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of <h1>Tribunal favors assessee in foreign tax credit appeal, prioritizing DTAA over Income Tax Rules</h1> <h3>Shridhar Madhav Diwan, Hyderabad Versus DCIT, Circle-12 (1), Hyderabad</h3> Shridhar Madhav Diwan, Hyderabad Versus DCIT, Circle-12 (1), Hyderabad - TMI Issues involved:The issues involved in this judgment are related to the denial of Foreign Tax Credit (FTC) to the assessee due to a delay in filing Form No. 67 and the dismissal of the rectification request made under section 154 of the Income Tax Act, 1961.Issue 1: Denial of Foreign Tax Credit (FTC) due to delay in filing Form No. 67:The assessee filed the return of income on 24/07/2019 instead of the due date of 31/08/2019, and subsequently filed Form No. 67 on 26/10/2020. The denial of FTC was based on the delay in filing the form. The learned CIT(A) upheld the denial of FTC citing Rule 128 of the Income Tax Rules, which mandates the filing of the statement of foreign tax deduction in Form No. 67 on or before the due date for claiming FTC.Issue 2: Interpretation of Rule 128(9) of the Income Tax Rules:The learned AR argued that Rule 128(9) does not explicitly provide for disallowance of FTC in case of a delay in filing Form No. 67. Various Tribunal decisions were cited to support the contention that filing Form No. 67 is a directory requirement, not a mandatory one, especially considering the provisions of the India-USA Double Taxation Avoidance Agreement (DTAA) which allows the assessee to claim the credit.Issue 3: Conflict in views regarding the mandatory nature of filing Form No. 67:The Learned DR contended that Rule 128(9) clearly states that the form must be furnished on or before the date specified for furnishing the return of income, making it a mandatory requirement. A decision from the Visakhapatnam Bench of the Tribunal was cited to support this view.Judgment:The Tribunal analyzed the arguments presented by both sides and referred to relevant case laws. It was noted that while there were conflicting views on the mandatory nature of filing Form No. 67, the Tribunal found that the provisions of the DTAA took precedence over the Rules. Article 25(2)(a) of the DTAA allows for deduction of foreign tax paid, which influenced the interpretation of Rule 128(9). The Tribunal held that Rule 128(9) must be read in conformity with the DTAA and allowed the appeal, directing the Assessing Officer to verify the foreign tax paid by the assessee and act in accordance with the established law.Separate Judgment by Judge:No separate judgment was delivered by the judges in this case.
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