Relief for taxpayer on foreign investments and double taxation, with credit allowed u/ss 90 and 91

ITAT Delhi held that the addition towards alleged unexplained foreign investment in the names of the assessee's minor daughters was unsustainable. The Tribunal noted that the assessee, a high-income taxpayer, had sufficient explained income, had duly disclosed the foreign investments in Schedule FA of the return, and had furnished complete particulars of related bank accounts in India and abroad. Consequently, the deletion of the addition by CIT(A) was upheld. On the issue of double taxation relief, ITAT observed that the assessee had properly disclosed foreign income in Schedules FSI and TR/ TY, filed Form 67, and substantiated tax paid in Singapore. The AO was directed to grant relief under sections 90/91.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the addition made as unexplained investment under section 69 in respect of foreign investments in shares held in the names of minor daughters was justified, when such investments were disclosed in the return of income and related schedules.

1.2 Whether the claim of relief from double taxation under sections 90/91 could be denied on the ground of non-compliance with Rule 128 regarding Form No. 67, in circumstances where Form No. 67 and the revised return were filed within the time permissible under section 139(4).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition under section 69 on account of alleged unexplained foreign investment

Interpretation and reasoning

2.1 The Tribunal noted that the assessee was a large taxpayer having returned taxable income of approximately Rs. 26.80 crores for the relevant assessment year, which also included income of the minor daughters clubbed under section 64(1A).

2.2 The investments in shares of the foreign company in the names of the two minor daughters, aggregating to Rs. 3,31,42,742/-, were found to be duly disclosed in the original return of income in Schedule FA (Details of Foreign Assets) at specified item numbers, and the corresponding Indian bank accounts (with Axis Bank Ltd., Karol Bagh, New Delhi) where these investments were reflected were also furnished.

2.3 On these facts, the Tribunal considered that, having regard to the substantial returned income, there should be no doubt as to the availability of sufficient source for making the impugned investments. Further, complete particulars of foreign assets and relevant bank accounts in the names of the assessee and the minor daughters, in India and abroad, had been provided to the Assessing Officer.

Conclusions

2.4 The Tribunal held that the addition made under section 69 treating the foreign investments in the names of the minor daughters as unexplained was not justified in the given factual matrix. The deletion of the addition by the first appellate authority was upheld, and the corresponding ground of the Revenue was dismissed.

Issue 2: Eligibility of relief under sections 90/91 in light of filing of Form No. 67

Legal framework (as discussed)

2.5 The dispute centered on the requirement under Rule 128 that Form No. 67 be filed for claiming foreign tax credit / relief under sections 90/91, and whether such filing must be within the due date specified under section 139(1), or whether filing within the extended time permissible under section 139(4) is adequate.

Interpretation and reasoning

2.6 The Tribunal recorded that the assessee had claimed double taxation relief in the return of income in Part B-TTI and had furnished the requisite details in Schedule FSI (Details of Income from outside India) and Schedule TR (Summary of tax relief claimed for taxes paid outside India) in both the original and the revised returns.

2.7 It was noted that Form No. 67 had been filed on 22.12.2017 under a specified acknowledgment number, along with a copy of the tax return filed in Singapore and proof of tax paid in Singapore. A detailed statement reconciling the tax paid in Singapore and tax payable in India on the Singapore salary income, which was taxable in India and included in the Indian return, was also submitted to the Assessing Officer.

2.8 The Tribunal referred to and accepted the findings of the first appellate authority that for the relevant assessment year the last date for filing a return under section 139(4) was 31.03.2019; Form No. 67 had been filed on 22.12.2017 and the revised return on 29.08.2018, both within this period. On this basis, the first appellate authority had held that Form No. 67 was validly filed and that the same income could not be subjected to tax twice by denying the foreign tax credit / double taxation relief.

Conclusions

2.9 The Tribunal concurred with the first appellate authority that the assessee had complied with the requirements for claiming relief under sections 90/91 and that Form No. 67, having been filed within the time permissible under section 139(4), was acceptable. The disallowance of foreign tax credit / double taxation relief was directed to be deleted, and the Assessing Officer was directed to allow the claim. The Revenue's ground on this issue was dismissed.

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