2024 (9) TMI 723 - AT - Income Tax

Assessee wins appeal as tribunal rules Form 67 for foreign tax credit valid if filed before assessment completion under section 139

Pashora Singh Versus Commissioner of Income Tax Appeal / Addl. JCIT (A) -1, Jaipur.

The ITAT Amritsar allowed the assessee's appeal regarding foreign tax credit denial. The tribunal held that Form No. 67 for claiming foreign tax credit ... Denial of relief u/s 90 for foreign tax credit - Form No. 67 for claiming “Foreign Tax Credit” has not been filed within the time allowed u/s 139(1) - directory OR mandatory provision - HELD THAT:- We are of the opinion that it will be sufficient compliance on the part of the assessee if the said Form No. 67 claiming the benefit of FTC is filed before the completion of assessment proceedings and the said Form No. 67 should be before the AO for his consideration at the time of processing or assessment u/s 143(1). In the instant case, since the Form No. 67 has been filed by the assessee alongwith return u/s 139(8A) on the same date which is updated return in ITR 3 U, the AO was not justified in ignoring the Form No. 67 which was also on record before him at the time of assessment proceedings. As such, we direct the AO to consider the Form No. 67 for the purpose of assessment of the updated return filed u/s 139(8A) Disallowance of TDS credit claimed - it is admitted that this particular return of income has been submitted under the provisions of section 139(8A) and no claim for TDS refund is allowable with respect to return filed under the said section - HELD THAT:- As pointed out by the CIT. DR that the assessee has also not claimed the full TDS as reflected in Form 26AS in his return of income. As such, on this issue we set aside the matter back to the file of the AO to examine the return and allow the credit of TDS to the extent of actually claimed in the return, which again should be supported by Form 26AS, and to allow the credit of TDS to the extent which is legally allowable as per provisions of the Act. Issues:1. Denial of relief under section 90 of the Act for foreign tax credit.2. Disallowance of TDS credit claimed by the assessee.Analysis:Issue 1: Denial of relief under section 90 of the Act for foreign tax credit:The appeal was filed against the order of the Ld. CIT (A) denying relief under section 90 of the Act for foreign tax credit. The assessee filed the return of income for the assessment year 2020-21, declaring total income, including income from salary received in Italy. The relief under section 90 was claimed but denied by CPC Bangalore due to the belated filing of Form No. 67 for claiming Foreign Tax Credit. The appellate order upheld the denial, citing the violation of Rule 128 (9) of the Income Tax Rules, 1962, which mandates filing Form No. 67 before the due date of filing the return of income under section 139(1) to claim credit for foreign taxes paid. The AR argued that filing Form No. 67 beyond the time limit does not disentitle the assessee for the claim of FTC, relying on various judgments. The tribunal held that filing Form No. 67 before the completion of assessment proceedings is sufficient compliance, directing the AO to consider Form No. 67 for assessment purposes.Issue 2: Disallowance of TDS credit claimed by the assessee:The second issue pertained to the disallowance of TDS credit claimed by the assessee. The matter was taken to the first appeal before the ld. JCIT(A), where both additions, including the disallowance of TDS credit, were sustained. The AR submitted that TDS credit reflected in Form 26AS should be allowed as a credit. However, the ld. DR argued that the updated return filed by the assessee did not comply with the provisions of section 139(8A) as it did not offer the entire income for taxation and did not claim the entire TDS. The tribunal set aside the matter back to the AO to examine the return and allow the credit of TDS to the extent actually claimed, supported by Form 26AS and as per the provisions of the Act.In conclusion, the appeal was partly allowed, directing the AO to consider Form No. 67 for assessment purposes and to allow the credit of TDS as per the legally allowable provisions of the Act.