TaxTMI 
TaxTMI 
2024 (12) TMI 853
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....n 234B and 234C of the Act. 3. The Learned AO has erred in the facts and circumstances of the case and in law in issuing the intimation order dated 6 March 2021 under Section 245 of the Act, 21 January 2022 under Section 143(1) of the Act and 3 August 2022 under Section 143(1) of the Act adjusting the Mura of INR 59.190, INR 7,480 and INR 28,400 for the AY 2020-21. AY 2021-22 and AY 2022-23 respectively against the demand of AY 2018-19. 4. Learned AO has in the facts and circumstances of the case and in law erred in imposing interest of INR 1,97,971 for delay in payment on impugned demand under section 220(2) of the Act thereby incorrectly raising a demand of INR 7,84,331. 5. Learned AO in the facts and circumstances of the case and in law erred in disregarding documentary evidence filed in support of the relief claimed under Article 23(2) of the India-Japan DTAA read with Section 90 of the Act i.e. Form 67 duly filed by the Appellant at the time of filing the revised return of income (ROI) including proof of taxes deducted/ paid in Japan along with computation of FTC / judicial precedents cited. 6. Learned AO has in the facts and circumstances o....
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.... for filing of return of income u/s 139(1) of the Act. Sub-rule 1 of Rule 128 states that a resident assessee shall be allowed a credit of foreign tax paid by him in a country or specified territory outside India, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India. This foreign tax credit is subject to the manner and to the extent as specified in this rule. Subrule 1 of Rule 128 make mandatory for the Assessing Officer to allow foreign tax credit to the resident assessee in the manner and to the extent as specified in this rule. Thus, the language used in sub-rule 1 is mandatory provision for the Assessing officer. In sub-rule 2 to 10 of Rule 128, everywhere the word 'shall' has been used. Once it is mandatory for the Assessing officer to allow foreign tax credit to the resident assessee, the manner and extent of providing such foreign tax credit becomes mandatory. The question is whether use of word "shall" as indicated in Rule 128(8) which requires the assessee to file form no. 67 before the due date of filing of return of income u/s 139(1) of the IT Act, is to be construed as mandatory or directory. On appeal, th....
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....t ("FTC") for taxes paid in Australia. 3. There is no dispute that the Assessee is entitled to claim FTC. Rule 128 of the Income Tax Rules, 1962 (Rules) provides for giving FTC and reads thus: "Foreign Tax Credit. 128. (1) An assessee, being a resident shall be allowed a 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 tax 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." One of the requirements of Rule 128 for claiming FTC is provided by Rule 128 (8) & (9) of the Rules and the same reads thus: "(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:- (i) a statement of income from the country or....
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.... before the time allowed under section 139(5) of the Act, and therefore Form 67 is nonest in law. The CIT(A) also held that provisions of Rule 128 are mandatory in nature. The CIT(A)rejected the contention of the Assessee that filing of Form 67 is a procedural requirement and noncompliance thereof does not disentitle the Assessee of the FTC. 7. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. The learned counsel for the Assessee submitted that disallowance of FTC is bad in law. He submitted 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 24 of India Australia DTAA provides for credit for foreign taxes. Article 24(4)(a) is relevant in the present context. Same is extracted below: "4. In the case of India, double taxation shall be avoided as follows: (a) the amount of Australian tax paid under the laws of Australia and in accordance with the provisions of this Agreement, whether directly or by deduction, by a resident of India....
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.... specifically provided that the FTC would be disallowed if the assessee does not file Form 67 within the due date prescribed under section 139(1) of the Act. It was submitted that that there are many sections in the Act which specifically deny deduction or exemption or relief in case the return is not filed within prescribed time. Reference was made to section 80AC, 80-IA(7), 10A(5) and 10B(5). Such language is not used in Rule 128(9). Therefore, such condition cannot be read into Rule 128(9). 11. It was further submitted that Filing of Form 67 is a procedural/directory requirement and is not a mandatory requirement. It was submitted that violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC. Reliance was placed on the decision of the Hon'ble Supreme Court, in the case of Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, (1992 Supp (1) Supreme Court Cases 21) wherein it observed that: "The mere fact that it is statutory does not matter one way or the 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....
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.... Excellence P Ltd v CIT (2021) 125 taxmann.com 42 (SC) (Pg 106-109 of PB 2-Para 25 & 26) CBDT Circular No 333 dated 2/4/82 137 ITR (St.) It was submitted that when there is no condition prescribed in DTAA that the FTC can be disallowed for non-compliance of any procedural provision. As the provisions of DTAA override the provisions of the Act, the Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision. 14. The learned DR reiterated the stand of the revenue that rule 128(9) of the Rules, is mandatory and hence the revenue authorities were justified in refusing to give FTC. He also submitted that the issue was debatable and cannot be subject matter of decision in Sec.154 proceedings which are restricted in scope to mistakes apparent on the face of the record. 15. In his rejoinder, the learned counsel for the Assessee submitted that Form No.67 was available before the AO when the intimation u/s. 143(1) of the Act dated 28.5.2020 was passed. He pointed out that the AO or the CIT(A) did not dismiss the Assessee application for rectification u/s. 154 of the A....