return impact on tax credit; Relief under Section 90 of the Act; Residency status of the assessee; Assessment of worldwide income; Grant of foreign tax credit based on revised claim; AO's failure to grant full foreign tax credit; CIT(A) dismissing appeal due to non-revised TDS return; Appellate authorities' power to provide relief; Consideration of taxes paid in India and Tanzania; Form 26AS details; Denial of tax credit due to deductor's non-revised TDS return.Analysis:The assessee filed appeals against the orders of CIT(A)-21, New Delhi dated 25.06.2018, with similar issues in both appeals being heard and adjudicated together. In ITA No. 5840/Del/2018, the assessee raised grounds related to the non-acceptance of revised computation of income during assessment proceedings and the denial of Foreign Tax Credit. The appellant, a Resident of India, voluntarily disclosed overseas salary income omitted earlier, leading to a revised foreign tax credit claim of Rs. 66,74,802, resulting in a refund. However, the AO only allowed a partial credit of Rs. 44,85,507, ignoring the revised claim. The Assessing Officer's failure to grant the full credit of Rs. 21,89,295 led to the appeal.The primary issue in the appeal was the denial of the full relief claimed under Section 90 of the Act, concerning the Double Tax Avoidance Agreement between India and Kenya. The appellant, being a Resident and Ordinarily Resident of India, reported worldwide income and claimed relief under the India-Kenya DTAA. The appellant provided necessary documentation to support the foreign tax credit claim, including proof of taxes paid in Kenya. The AO's omission to grant the excess credit due to the assessee led to the dispute.The CIT(A) dismissed the appeal citing the non-revised TDS return by the employer as a reason, affirming the AO's decision. However, the appellate tribunal, referring to the Goetze (India) Ltd. case, emphasized the authority to provide rightful relief to the assessee. The tribunal directed the AO to consider all taxes paid in India and Tanzania, granting due credit and foreign tax credit as per the revised claim. The denial of tax credit based on the deductor's non-revised TDS return was deemed beyond the assessee's control, leading to the allowance of the appeals.In conclusion, the appellate tribunal allowed the appeals, directing the AO to provide the appropriate relief and grant the foreign tax credit as per the revised claim, emphasizing the authority to consider taxes paid and the impact of non-revised TDS returns on tax credits. The judgment highlighted the importance of ensuring rightful relief to the assessee based on legal provisions and the Double Tax Avoidance Agreement.