Court Remands Case for Reassessment, Affirms Filing Form No.67 as Directory, Orders Final Assessment in Four Weeks.

The HC set aside the impugned order dated 02.01.2024, remanding the matter to the 1st respondent for reassessment, directing due consideration of the Foreign Tax Credit claim filed under Form No.67. The Court emphasized that filing Form No.67 is directory, not mandatory, and ordered a final assessment within four weeks. The Writ Petition was disposed of without costs, providing relief to the petitioner by recognizing the Foreign Tax Credit claim.

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Issues:
Challenge to impugned order under Section 154 read with section 143(1) of the Income Tax Act for Assessment Year 2022-2023 regarding Foreign Tax Credit claim filed under Form No.67.

Analysis:

1. Filing of Income Tax Return and Foreign Tax Credit Claim:
The petitioner filed the income tax return for the assessment year 2022-2023 on 31.12.2022, declaring taxable income and claiming Foreign Tax Credit of Rs. 10,78,563 under Article 25 of the Double Taxation Avoidance Agreement with the USA. However, the petitioner received an intimation on 20.06.2023, denying the Foreign Tax Credit benefit and demanding Rs. 13,58,070 along with interest.

2. Rectification Request and Respondent's Stand:
The petitioner filed a rectification request on 12.07.2023 through the income tax web portal, but the 1st respondent, in the impugned order under Section 143(1) of the Act, did not provide credit for the foreign tax paid as per Form No.67. The Senior Standing Counsel for the respondents argued that Form No.67 should have been filed before the due date of filing the return, as per Rule 128 of the Income Tax Rules, 1962.

3. Court's Evaluation and Precedents:
The Court noted that the petitioner had filed the income tax return along with Form No.67 on time, and the payment of foreign tax was not considered in the intimation under Section 143(1). Referring to a previous judgment, the Court emphasized that filing Form No.67 was not mandatory but directory. Citing the law laid down by the Supreme Court in CIT Vs. G.M.Knitting Industries, the Court held that the Foreign Tax Credit filing under Rule 128 is only directory.

4. Judgment and Directions:
The Court set aside the impugned order dated 02.01.2024 and remitted the matter back to the 1st respondent for reassessment, emphasizing the consideration of the Foreign Tax Credit filed by the petitioner under Form No.67. The 1st respondent was directed to give due credit for the petitioner's foreign income and pass a final assessment order within four weeks. The Court clarified that the setting aside of the order pertained only to the rejection of the Foreign Tax Credit claim.

5. Conclusion:
The Writ Petition was disposed of with no order as to costs, and the connected miscellaneous petition was closed. The judgment highlighted the importance of considering Foreign Tax Credit claims and reiterated the non-mandatory nature of filing Form No.67, providing relief to the petitioner in this case.

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