TMI Blog2023 (5) TMI 1287X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the relevant assessment year makes the assessee entitled to claim FTC . Therefore, considering the facts of the present case, the FTC deserves to be allowed to the assessee even if Form 67 was filed by the assessee after the due date of filing the return under section 139(1) of the IT Act, 1961, and in our view not allowing foreign tax credit by AO (CPC) was nothing, but a mistake apparent on record. Therefore, we direct the revenue to allow the claim of the assessee. - Shri Sandeep Gosain, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri Rohan Sogani (CA). For the Revenue : Smt. Monisha Choudhary, (Addl. CIT). ORDER PER: SANDEEP GOSAIN, J.M. This appeal by the assessee is directed against the order dated 20.12.2022 of ld. CIT (A), Udaipur-2 passed under section 250 of the IT Act for the assessment year 2018-19. The assessee has raised the following grounds :- 1. In the facts and circumstance of the case and law, ld. CIT (A) has erred in confirming the action of ld. AO (CPC), in not allowing the credit of the taxes paid outside India by the assessee, while processing the Return of Income under section 143(1) of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the purview of section 143(1). 5. The assessee craves his right to add, amend or alter any of the grounds on or before the hearing. 2. The brief facts of the case are that the assessee for the relevant previous year earned income from salary, rental income and also income from business or profession. Part of the income was received by the assessee from outside India, i.e. from M/s. Strata Stones Ltd., entity based in United Kingdom (UK) and salary income in India from M/s. Stone Age Private Ltd. He also earned rental income from his house properties situated in India and Income from business. For the relevant previous year, assessee was a resident in India, in accordance with section 6 of the IT Act, 1961. Thus, in accordance with section 5 read with section 4 and 6, assessee offered entire income earned by him, whether in India or outside India i.e. his Global Income to tax in India, while filing his return of income on 13.03.2019 for the relevant previous year. While filing the return of income, assessee considered income of Rs. 21,56,330/- earned in UK as part of his total income offered for tax in India. Against the income earned in UK, assessee paid tax of Rs. 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reunder for the sake of our ready reference. 2. Subject to the provisions of the law of India regarding the allowance as a credit against Indian tax of tax paid in a territory outside India (which shall not affect the general principle hereof), the amount of the United Kingdom tax paid, under the laws of the United Kingdom and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of India, in respect of income from sources within the United Kingdom which has been subjected to tax both in India and the United Kingdom shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax . 2.4 As per Article 24, assessee having paid taxes in UK was entitled to claim credit of such taxes, without even fulfilling any procedural requirement, such as filing of any form or otherwise. Thus, as long as the assessee paid taxes in UK and offered the income earned in UK to tax in India the assessee was entitled to claim credit of such taxes paid in UK. 2.5 The requirement for filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only limitation placed is by insertion of Sub-Section (2A) to Section 90 which states that notwithstanding anything contained in subsection (2), the provisions of Chapter X-A (dealing with the General Anti Avoidance Rules) of the Act shall apply to the assessee even if such provisions are not beneficial to him . Thus, Section 90(2A) is the only statutory provision in the ITA, which starts with a non-obstante clause vis- -vis the provisions of Section 90(2), and it is the only rider to the treaty override provision set out in Section 90(2). 2.8 Accordingly, when the provisions of DTAA are juxtaposed alongside the provisions of the ITA, then the provisions of DTAA shall always override the provisions of ITA. 2.9 However, in a scenario, wherein, if the provisions of the ITA are more beneficial in comparison to the DTAA then only to that extent the beneficial provisions as contained in the ITA shall have to be made applicable on the assessee. In other words, only to the extent of the beneficial provisions, will the provisions of the ITA supersede the provisions of DTAA, otherwise, DTAA shall always have an overriding effect on the provisions of the ITA. 2.10 Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 253, parliament has power to make any law for whole or any part of India for implementing any treaty, agreement and convention with any other country or countries. 