Foreign tax credit allowed despite delayed Form 67 filing due to technical difficulties and lack of consequence provisions in Rule 128(9)

ITAT Patna allowed the assessee's appeal for foreign tax credit despite delayed filing of Form 67. The tribunal noted technical difficulties in filing the form online and followed precedent from ITAT Kolkata in Vineet Bahety case, holding that non-compliance with Rule 128(9) regarding filing deadline does not bar FTC eligibility since the rule lacks consequence provisions. The assessee filed Form 67 before assessment completion for tax deducted on salary from SBI Germany, making them eligible for foreign tax credit.

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Issues:
Appeal against order passed u/s 250 of the Income Tax Act, 1961 by Ld. Commissioner of Income-tax, (Appeals) arising out of the rectification order framed u/s. 154 of the Act. Non-granting of Foreign Tax Credit (FTC) due to delay in furnishing Form 67. Upholding of enhancement of interest u/s 234B and 234C. Denial of proper opportunity of being heard to the Appellant.

Analysis:

Issue 1: Appeal against order passed u/s 250 of the Income Tax Act
The appellant filed an appeal against the order passed by the Ld. Commissioner of Income-tax, (Appeals) pertaining to the Assessment Year 2019-20. The appeal challenged the rectification order framed by ADIT, CPC, Bengaluru. The grounds of appeal raised by the assessee included issues related to the denial of Foreign Tax Credit (FTC) and the enhancement of interest under sections 234B and 234C.

Issue 2: Non-granting of Foreign Tax Credit (FTC)
The appellant, a resident individual working for State Bank of India in Germany, claimed FTC of Rs. 3,49,286 in the income tax return. However, the FTC was not granted initially due to a delay in furnishing Form 67, which was filed after the due date specified under section 139(1) of the Income Tax Act. The Tribunal referred to previous decisions where it was held that the filing of Form 67 is directive, not mandatory, and a delay in filing should not result in denial of FTC. The Tribunal allowed the appeal, stating that the delay in filing Form 67 was due to technical difficulties faced by taxpayers and that the appellant was entitled to the claimed FTC.

Issue 3: Enhancement of interest u/s 234B and 234C
The appellant contended that the enhancement of interest under sections 234B and 234C was erroneous since granting the foreign tax credit would eliminate the demand. The Tribunal, after considering the submissions, held that once the appellant was entitled to the FTC, there would be no demand, thereby allowing the appeal on this ground as well.

Issue 4: Denial of proper opportunity of being heard
The appellant raised concerns regarding the denial of a proper, sufficient, and adequate opportunity of being heard during the appellate proceedings. However, the Tribunal did not delve deeply into this issue in the judgment, as the primary focus was on the grant of FTC and the enhancement of interest under sections 234B and 234C.

In conclusion, the Tribunal allowed the appeal of the assessee, granting the Foreign Tax Credit and setting aside the enhancement of interest under sections 234B and 234C. The judgment emphasized the importance of considering the nature of Form 67 filing requirements and upheld the appellant's right to claim the FTC despite a delay in filing due to technical difficulties.

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