Foreign Tax Credit denial unsustainable where record gave no clear reason; matter remanded for fresh consideration.

Foreign Tax Credit claimed on the basis of the return, revised return, Form 67, Australian tax return and activity statements could not be denied when the record did not disclose the reasons for refusal. The rectification order under Section 154, read with the earlier Section 143(1) intimation, reflected the credit claim but still withheld relief without a discernible basis. The denial was therefore set aside and the matter remanded for fresh consideration of the Foreign Tax Credit claim after giving the assessee a reasonable opportunity.

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Issues: Whether the denial of Foreign Tax Credit in the rectification order under Section 154 of the Income-tax Act, 1961 was sustainable and whether the matter required reconsideration.

Analysis: The claim for Foreign Tax Credit was supported by the return of income, revised return, Form 67, the Australian tax return and activity statements. The computation in the intimation under Section 143(1) as well as in the rectification order reflected the Foreign Tax Credit claim, yet the relief was denied. Since the reasons for denying the credit were not discernible from the record, the refusal to grant the credit could not be sustained on the existing material. The circumstances therefore justified fresh consideration of the Foreign Tax Credit claim after giving the assessee a reasonable opportunity.

Conclusion: The denial of Foreign Tax Credit was set aside and the matter was remanded for reconsideration.

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