2024 (12) TMI 558 - AT - Income Tax

Foreign tax credit allowed despite delayed Form 67 filing under DTAA provisions following Anindya Sarka precedent

ITAT Kolkata allowed assessee's appeal regarding denial of foreign tax credit despite delay in filing Form No. 67. The tribunal relied on DTAA provisions ... Denial of Foreign Tax Credit (FTC) - delay in Filing of Form No. 67 - HELD THAT:- As per the provision of DTAA as well as the judicial precedent in Anindya Sarka [2024 (7) TMI 1564 - ITAT KOLKATA] we find no justification for not allowing the credit for FTC. The order of the Ld. CIT(A) as well as the AO for disallowing the foreign tax credit claimed in revised Indian tax return is hereby set aside. The assessee is entitled for advance of FTC. So far the other submission of the record for levying interest is concerned in view of the decision as stated above, the levying additional interest is also hereby set aside. Decided in favour of assessee. Issues Involved:1. Disallowance of Foreign Tax Credit (FTC) due to delayed filing of Form No. 67.2. Levy of additional interest under Sections 234A, 234B, and 234C of the Income Tax Act.Issue-wise Detailed Analysis:1. Disallowance of Foreign Tax Credit (FTC) due to delayed filing of Form No. 67:The primary issue in this appeal was the disallowance of the Foreign Tax Credit (FTC) claimed by the assessee, which was denied by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] due to the delayed submission of Form No. 67. The assessee, an individual, was on an assignment in the Netherlands during the financial year 2019-20 and received salary income both in the Netherlands and India. The assessee filed the original income tax return on 31.07.2017 and submitted Form No. 67 on 12.07.2018, beyond the due date specified under Rule 128(9) of the Income Tax Rules.The Tribunal examined the provisions of the India-Netherlands Double Taxation Avoidance Agreement (DTAA) and Section 90 of the Income Tax Act, which allow for relief from double taxation. It was argued that the DTAA overrides the provisions of the Act, and the rules cannot be contrary to the Act. The Tribunal referred to several precedents, including the cases of Anindya Sarkar vs. ACIT and Deepak Shimoga Padmaraju vs. Assistant Director of Income Tax, which established that the filing of Form No. 67 is a procedural requirement and not mandatory. The Tribunal concluded that the delay in filing Form No. 67 should not result in the denial of FTC, as it is a substantive right under the DTAA. Consequently, the Tribunal directed the AO to allow the FTC claimed by the assessee.2. Levy of additional interest under Sections 234A, 234B, and 234C of the Income Tax Act:The second issue pertained to the levy of additional interest under Sections 234A, 234B, and 234C of the Income Tax Act. The assessee contested the imposition of interest, arguing that the denial of FTC was unjustified, which consequently affected the computation of interest. The Tribunal, having allowed the FTC claim, also set aside the additional interest levied under these sections. The Tribunal held that the levy of interest was not justified in light of the decision to allow the FTC, thereby providing relief to the assessee on this ground as well.Conclusion:The Tribunal allowed the appeal of the assessee, directing the AO to grant the FTC of Rs. 20,64,365/- and set aside the additional interest levied under Sections 234A, 234B, and 234C. The Tribunal emphasized that procedural delays should not override substantive rights under the DTAA, and the filing of Form No. 67 is not a mandatory requirement for claiming FTC. The order was pronounced in the open court on 5th December 2024.