Foreign tax credit allowed despite Form 67 filed with revised return under section 90

The ITAT Delhi allowed the assessee's appeal regarding foreign tax credit under section 90, rejecting the denial based solely on Form 67 not being filed with the original return under section 139(1). The tribunal held that foreign tax credit can be claimed per DTAA provisions even when Form 67 is filed with revised return. The CIT(A)'s adverse inference was incorrect as the claim was properly before the AO. Following Supreme Court precedent in Goetze (India) Ltd., the tribunal exercised discretion to admit the claim and remitted the matter to AO for fresh consideration per law.

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Issues:
1. Denial of claim of Foreign tax credit under section 90 of the Income Tax Act, 1961.
2. Excessive interest levied under sections 234B and 234C of the Act.

Analysis:

Issue 1: Denial of claim of Foreign tax credit under section 90 of the Income Tax Act, 1961:
The appeal was against the order of the ld. CIT (Appeals)/National Faceless Appeal Centre (NFAC) dated 12.10.2023 for the assessment year 2018-19. The appellant objected to the denial of foreign tax credit (FTC) under section 90 of the Act. The appellant argued that the denial was contrary to law and that the filing of Form 67 should not control the claim of FTC, which is otherwise allowed under the Act. The appellant contended that the intimation under section 143(1) merged with the scrutiny assessment order under section 143(3), allowing the CIT(A) to consider and grant relief. However, the CIT(A) held that the appeal was not maintainable as the issue of disallowance of FTC arose from the intimation under section 143(1) and was not part of the assessment order. The appeal was dismissed on this ground.

Issue 2: Excessive interest levied under sections 234B and 234C of the Act:
The appellant also raised the issue of excessive interest levied under sections 234B and 234C of the Act. The appellant argued that the NFAC/CPC erred in levying excessive interest. However, the judgment did not provide detailed analysis or resolution of this issue, and it was not a primary focus of the decision.

In the detailed analysis of the first issue, the appellant had filed Form 67 along with the original return and revised return, but the necessary proof of tax payment in the US was not attached initially. The appellant later submitted an updated Form 67 with proper attachments showing tax payment in the US. The lower authorities denied the FTC benefit based on the belated filing of the updated Form 67. The appellant argued that Rule 128's requirement of filing Form 67 before the due date for the return of income is directory, not mandatory. The appellant cited legal precedents supporting this argument. The Tribunal found merit in the appellant's submissions, admitting the claim and remitting the issue to the AO for consideration in accordance with the law and documents submitted.

The judgment highlights the importance of timely compliance with procedural requirements and the distinction between mandatory and directory provisions in tax law. The decision also underscores the significance of legal precedents in supporting arguments before tax authorities and tribunals.

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