The case involves an assessee who is a Resident and ordinarily Resident under Indian Income Tax law and also a tax Resident of the USA. He filed his income return on October 21, 2021, seeking a refund of Rs.34,380/-, claiming a Foreign Tax Credit (FTC) of Rs.4,32,10,256/- under section 90 of the Income Tax Act, 1961, in accordance with the India-USA Double Tax Avoidance Agreement (DTAA). Due to Covid-19, the filing deadline was extended to March 15, 2022. Initially, Form No.67 was filed on October 21, 2021, with an incorrect assessment year mentioned, followed by a corrected filing on March 28, 2022. Despite these efforts, the Central Processing Centre (CPC), Bengaluru, rejected the claim for FTC and issued a demand for Rs.5,03,96,640/-. Even after a rectification application was submitted and rejected, the CPC did not allow the FTC. Eventually, an appeal was made to the Commissioner of Income Tax (Appeals) [CIT(A)]/National Faceless Assessment Centre (NFAC), who, in a decision dated January 16, 2023, directed the Assessing Officer to accept the FTC claim.
Displeased with this decision, the revenue filed an appeal before the tribunal.
The Learned Deputy Representative (DR) vehemently opposed the CIT(A)/NFAC’s decision, arguing that since Form 67 was not filed within the specified time under section 139(1) of the Act, allowing the FTC was unjustified. Conversely, the assessee’s counsel cited precedent decisions where the Tribunal had granted FTC even for belated filings under similar circumstances:
- Deelip Kanhailal Chawla vs. ITO vide ITA No.87/PUN/2023, order dated 09.03.2023
- Milind Moreshwar Pimpalkhare vs. DDIT, CPC vide ITA No.1031/PUN/2023, order dated 13.10.2023
- Duraiswamy Kumaraswamy vs. PCIT & Ors vide W.P. No.5834 of 2022 and W.M.P. Nos.5925 and 5927 of 2022, order dated 06.10.2023.
The tribunal determined that the Assessing Officer at the CPC rejected the FTC claim of Rs.4,32,10,256/- based on the argument that the assessee did not submit form No.67 by the specified due date for filing the return of income under section 139(1) of the Act. The Assessing Officer cited CBDT’s Notification No.9, dated September 19, 2017, which mandates Form 67 to precede the filing of the income return. Consequently, the Assessing Officer rejected the 154 application filed by the assessee. However, the tribunal noted that the CIT(A)/NFAC allowed the FTC claim. The tribunal found no flaws in the CIT(A)/NFAC’s decision instructing the Assessing Officer to accept the FTC claim despite the delay in filing form No.67.
The Tribunal referred to the Hyderabad Bench’s decision in the case of Baburao Atluri vs. DCIT, noted under ITA Nos.108 & 118/Hyd/2022, with an order dated July 22, 2022. In this case, despite a delay in filing the FTC certificate in Form 67, the Hyderabad Bench allowed the FTC. Their decision was based on the following observation:
“10. We have heard the rival arguments made by both the sides, perused the orders of the AO and NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case did not allow the Foreign Tax Credit (FTC) on the ground that Form No.67 has been filed beyond the due date of filing of the return. We find the NFAC upheld the action of the AO, the reasons of which have already been reproduced in the proceeding paragraph. It is the submission of the ld.Counsel for the assessee that filing of foreign tax credit certificate in Form-67 is directory in nature and not mandatory and therefore the NFAC is not justified in denying the Foreign Tax Credit.
11. We find the Bangalore Bench of the Tribunal in the case of M/s. 42 Hertz software India Pvt.Ltd(supra) while deciding an identical issue has held that FTC cannot be denied to the assessee, where the assessee filed FTC in Form No.67, although belatedly since filing of such Form 67 is not mandatory but directory in nature. The relevant observation of the Tribunal from para 6 onwards reads as under:-
“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) does not provide for disallowance of FTC in case of delay in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda Kumar Krishna vs.ITO in ITA no.454/Bang/2021 by order dated 17/11/2021.
7. It‟s a trite law that DTAA overrides the provisions of the Act and the Rules, as held by various High Courts, which has also been approved by Hon‟ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471.
8. We accordingly, hold that FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/evidences in support of its claim. We thus remand this issue back to the Ld.AO to consider the claim of assessee in accordance with law, based on the verification carried out in respect of the supporting documents filed by assessee. Accordingly the grounds raised by assessee stands allowed for statistical purposes.”
12. We further find, in the instant case, the delay in filing of the FTC certificate in Form-67 was explained to be due to non receipt of the tax deduction certificate form the foreign deductor from Zambia within time for which the said Form-67 was filed belatedly by 14 days. It was stated that the tax jurisdiction of the Zambian deductor follow different period for taxing the income and have different due dates for filing the return as compared to India. So far as the decision relied on by ld. DR in the case of Muralikrishna Vaddi(supra) is concerned, we find there is a delay of more than two years without any valid and reasonable cause. Therefore, the said decision in our opinion cannot be applicable to the facts of the present case. In any case, when there are two view possible, the view which is favourable to the assessee has to be followed as held by Hon‟ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. reported in (1972) 88 ITR 192. Since, the assessee in the instant case has filed FTC certificate in Form No.67 with delay of only „14‟ days, therefore following the decision of the Bangulur Bench of the Tribunal in the case of M/s. 42 Hertz Software India Pvt.Ltd.(supra), we direct the AO to allow the FTC after due verification. The grounds raised by the assessee are accordingly allowed.”
Therefore, considering the entirety of the facts and circumstances of the case and in the interest of justice, the tribunal remanded the issue back to the Assessing Officer. The Assessing Officer is directed to verify the form No.67 and allow the consequential Foreign Tax Credit (FTC).
Citation: JCIT (OSD), Circle-12, Pune vs Raj Surendra Mohan Hajela ITA No.470/PUN/2023 Assessment Year : 2021-22
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