2022 (10) TMI 107 - AT - Income Tax

Relief u/s 90 - foreign tax credit - disallowance of FTC in case of delay in filing Form No. 67 - whether assessee is entitled to foreign tax credit even when form number 67 required to be filed according to the provisions of rule 128 (9) of the Income Tax Rules on or before the due date of filing of the return of income not complied by the assessee but same was filed before the completion of the assessment proceedings? - HELD THAT - It is well settled that while laying down a particular procedure if no negative or adverse consequences are contemplated for non-adherence to such procedure the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Admittedly Rule 128 does not prescribe denial of credit of FTC. Further the Act i.e. section 90 or 91 also do not prescribe timeline for filing of such declaration on or before due date of filing of ROI. Further rule 128 (4) clearly provides the condition where the foreign tax credit would not be allowed. Rule 128 (9) does not say that if prescribed form would not be filed on or before the due date of filing of the return no such credit would be allowed. Further by the amendment to the rule with effect from 1 April 2022 the assessee can file such form number 67 on or before the end of the assessment year. Therefore legislature in its own wisdom has extended such date which is beyond the due date of filing of the return of income. Further the fact in the present case is quite distinct then the issue involved in the decision of the honourable Supreme Court in case of Wipro Ltd 2022 (7) TMI 560 - SUPREME COURT - Here it is not the case of violation of any of the provisions of the act but of the rule which does not provide for any consequence if not complied with. Therefore respectfully following the decisions of the coordinate bench on this issue we hold the assessee is eligible for foreign tax credit as she has filed form number 67 before completion of the assessment though not in accordance with rule 128 (9) of The Income Tax Rules which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly ground number 2 of the appeal of the assessee is allowed.

Summary

Issues:
- Disallowance of foreign tax credit by National Faceless Appeal Centre for assessment year 2018-19.
- Requirement of filing Form 67 for claiming foreign tax credit.
- Interpretation of Rule 128 of The Income Tax Rules, 1962 regarding the mandatory nature of filing Form 67.
- Assessment of total income and disallowance of foreign tax credit by the assessing officer.
- Appeal by the assessee against the assessment order before National Faceless Appeal Centre.
- Legal arguments regarding the mandatory nature of filing Form 67 for claiming foreign tax credit.
- Decision of the National Faceless Appeal Centre dismissing the appeal.
- Further appeal before the Appellate Tribunal ITAT Mumbai.
- Arguments presented by both the authorised representative and the departmental representative.
- Reference to the decision of the Supreme Court in a similar matter.
- Analysis of the requirement of filing Form 67 before the due date of filing the return of income.
- Decision of the Appellate Tribunal ITAT Mumbai allowing the appeal of the assessee.
- Conclusion of the judgment allowing the appeal and granting foreign tax credit to the assessee.

Detailed Analysis:
- The appeal was filed by the assessee against the appellate order passed by the National Faceless Appeal Centre, denying foreign tax credit for assessment year 2018-19.
- The issue revolved around the requirement of filing Form 67 for claiming foreign tax credit, as per Rule 128 of The Income Tax Rules, 1962.
- The assessing officer disallowed the foreign tax credit claimed by the assessee due to the belated filing of Form 67, despite the return of income being filed within the due date.
- The National Faceless Appeal Centre upheld the disallowance, emphasizing the mandatory nature of filing Form 67 before the due date of filing the return of income.
- The assessee argued that the filing of Form 67 should not be considered mandatory for claiming foreign tax credit, citing legal precedents and interpretations.
- The Appellate Tribunal ITAT Mumbai analyzed the provisions of Rule 128 and held that the requirement of filing Form 67 before the due date of filing the return of income was not mandatory but directory in nature.
- Referring to previous decisions and the absence of adverse consequences for non-compliance, the Tribunal allowed the appeal of the assessee and granted foreign tax credit.
- The Tribunal concluded that the assessee was eligible for foreign tax credit as Form 67 was filed before the completion of the assessment proceedings, even though not in accordance with Rule 128.
- The judgment allowed the appeal of the assessee, emphasizing the distinction between a violation of the act and a rule without prescribed consequences for non-compliance.
- The Tribunal also allowed other grounds of appeal related to the claim of foreign tax credit, ultimately granting relief to the assessee.