2023 (6) TMI 363 - AT - Income Tax

Tribunal grants Foreign Tax Credit, emphasizes substantive rights over procedural lapses.

Ajay Kumar Mishra Versus DCIT, Circle-1 (1), Gurgaon.

Ajay Kumar Mishra Versus DCIT, Circle-1 (1), Gurgaon. - TMI Issues Involved:1. Validity of the final assessment order u/s 143(3) read with Section 144B of the Act.2. Disallowance of Foreign Tax Credit (FTC) due to procedural lapse in filing Form 67.3. Charging of interest u/s 234A, 234B, and 234C of the Income Tax Act.Summary:Issue 1: Validity of the Final Assessment OrderThe assessee contended that the final assessment order passed by the learned Assessing Officer (AO) u/s 143(3) read with Section 144B of the Act is bad in law and on facts. However, this ground was considered routine and was not elaborated upon in the judgment.Issue 2: Disallowance of Foreign Tax Credit (FTC)The primary issue was the disallowance of FTC amounting to INR 35,02,850/- claimed by the assessee for taxes paid in the USA. The AO disallowed the FTC due to the procedural lapse of filing Form 67 after the due date specified u/s 139(1). The assessee argued that this disallowance violated the principle of natural justice and the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the USA.The Tribunal noted that Rule 128 of the Income Tax Rules, 1962, which governs FTC, does not explicitly state that FTC should be disallowed for delayed filing of Form 67. The Tribunal referenced several judgments, including those from the Hon'ble ITAT Mumbai, ITAT Jaipur, and ITAT Bangalore, which held that procedural requirements should not override substantive rights. The Tribunal concluded that the procedural lapse of late filing of Form 67 should not deny the assessee's substantive right to claim FTC.Consequently, the Tribunal directed the AO to grant FTC to the assessee, following the decisions of the Co-ordinate Benches in similar cases.Issue 3: Charging of Interest u/s 234A, 234B, and 234CThe assessee also raised a ground against the charging of interest u/s 234A, 234B, and 234C of the Income Tax Act. This ground was considered routine and was not elaborated upon in the judgment.Conclusion:The Tribunal allowed the appeal of the assessee, directing the AO to grant the Foreign Tax Credit (FTC) and thereby resolving the primary issue in favor of the assessee. The judgment emphasized the distinction between procedural and substantive requirements, aligning with the principle that procedural lapses should not defeat substantive rights.