TaxTMI 
TaxTMI 
2024 (12) TMI 636
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....United Kingdom. The assessee also filed Form 67 (relating to filing a Statement of income from a country or specified territory outside India and Foreign Tax Credit) in support of its foreign tax credit. The reasons cited by the assessee for the delayed filing of income tax return was that the assessee a British Citizen has been working in the United Kingdom since long time paying regular taxes to HMRC, UK. The assessee was stuck in Kolkata during COVID period and his health condition was not good as he was suffering from several comorbidities. The claim of the assessee was rejected in the intimation issued under section 143(1) of the Act and thereafter the assessee moved a rectification application which was also rejected and hence, the assessee came in appeal before the ld. CIT(Appeals). 4. The ld. CIT(Appeals) also dismissed the appeal of the assessee by observing and holding as under:- "I have carefully considered the facts of the case and the findings of the Ld. AO recorded while passing Rectification Order u/s 154 of the Income Tax Act, 1961. I have carefully examined the material at hand including the impugned orders, the submissions of the appellant, the citatio....
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....ly a procedural formality and not mandatory in nature. But, most respectfully I beg to differ from the above mentioned judgments passed by the Ld. ITAT since Rule 128 of the Income Tax Rules, 1962 categorically mandates that for claiming credit of any taxes in a country or territory specified outside India, for the AY-2021- 22, the assessee shall file Form No. 67 under sub-rule (9) of rule 128 of the Income-tax rules, 1962 before the due date for filing the return of income under section 139(1) the Income-tax Act, 1961 and also mandates that filing of Form No. 67 shall precede the filing of the return. Therefore, I am of the view that it is not only directory but also mandatory in nature. In this case, the appellant failed to follow the procedure suggested by the LT Rules. In view of the above, the grounds of appeal are dismissed". 5. After considering the rival contentions and perusing the relevant material available on record, we find that the assessee has been staying abroad and was a non-resident during the year in connection with his employment abroad. The assessee claimed foreign tax credit of Rs. 37,79,568/- under section 90 and also filed Form 67 with the return....
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....43(1) of the dated 28.03.2019 and was withdrawn by the AO by passing order u/s 154 of the Act when the assessee filed form 67 before the AO. In our opinion the credit in respect of foreign tax cannot be denied to the assessee for the technicality of not filing the form 67 within the due date of return u/s 139(1) of the Act. The case of the assessee finds support from the decision of Coordinate Benches in the case of Atanu Mukherjee Vs. ITO in ITA No. 439/KOL/2022 for AY 2020-21 order dated 20.12.2022 and Sobhan Lal Gangopadhyay Vs. ADIT in ITA No. 782/KOL/2022 for AY 2020-21 order dated 09.05.2023. 6. In the result, the appeal filed by the assessee is allowed." 8. Further, in the case of Deepak ShimogaPadmaraju Vs. Assistant Director of Income Tax (supra), relying upon the case of Brinda Rama Krishna in ITA No. 454/Bang/2021 for AY 2018-19, order dated 17.11.2021 it has been held that Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67. The relevant extract of the aforesaid order read as under: "(ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provision....
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.... it is accompanied by,- (A) an acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee; (B) proof of deduction where the tax has been deducted. (9) The statement in Form No.67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under subsection (1) of section 139, in the manner specified for furnishing such return of income." 4. The Assessee claimed FTC of Rs. 4,73,779/- u/s. 90 of the Act read with Article 24 of India Australia tax treaty ("DTAA") in a revised return of income filed on 31.8.2018. The Assessee had not filed the Form 67 before filing the return of income. On realising the same, the Assessee filed Form 67 in support of claim of foreign tax credit on 18.04.2020. The revised return of income was processed by Centralized Processing Centre (CPC) electronically and intimation u/s 143(1) of the Act on 28.05.2020 was passed disallowing the claim of FTC. 5. The Assessee filed a rectification application be....
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.... An assessee, being a resident shall be allowed credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such lax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule: Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India" 8. We further note that section 90 of the Act provides that Government of India can enter into Agreement with other countries for granting relief in respect of income on which taxes are paid in country outside India and such income is also taxable in India. Article 25 of DTAA between India and USA provides for credit for foreign taxes. Article 25(2)(a) is relevant in the present context. Same is extracted below: "Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in the Unit....
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.... in respect of compliance with the procedural requirements have observed that: "The mere fact that it is statutory does not matter one way of that other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve." 12. Further, in the case of Engineering Analysis Centre of Excellence Private Limited vs the Commissioner of Income -tax & Anr. Civil Appeal Nos. 8733-8734 of 2018 & Ors. Hon'ble Supreme Court have held as under that the provisions of DIAA shall override the provisions of the Income-tax Act unless they are more beneficial to the assessee: 165. The conclusions in the aforestated paragraph have no direct relevance to the facts at hand as the effect of section 902) of the Income Tax Act wat explanation 4 thereof, is to treat the DTAA provisions as the low that must be followed by Indian courts, notwithstanding what may be contained in the Income Tax Act to the contrary, unless more beneficial....
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....of FTC and hold that rule 128(9) of the Rules 3 does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory het directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. 9. In the result, the appeal filed by the assessee is allowed. 15. Similarly, in the case of Ashish Agrawal Vs. Income Tax Officer, Ward-12(1), Hyderabad ITA No. 337/Hyd/2023 ITAT HYDERABAD BENCHES "B", have held vide order dated 26/09/2023 that: 11. As far as the issue of FTC is concerned, learned AR placed reliance on the decision in the case of Ms. Brinda Rama Krishna (supra) in the case of Ms Brinda Rama Krishna (supra), the Bench considered the issue in the light of the provisions of 10 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 DTAA, section 295(1) of the Act, the decisions of the Hon'ble Apex Court in the case of Mangalore Chemicals & Fertilizers 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 m Union of India Vs. Azadi BachaoAndolan (2003) 263 ITR 706 (SC) etc. and reached a con....
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....ive effect to the FTC was not accepted and intimation along with notices of demand was received. The assessee also could not succeed with the rectification application filed and approached the CIT u/s 264 of the Act and at the same time filed a writ petition before the Hon'ble Madras High Court. It was stated by the respondent- department that rule 128 is mandatory and cannot be considered as directory in nature. The petitioner referred to the judgment of the Hon'ble Supreme Court in the case of CIT vs. G.M. Knitting Industries (P) Ltd. Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015 The Hon'ble High Court allowed the Writ Petition in favour of the assessee by holding as under. "11. The law laid down by the Hon'ble Apex Court in Commissioner of Income Tax, Maharashtra v. G.M.Knitting Industries (P) Limited in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015, which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without FIC, 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....