2.15 Attention is drawn towards the decision of Nagarjuna Fertilizers and Chemical Ltd. [2017] 55 ITR (TRIB) 1 [Hyd.], rendered by the Special Bench of Hon'ble ITAT. In the said case, the issue was that the assessee had made payment outside India. For the purpose of deduction of Tax at Source, the assessee applied the tax rate as prescribed under the relevant Article of DTAA, entered between India and the country of residence of the payee. The payees to whom the payment were made by the assessee were not having any Permanent Account Number ( PAN ), in India. Department was of the view that since the payees were not having PAN in India, then assessee should have deducted tax at source, not as per the rate prescribed under DTAA, but as per the higher rate prescribed under Section 206AA. The precise question for adjudication before the Special Bench was that whether the provisions of DTAA would be applied or whether the provisions of Section 206AA would supersede the provisions of DT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision beneficial to the assessee 2.17 Without prejudice to above, i.e. under the DTAA there is no requirement of filing Form 67 for availing FTC, It is submitted that Filing of Form 67, for the purpose of claiming FTC is a procedural requirement provided in the Income Tax Rules, 1962. It is a trite law that non fulfilment of any procedural requirement, cannot in any way, debar the assessee from any claim or benefit under the law to which he is otherwise entitled to. 2.18 Even Rule 128 nowhere prescribes that if Form 67 is not filed within the stated time frame, the relief as sought by the assessee under Section 90 of the ITA would be denied. In case the intention of the statute was to deny the FTC, either the ITA or the relevant Rule 128 would have specifically provided that the FTC would be disallowed if the assessee does not file Form 67 within the due dates prescribed under Section 139(1) of the ITA. It is submitted that there are many sections in the ITA which specifically denied deduction or exemption or relief in case the return is not filed within the prescribed time frame. Attention is drawn toward Section 80AC, Section 80IA, Section 10A, Section 10B etc. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed, no fault could be found against the assessee. That was also the view of the Delhi High Court in the case in CIT v. Contimeters Electricals (P.) Ltd. [2009] 317 ITR 249/ 178 Taxman 422 (Delhi), wherein the Delhi High Court, by following the judgements of the Madras High Court in CIT v. A.N. Arunachalam [1994] 208 ITR 481 / 75 Taxman 529 and in CIT v. Jayant Patel [2001] 248 ITR 199/ 117 Taxman 707 (Mad.) held that the filing of audit report along with the return was not mandatory but directory and that if the audit report was filed at any time before the framing of the assessment, the requirement of the provisions of the Act should be held to have been met. 6. That is also the consistent view of the other High Courts, including the High Court of Bombay in CIT v. Shivanand Electronics [1994] 209 ITR 63 / 75 Taxman 93 (Bom.), apart from Gujarat High Court in Zenith Processing Mills v. CIT [1996] 219 ITR 721 (Guj.) and Punjab and Haryana High Court in CIT v. Mahalaxmi Rice Factory [2007] 294 ITR 631/ 163 Taxman 565 (Punj. Har). 7. The Calcutta High Court in the case in the CIT v. Berger Paints (India) Ltd. [2002] 254 ITR 503/[2003] 126 Taxman 435 (Cal.) has also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. As against that, in the present case, there is no express requirement of filing Form 67, either in the DTAA or in the ITA, as a mandatory requirement for claiming FTC. Under such circumstances, even if Form 67 has been filed by the assessee with delay, the claim of FTC cannot be rejected. 2.23 Moreover, nowhere in Rule 128 of the ITR, it has been specified that if Form 67 is not filed at all or if filed after the due date of filing of return u/s 139(1) then the assessee would be denied the claim of FTC. 2.24 In view of the above settled legal position that non-compliance of procedural requirements, even if mandated under the law cannot be fatal and debar the assessee from claiming various benefits/credits, if the assessee, on substantive basis, is otherwise eligible for those benefits/credits. Thus, the action of ld. AO(CPC) is not only contrary to settled legal position, but is also outside the purview of automatic processing under 143(1) 2.25 In the present case, assessee filed Form 67, although with a delay. Thus, it is not the case that the assessee has not filed the Form 67 at all but has filed it with a delay. 2.26 Attention is drawn towards the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Case Law Page 1 Ritesh Kumar Garg 261/JP/2022 Jaipur Page 7 2 Bhaskar Dutta 1869/DEL/2022 New Delhi Page 16 3 Sumedha Arora 1399/DEL/2022 New Delhi Page 20 2.28 Hon ble ITAT, Jaipur Bench, in the case Ritesh Kumar Garg, ITA 261/JP/2022, under identical set of facts, held that filing of Form 67, in accordance with Rule 128 was only a procedural/directory requirement and not a mandatory requirement. Hon ble ITAT, also relied upon the decision of ITAT Bangalore Bench, in the case of Brinda Rama Krishna (supra). 