TaxTMI 
TaxTMI 
2024 (6) TMI 880
X X X X Extracts X X X X
X X X X Extracts X X X X
....rn u/s. 143(1). 2. For that the Ld. Addl./JCIT (A) ought to have allowed relief of Rs. 4,63,266/- which was rightly claimed u/s. 90/90A. 3. For that the Ld. Addl./JCIT (A) failed to appreciate that belated filing of Form No 67 was not fatal to the claim u/s. 90. 4. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing." 3. This appeal of the assessee is delayed by 84 days and a condonation petition along with an affidavit has been placed on file wherein the assessee has prayed that the delay in filing appeal before the Tribunal may kindly be condoned and the case be heard on merits. The affidavit sworn by the assessee, which is available in the file, is extracted as under: "1. That the return filed by your petitioner for the A Y: 2020-21 was processed u/s 143(1) dated 15.12.2021 wherein the claim of relief u/s 90 to the tune of Rs. 4,63,266/- had been denied. 2. That thereafter, your petitioner, had filed a rectification petition and CPC had passed a rectification order on 03.08.2022 wherein they once again denied the relief claimed u/s 90 to the tune of Rs. 4,63,266/-. However, your p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the time of hearing, since ld. DR did not raise any serious objection for condoning the delay, we hereby condone the delay and admit the appeal for hearing. 4. Though the assessee has raised four grounds of appeal but the sole issue involved in this appeal is confirming the disallowance of Rs. 4,63,266/- claimed u/s. 90/90A of the Income Tax Act, 1961 (hereinafter referred to as the "Act"). 5. Brief facts of the case are that the assessee filed his return of income on 25.03.2021 declaring a taxable income of Rs. 24,10,660/-. The AO, CPC assessed the same with a tax liability of Rs. 4,77,170/- by an order u/s. 143(1) of the Act dated 15.12.2021. Thereafter, the assessee made a rectification petition u/s. 154 of the Act but the same was not allowed. Thereafter, the assessee preferred an appeal before the Ld. CIT(A), who, without going into the merits of the case, dismissed the assessee's appeal on account of delay of 254 days because the reasons assigned were not sufficient for condonation of delay. Aggrieved, the assessee is in appeal before the Tribunal. 6. We have heard the rival submissions and perused the material available on record. We note that the AO disallowed re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ainst the order u/s. 143(1) and thereon the rectification order has been received on 23.02.2023." since the assessee had filed the rectification application which was disallowed it had the option to file an appeal u/s. 143(1) of the Act before the Commissioner. However, without deciding the appeal on merit, the appeal was dismissed as the Ld. CIT(A) was of the view that the appeal ought to have been filed against the rectification order u/s. 154 of the Act dated 22.02.2023. 8. The right to file an appeal is a statutory right and the order u/s. 143(1) is appealable to the first appellate authority i.e. the Ld. CIT(A). therefore, merely because the rectification application was rejected and the assessee requested for credit of foreign tax paid, the claim cannot be said to have been obliterated by rejection of the rectification application, if it is otherwise admissible. The assessee had income under the head "salary" in Bhutan for which Form No. 67 was filed on 25.03.2021 while the return was also filed on 25.03.2021 which was filed under sub-section (4) of section 139 of the Act. The rectification order was passed on 03.08.2022. Since Form No. 67 was filed before the return was p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d income. (ii) In Bhutan: (a) Where a resident of Bhutan derives income which, in accordance with the provisions of this Agreement, may be taxed in India, Bhutan shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in India. Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in India. (b) Where in accordance with any provision of the Agreement, income derived by a resident of Bhutan is exempt from tax in Bhutan, Bhutan may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income." 11. Thus, Section 90 of the Act read with Article 22(2) of the DTAA provides that tax paid in Bhutan shall be allowed as a credit against the tax payable in India but limited to the proportion of Indian tax. Neither section 90 nor the DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirement. Foreign Tax Credit is an assessee's vested right as per Article 22(2) of the DTAA read wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed paragraph have no direct relevance to the facts at hand as the effect of section 90(2) of the Income Tax Act, read with explanation 4 thereof, is to treat the DTAA provisions as the law that must be followed by Indian courts, notwithstanding what may be contained in the Income Tax Act to the contrary, unless more beneficial to the assessee. 15. We have gone through the decisions of the coordinate Benches and concur with their findings in this regard that filing of Form No. 67 is directory and not mandatory and the credit for foreign taxes paid cannot be denied merely on the delay in filing the Form No. 67. In the case of M/s. 42 Hertz Software India Pvt. Ltd. Vs the Assistant Commissioner of Income Tax, Circle - 3 (1)(1), Bangalore, ITA No. 29/Bang/2021 ITAT, BANGALORE it is held that: 6. There is no dispute that the Assessee is entitled to claim FTC. On perusal of provisions of Rule 128 (8) & (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view, this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd. Vs. Deputy Commissioner (1992 Supp (1) SCC 21), Sambhaji Vs. Gangabai (2008) 17 SCC 117 and a lot many decisions of the Hon'ble Apex Court including the case in Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC) etc. and reached a conclusion that since Rule 128(9) of the Rules does not provide for disallowance of FTC in the case of delay in filing Form 67 and such filing within the time allowed for filing the return of income under section 139(1) of the Act is only directory, since DTAA over rides the Act, and the Rules cannot be contrary to the Act. 12. We find from Article 25(2)(a) of the DTAA that where a resident of India derives income which, in accordance with the provisions of the convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of the resident an amount equal to the income tax paid, paid in the United States, whether directly or by deduction. In view of this provision over riding the provisions of the Act, according to us, Rule 128(9) of the Rules has to be read down in conformity thereof. Rule 128(9) of the Rules cannot be read in isolation. Rules must be read in the context of the Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e squarely applicable to the present case. In the present case, the returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature. This is what the Hon'ble Supreme Court had held in the above cases when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of assessment order. W.P.No.5834 of 2022 12. Further, in the present case, the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC was rejected by the respondent, which is not proper and the same is not in accordance with law. Therefore, the impugned order is liable to be set aside. 13. Accordingly the impugned order dated 25.01.2022 is set aside. While setting aside the impugned order, this Court remits the matter back to the respondent to make reassessment by taking into considera....