2023 (3) TMI 662 - AT - Income Tax

Tribunal Grants Foreign Tax Credit Appeal

Ms. Anju Agast Srivats Versus The Income Tax Officer NFAC, Delhi

The Tribunal allowed the appeal, directing the AO to grant the Foreign Tax Credit (FTC) claimed by the assessee. The Tribunal held that the denial of FTC ... Denial of Foreign Tax Credit (FTC) - assessment was selected for limited scrutiny regarding “foreign financial interest”- AO did not allow the credit for FTC on the ground that the assessee did not furnish form 67 on or before filing return of income within the prescribed due date u/s 139(1) as required under Rule 128 of I.T. Rules - CIT(A) confirmed the view taken by the AO and held that failure to comply with the mandatory requirements under Rule 128 of I.T. Rules and non filing of Form 67 within the due date prescribed under Section 139(1) of the Act cannot be condoned - HELD THAT:- As stated that this was a bona fide mistake and the said dividend income has already been taxed outside India. It is claimed that since the due date for filing the revised return of income was lapsed the assessee could not file the revised return of income. However, she recomputed the total income and filed Form 67. The assessee had also duly remitted the tax on the said income and requested the AO to allow the due FTC. The same has been denied solely for the reason that Form 67 has not been filed within the due date prescribed for filing return under Section 139(1) of the Act. This issue is no longer res-integra and the same is covered in favour of the assessee by the coordinate bench order of the Tribunal in the case of Shashidhar Seetharam Sharma[2022 (9) TMI 1430 - ITAT BANGALORE] The coordinate bench order of the Bangalore Tribunal had considered other coordinate benches orders and had held that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing for Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provision of the Act and the rules cannot be contrary to the Act. It was concluded by the Tribunal that non-furnishing of Form No. 67 before the due date under Section 139(1) of the Act is not fatal to the claim for FTC. We direct the AO to allow the claim of FTC. Appeal filed by the assessee is allowed. Issues Involved:1. Whether the CIT(A) was justified in confirming the AO's denial of Foreign Tax Credit (FTC) due to the late filing of Form 67.Issue-wise Detailed Analysis:1. Confirmation of AO's Denial of FTC by CIT(A):The solitary issue raised in this appeal is whether the CIT(A) was justified in confirming the AO's order, which denied the Foreign Tax Credit (FTC) to the assessee. The denial was based on the late submission of Form 67, which was not furnished on or before the due date prescribed under Section 139(1) of the Income Tax Act, 1961, as required under Rule 128 of the Income Tax Rules.Facts of the Case:The assessee, an employee of HP India, filed a return of income for AY 2018-19 on 27.08.2018, declaring income under 'Salary', 'House Property', and 'Other Sources'. During limited scrutiny, it was found that the assessee did not declare foreign dividend income of USD 2720 in the return nor filed a revised return. The assessee claimed FTC by filing Form 67 on 23.01.2021 during the assessment proceedings. The AO denied the FTC because Form 67 was not filed within the due date under Section 139(1).CIT(A)'s Findings:The CIT(A) upheld the AO's decision, stating that the mandatory requirements under Rule 128 were not met, and the delay in filing Form 67 could not be condoned. The CIT(A) emphasized that the primary onus was on the assessee to comply with statutory requirements, citing the case of Commissioner of Income-tax v. Shivanand Electronics, which held that failure to comply with mandatory requirements precludes the benefit of the claim.Tribunal's Analysis:The Tribunal examined whether the denial of FTC solely due to the late filing of Form 67 was justified. The Tribunal referred to the coordinate bench's decision in Shashidhar Seetharam Sharma vs. ITO, which held that:(i) Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67.(ii) Filing Form 67 is a directory, not a mandatory requirement.(iii) DTAA overrides the provisions of the Act, and the rules cannot contradict the Act.The Tribunal also considered the decision in Brinda Rama Krishna's case, which reiterated that non-furnishing of Form 67 before the due date under Section 139(1) is not fatal to the FTC claim. The Tribunal noted that the assessee had already paid taxes on the foreign dividend income and filed Form 67 during the assessment proceedings, albeit late.Conclusion:The Tribunal concluded that the assessee's claim for FTC should not be denied solely due to the late filing of Form 67. The Tribunal directed the AO to allow the FTC claim, following the principles laid down in the coordinate bench decisions.Result:The appeal filed by the assessee was allowed, and the AO was directed to grant the FTC as claimed.Order Pronouncement:The order was pronounced in the open court on 23rd February 2023.