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TMI Blog2023 (6) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... which claimed to include salary income earned in India as well as salary income earned outside India along with dividend income earned outside India. The assessee had claimed taxes paid outside India as FTC under section 90 of the Act. For the Assessment Year 2021-22, the return of income was filed on 10.01.2022 declaring total income of Rs. 99,85,580/-. The tax liability on the said income declared in the return was Rs. 32,12,551/- and the same was sought to be discharged by credit of FTC under section 90 of the Act to the extent of Rs. 9,47,077/- and TDS of Rs. 22,65,473/-. 3. The return was processed and intimation under section 143(1) of the Act was issued on 13.10.2022. In the said intimation, the AO did not grant FTC to the extent of Rs. 9,47,077/- as claimed in the return of income. 4. Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). The CIT(A) confirmed the view taken by the AO primarily for the reason that the assessee has not filed the return of income within the time prescribed under section 139(1) of the Act. Secondly, it was also mentioned in the impugned order of the CIT(A) that FTC is available in respect of only income taxable in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rused the fact of the case including the findings of the CIT(A) and other materials brought on record. The only issue under consideration in the present appeal is that the NFAC denied of FTC available to the sssessee merely because there was a delay in filling Form 67 i.e., it was filed after the due date for filling original return of income prescribed under section 139(1) of the income tax Act. The said issue under consideration is no longer res integra. We note that on identical issue, the Co-ordinate Bench of ITAT, Bangalore in the case of Brinda Rama Krishna (in ITA No. 454/Bang/2021 for AY.2018-19), order dated 17.11.2021 held that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Therefore, non-furnishing of Form No.67 before the due date u/s 139(1) of the Act is not fatal to the claim for FTC. The findings of the Coordinate Bench is reproduced below: "2. The Assessee is an individual and during the previous year relevant to AY 2018-19 an ordinary res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred 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 before the AO on 15.06.2020 & 25.02.2021 and submitted that credit for FTC as claimed in the return should be given. In the rectification order dated 10.03.2021, the AO upheld the action on the ground that the Assessee has failed to furnish Form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act which is mandatory acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules for FTC. The relevant extract is as follow: "(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters:- (ha) the procedure for granting of relief or deduction, as the case may be, of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, against the income-tax payable under this Act;" 9. It was submitted that the Board has power to prescribe procedure to granting FTC. However, the Board does not have power to prescribe a condition or provide for disallowance of FTC. The procedure prescribed in Rule 128 should therefore be interpreted in this context. Rule 128 is therefore a procedural provision and not a mandatory provision. 10. It was further submitted that Rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed u/s 139(1) of the Act. However, the Rule nowhere provides that if the said Form 67 is not filed within the above stated time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. The learned counsel for the Assessee submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that filing of audit report is directory and not mandatory. Reliance in this regard was placed on the following cases: CIT vs Axis Computers (India) (P.) Ltd [2009] 178 Taxman 143 (Delhi) PCIT, Kanpur vs Surya Merchants Ltd [2016] 72 com 16 (Allahabad) CIT, Central Circle vs American Data Solutions India (P.) Ltd [2014] 45 com 379 (Karnataka) CIT-II vs Mantec Consultants (P.) Ltd [2009] 178 Taxman 429 (Delhi) CIT vs ACE Multitaxes Systems (P.) Ltd [2009] 317 ITR 207 (Karnataka). 13. It was submitted that as per the provisions of section 90(2) of the Act, where the Central Government of India has entered into a DTAA, the provisions of the Act would apply to the extent they are more beneficial to a taxpayer. Therefore, the provisions of DTAA override the provisions of the Act, to the extent they are beneficial to the assessee. Reliance in this regard is placed on the following cases and circulars: Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) CIT v Eli Lily & Co (India) P Ltd (2009) 178 Taxman 505 (SC) GE India Technology Centre P Ltd v CIT (2010) 193 Taxman 234 (SC) Engineering Analysis Centre of Excellence P Ltd v CIT (2021) 125 taxmann.com 42 (SC) (Pg 106-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard. 17. In the result, the appeal is allowed." 7. The aforesaid decision has also been followed by a Division Bench of ITAT Surat Bench in the case of Sanjay Patil Vs Assessing Officer (ITAT Surat) ITA No.189/SRT/2021 Order dated 18/05/2022. Following the view expressed in the aforesaid decision, we hold that the assessee is entitled to FTC and the AO is directed to allow the claim. The decision rendered by the ITAT Visakapatnam Bench in ITA No.269/Viz/2021 dated 14.6.2022 is distinguishable in as much as in the present case, Form No.67 was filed along with the return of income by the assessee and not after the commencement of the scrutiny proceedings by the AO after a delay of more than 2 years, as was the facts in the case decided by the Visakapatnam Bench (supra). We are therefore of the view that the said decision rendered by the Visakapatnam Bench is not applicable to the facts of the present case and the other decisions taking a view in favour of the assessee are applicable. The said decision also does not consider the effect of DTAA and Sec.90 of the Act, vis-à-vis the provisions of Rule 128(9) of the Rules and as to whether the Rules can override the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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