2.29 Ld. CIT(A) /NFAC rejected the claim of the assessee on two grounds: - 2.29. i Filing of Form 67 is mandatory requirement; and 2.29. ii Rejection of FTC for delayed filing of Form 67 is a debatable issue not falling under the purview of Section 154, which only deals with the mistake apparent on record. NFAC, in this regard, also relied u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FTC was allowed by different benches of Hon ble ITAT. S.No. Case law ITA No. Bench AY Date of filing Form 67 Case Law Page 1 Ritesh Kumar Garg 261/JP/2022 Jaipur AY 2020-21 24.04.2021 Page 5 2 Brinda Ramakrishna 454/Bang/2021 Bangalore AY 2018-19 18.04.2020 Page 9 3 Bhaskar Dutta 1869/DEL/2022 New Delhi AY 2020-21 31.05.2021 Page 15 4 Sumedha Arora 1399/DEL/ 2022 New Delhi AY 2019-20 15.07.2021 Page 19 In view of the above, Foreign Tax Credit, deserves to be allowed in to-to, even if the Form 67 was filed after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Form 67 is enclosed] 02.11.2019 6.1. After having gone through the facts of the present case, we find that the sole reason for rejecting the Foreign Tax Credit (FTC) to the assessee was that Form 67 for claiming FTC was filed by the assessee after the due date prescribed under section 139(1) relevant for the year under consideration. It is undisputed fact that Form 67 had already been filed by the assessee although he had filed it delayed. The entitlement of claiming FTC of taxes having paid outside India emerges from Double Taxation Avoidance Agreement (DTAA) entered by India with different countries. In the present case assessee had offered his income earned in UK by filing return of income in India. The assessee claimed the credit of taxes paid in UK which was in accordance with Article 24 of the DTAA between India and UK. The relevant extract of the same are reproduced below for the sake of brevity :- 2. Subject to the provisions of the law of India regarding the allowance as a credit against Indian tax of tax paid in a territory outside India (which shall not affect the general principle hereof), the amount of the United Kingdom tax pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of of deduction where the tax has been deducted. (9) The statement in Form No.67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred 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 sub-section (1) of section 139, in the manner specified for furnishing such return of income Our attention was drawn towards Sub-Section (2) of Section 90, which states that for granting relief in accordance with the provisions of the DTAA, the provisions of the I.T. Act shall apply only to the extent they are more beneficial to the assessee. Going by the plain words of the statute, the provisions of the ITA, in a situation covered by the tax treaty, cannot put the assessee to any greater burden than the burden placed by the provisions of applicable tax treaty. The only limitation placed is by insertion of Sub-Section (2A) to Section 90 which states that notwithstanding anything contained in sub-section (2), the provisions of Chapter X-A (dealing with the General Anti Avoidance Rules) of the Act shall apply to the assessee even if such provisions are not beneficial to him . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he due dates prescribed under section 139(1) of the IT Act. The ld. A/R further submitted that there are many sections in the IT Act which specifically denied deduction or exemption or relief in case the return is not filed within the prescribed time frame. Our attention was drawn toward section 80AC, sec. 80IA, sec. 10A, sec. 10B etc. However, such language is not used in Rule 128(9). Therefore, such condition cannot be read into Rule 128. In this regard our attention was drawn to the recent decision passed by the Coordinate Bench of the Tribunal, Bangalore Bench in the case of Brinda Rama Krishna [2022] 135 taxmann.com 358 (Bangalore - Trib.) [Case Law Page 12] which laid down the ratio that Rule 128(9) of Income Tax Rules, 1962, does not provide for disallowance of Foreign Tax Credit in case of delay in filing Form 67, and filing of Form 67 is not mandatory but a directory requirement. In the said case, assessee had not filed Form 67 before filing the return of income. Even such Form 67 was not filed before the time-limit prescribed under Section 139(4). When the FTC claimed by the assessee was rejected while processing the return of income under Section 143(1), assessee filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and not a mandatory requirement. The Coordinate Bench also relied upon the decision of ITAT Bangalore Bench in the case of Brinda Rama Krishna (supra). 6.3. While rejecting the claim of assessee, the ld. CIT (A) has relied upon the decision of ITAT Vishakhapatnam Bench in the case of Murlikrishna Vaddi in ITA No. 269/Viz/2021. However, the said decision has already been distinguished by the Coordinate Benches of the Tribunal, in the cases of Ritesh Kumar Garg in ITA No. 261/JP/2022, Bhaskar Dutta in ITA No. 1869/Del/2022, Baburao Atluri in ITA Nos. 108 118/Hyd/2022 and even in the case of Brinda Ramakrishna in ITA No. 454/Bang/2021, it has been held that not allowing FTC for the sole reason of delayed filing of Form 67 was held to be a mistake apparent on the record. Therefore, it was held by the Coordinate Benches of the Tribunal in the cases supra, that rectification application of the assessee for not allowing claim of FTC was maintainable and the Coordinate Bench of the Tribunal, in the cases of Brinda Ramakrishna in ITA No. 454/Bang/2021, Bhaskar Dutta in ITA No. 1869/Del/2022, Sumedha Arora in ITA No. 1399/Del/2022 has held that Form 67 filed by the respective asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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