Foreign Income Tax Appeal Succeeds: DTAA Claim Requires Substantive Examination and Fair Hearing for Proper Assessment

ITAT Cochin allowed the assessee's appeal against CIT(A)'s order regarding foreign income taxation. The Tribunal found CIT(A) erred by not examining the Double Taxation Avoidance Agreement (DTAA) claim on merits and merely directing rectification. The case was remanded for re-examination, with the assessee to be granted proper hearing on the tax treatment of declared foreign income.

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The Appellate Tribunal (ITAT Cochin) heard an appeal by the assessee against the CIT(A)'s order dated 29.03.2025 for AY 2024-25. The assessee declared foreign income of Rs. 2,50,29,867/- taxable at a special rate under the DTAA and filed Form 67 before issuance of intimation under Section 143(1). However, the CPC processed the return taxing the income at normal rates. The CIT(A) dismissed the appeal, directing the assessee to seek rectification under Section 154 instead of adjudicating on merits.The Tribunal held that the CIT(A) erred in not examining the DTAA claim on merits and merely directing rectification. Since the Form 67 was duly filed and the claim was made correctly, the Tribunal remanded the matter to the CIT(A) with a direction to re-examine the DTAA claim in accordance with law, granting the assessee a proper opportunity of hearing. The appeal was allowed for statistical purposes.

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