Tribunal Orders Recalculation of Tax Liability, Accepts Relief Claim, and Overrules Disallowance of Foreign Tax Credit.

The Tribunal allowed the assessee's appeal, directing the CPC to recalculate the tax liability. It accepted the claim of relief under Section 90 of the Income Tax Act, 1961, and deemed the disallowance of Foreign Tax Credit unjustified due to the belated filing of Form 67, which was considered directory, not mandatory.

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Issues involved: Appeal against National Faceless Appeal Centre's order u/s. 154 of the Income Tax Act, 1961 for assessment year 2020-21.

Summary:

Issue 1: Claim of relief u/s. 90 of the Act for taxes paid outside India

The assessee contended that the CIT(A) erred in not allowing the claim of relief u/s. 90 of the Act for taxes paid outside India due to a technical default of not filing Form 67 at the time of filing the return of income. The assessee argued that filing Form 67 is procedural and not mandatory. The Tribunal agreed with the assessee, citing a relevant case law and held that the Form 67 requirement is directory, not mandatory. As the assessee had submitted Form 67 before the processing date, the Tribunal allowed the claim of relief and directed the CPC to recalculate the assessee's tax liability accordingly.

Issue 2: Disallowance of Foreign Tax Credit (FTC) due to belated filing of Form 67

The main grievance of the assessee was the disallowance of Foreign Tax Credit (FTC) because Form 67 was filed after the due date of filing the return of income u/s. 139(1) of the Act. The Tribunal noted that the assessee had submitted Form 67 before the processing date and ruled that the disallowance was not justified. Referring to a relevant case law, the Tribunal emphasized that Rule 128 prescribing Form 67 is directory, not mandatory. Consequently, the Tribunal accepted the assessee's grievance and directed the CPC to recompute the tax liability accordingly.

Final Decision:

The Tribunal allowed the assessee's appeal and directed the CPC to recalculate the tax liability based on the acceptance of the claim of relief u/s. 90 of the Act and the disallowance of Foreign Tax Credit was deemed unjustified due to the belated filing of Form 67. The order was pronounced in open court on 25.04.2024.

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