TMI Blog2023 (6) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds of appeal:- 1. On the facts and circumstances of the case, the final assessment order passed by the learned Assessing Officer under Section 143(3) read with Section 144B of the Act is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in passing the order without considering the foreign tax credit merely due to a procedural lapse of filing of Form 67 is clear violation of the principle of natural justice. 3. (i) On the facts and circumstances of the case, the learned AO has erred both on facts and in law in making the disallowance of Rs. 35,02,850/- on account of foreign tax credit claimed by the assessee in respect of taxes paid in the USA and availed the relief from the double taxation as per the treaty between India and USA. (ii) That the above said disallowance has been made despite the submissions and explanation along with the evidences brought on record justifying the claims made by the assessee. (iii) That the above disallowance has been made ignoring the settled position of law that the foreign taxes paid by the assessee, shall be allowed as a credit against the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. iii) That the above disallowance has been made ignoring the settled position of law that the FTC paid by the assessee, shall be allowed as a credit against the Indian Tax, payable by a resident Indian to give him relief from double taxation on the same income. In respect to the above grounds of appeal, we would like to draw your kind attention that the Ld. A.O./NFAC has accepted the total income of the assessee at Rs.1,08,66,510/- as declared by him in his tax return and disallowed only the relief claimed under section 90 of the Income Tax Act, 1961 for FTC, on the ground of delay in filing of Form 67 by the assessee as required under Rule 128 of the Income Tax Rules, 1962. We would like to reproduce the Rule 128 of the Income Tax Rules, 1962 (Rules) which provides the provisions related with 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, ld. NFAC had denied the FTC relief available to assessee merely because there was a delay in filling Form 67 and made observation in the impugned order at Page No.8 in last para that:- The due date for furnishing return of income in the case of the assessee was 31/07/2018 which was further extended upto 31/08/2018. On perusal of E-filing portal, it has been found that the assessee has furnished Form 67 on 03/09/2018. Thus, it is evident that the assessee has not furnished Form 67 on or before the due date specified for furnishing the return of income under subsection (1) of section 139. The assessee has also failed to furnish the certificates of statements referred to in rules 128(8)(ii). Thus, the assessee failed to fulfill both the conditions as stated above for allowance of his foreign tax credit. . On the basis of above observation, the Ld A.O/NF AC has made decision in the impugned order at page No.10 in last para that:- Thus, the provisions of Rule-128 of the Rule can not be ignored or relaxed in the case of the assessee relating to his claim of foreign tax credit. Since the assessee failed to fulfill the conditions as laid down in Rule-128 of I.T. Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SA shall be allowed as a credit against the Indian tax but limited to proportion of Indian tax. Neither section 90 nor DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirements. FTC is Assessee s vested right as per Article 25(2)(a) of the DTAA read with Section 90 and same cannot be disallowed for non-compliance of procedural requirement that is prescribed in the Rules. It is further submitted that Section 295(1) of the Act gives power to the CBDT to prescribe Rules for various purposes. Section 295(2)(ha) gives power to the Board to issue 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; 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 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Act which specifically deny deduction or exemption or relief in case the return/form is not filed within prescribed time limits. Reference was made to section 80AC, 80-IA(7), l0A(5) and l0A(5) etc, wherein there is specific provision for disallowance of deduction/exemption if audit report is not filed along with the return, various High Courts have taken a view that filing of audit report is directory and not mandatory. Such language is not used in Rule 128(9). Therefore, such condition cannot be read into Rule 128(9). 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 taxmann.com 16 (Allahabad) - CIT, Central Circle vs American Data Solutions India (P) Ltd [2014] 45 taxmann.com 379 (Karnataka) - CIT-II vs Mantee Consultants (P.) Ltd [2009] 178 Taxman 429 (Delhi) - CIT vs ACE Multitaxes Systems (p.) Ltd [2009] 317 ITR 207 (Karnataka). We submit 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, is a procedural/directory requirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantive right of claiming the credit of FTC . iii) Brinda Rama Krishna Vs ITO (2022) (Hon'ble ITAT Bangalore):- It was 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. In the result, the appeal is allowed and benefit of FTC is allowed iv) Mangalore Chemicals Fertilizers Ltd. vs. Deputy Commissioner (1992 Supp (1) Supreme Court 21) Sambhaji and Others vs. Gangabai and others [2008] 17 SCC 117 (SC):- The Hon'ble Apex Court had laid down the proposition that procedural law should not be construed as mandatory and should only aid the claim of substantive right . Prayer:- Therefore, when once the authenticity, veracity and genuineness of the claim of the assessee, in respect of his foreign tax credit, has been established by him, by production of the corresponding docu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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