2024 (12) TMI 853 - AT - Income Tax

Foreign Tax Credit allowed despite late filing of Form 67 as rule is directory not mandatory

Krishnakumar Balasankara Subramanian Versus DCIT Circle-3 (3) (1) Bangalore

Krishnakumar Balasankara Subramanian Versus DCIT Circle-3 (3) (1) Bangalore - TMI Issues Involved:1. Disallowance of Foreign Tax Credit (FTC) due to late filing of Form No. 67.2. Imposition of interest under Sections 234B and 234C of the Income Tax Act.3. Adjustment of refunds for subsequent assessment years against the demand for AY 2018-19.4. Imposition of interest for delay in payment under Section 220(2) of the Act.5. Disregard for documentary evidence supporting FTC claims.6. Non-consideration of revised return filed by the appellant.Issue-wise Detailed Analysis:1. Disallowance of Foreign Tax Credit (FTC) due to late filing of Form No. 67:The primary issue revolves around the disallowance of FTC claimed by the assessee under Section 90 of the Income Tax Act, read with Article 23(2) of the India-Japan DTAA. The claim was denied due to the late submission of Form No. 67, which is mandated by Rule 128 of the Income Tax Rules. The Tribunal noted that similar issues had been addressed in previous cases, such as Vinod Kumar Lakshmipathi and Brinda Rama Krishna, where it was held that Rule 128(9) does not explicitly disallow FTC for delayed filing of Form No. 67. It was determined that filing Form No. 67 is a procedural requirement and not mandatory, thus non-compliance should not lead to FTC denial. The Tribunal directed the Assessing Officer (AO) to verify and grant the FTC based on the Form No. 67 filed by the assessee.2. Imposition of interest under Sections 234B and 234C of the Income Tax Act:The assessee contested the imposition of interest under Sections 234B and 234C, which pertain to interest for default in payment of advance tax and deferment of advance tax, respectively. The judgment did not provide a detailed analysis of this issue, suggesting that the primary focus was on the FTC claim. However, the resolution of the FTC issue could potentially impact the interest calculations, necessitating a re-evaluation by the AO.3. Adjustment of refunds for subsequent assessment years against the demand for AY 2018-19:The assessee objected to the adjustment of refunds for AY 2020-21, AY 2021-22, and AY 2022-23 against the demand for AY 2018-19. The Tribunal did not explicitly address this issue in the judgment, indicating that it may be contingent upon the resolution of the primary FTC issue. If the FTC claim is allowed, the demand for AY 2018-19 could be reduced, affecting the necessity and extent of these adjustments.4. Imposition of interest for delay in payment under Section 220(2) of the Act:The imposition of interest for delayed payment under Section 220(2) was challenged by the assessee. Similar to the interest under Sections 234B and 234C, this issue was not detailed in the judgment. The resolution of the FTC issue and any subsequent adjustments could influence the interest calculations, requiring further assessment by the AO.5. Disregard for documentary evidence supporting FTC claims:The assessee argued that the AO disregarded documentary evidence submitted in support of the FTC claim, including Form 67 and proof of taxes paid in Japan. The Tribunal acknowledged the procedural nature of the filing requirement and directed the AO to consider the evidence provided, reinforcing the assessee's right to FTC based on substantive compliance.6. Non-consideration of revised return filed by the appellant:The assessee contended that the AO failed to consider the revised return filed. The judgment focused primarily on the procedural aspects of the FTC claim, implying that the revised return's consideration is intertwined with the resolution of the FTC issue. The Tribunal's directive to the AO to verify and grant FTC suggests an implicit requirement to consider all relevant submissions, including the revised return.Conclusion:The Tribunal's decision primarily addressed the procedural aspects of claiming FTC, emphasizing that non-compliance with procedural requirements should not negate substantive rights. The AO was directed to verify the Form No. 67 and grant FTC accordingly, impacting related issues such as interest imposition and refund adjustments. The appeal was partly allowed for statistical purposes, necessitating further action by the AO.