2024 (7) TMI 1092 - HC - Income Tax

Tax Credit Denial Overturned; FTC Claim Reconsidered for 2022-2023. CPC Directed to Reissue Order in 3 Months.

Thejo Engineering Limited Versus The Deputy Director of Income Tax, The Deputy Commissioner of Income Tax, Corporate Circle 3 (1), Chennai

Thejo Engineering Limited Versus The Deputy Director of Income Tax, The Deputy Commissioner of Income Tax, Corporate Circle 3 (1), Chennai - TMI Issues: Challenge to order under Section 154 of the Income Tax Act regarding Foreign Tax Credit claim denial.In this case, the petitioner challenged an order under Section 154 of the Income Tax Act, 1961, dated 27.05.2024, which denied the Foreign Tax Credit claim for the assessment year 2022-2023. The petitioner had initially filed the original return of income on 29.11.2022, followed by a revised return on 29.12.2022, claiming the benefit of Foreign Tax Credit under Section 90/90A of the Income Tax Act. The petitioner had uploaded necessary documents to support the claim, including Form 67, business activity statements filed with the Australian Tax Office, and the company tax return filed in Australia. Despite the claim, a demand of Rs. 1,40,47,430/- was made after processing the return, with the Foreign Tax Credit being denied. Subsequent rectification petitions were also rejected, leading to the filing of the writ petition challenging the denial of the Foreign Tax Credit claim.The petitioner's counsel argued that the tax liability in Australia was duly discharged, and the Foreign Tax Credit claim was made due to differential tax rates in India and Australia. He highlighted discrepancies where the intimation under Section 143(1) computed the Foreign Tax Credit but denied it in the same document and in the subsequent rectification order. The senior standing counsel for the respondents agreed that the matter should be remanded for reconsideration regarding the Foreign Tax Credit claim.Upon examination, the court found that the petitioner had indeed remitted taxes through the Australian branch, supporting the Foreign Tax Credit claim with relevant documents. The assessing officer's computation of the Foreign Tax Credit matched the claim made by the assessee, yet the relief was denied without clear reasons. The court concluded that the denial was unjustified and ordered the impugned rectification order to be set aside. The matter was remanded for reconsideration specifically regarding the Foreign Tax Credit claim. The Central Processing Centre was directed to issue a fresh order within three months after reconsideration. The writ petition was disposed of without costs, and connected miscellaneous petitions were closed.