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TMI Blog2024 (7) TMI 1564X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 by way of foreign tax credit which is deducted in foreign country would be denied (sic). 3. For that the assessee craves leave to add, alter or withdraw any ground/s of appeal before or at the time of hearing." 3. Brief facts of the case as noted from Form No. 35 filed before the Ld. CIT (A) are that the assessee is an individual and during the previous year 2019-20, he was employed with M/s Finmechanics Pte. Ltd., #23-09,20, Cecil Street, Singapore - 049705. He had to stay in India for more than 108 days, hence for the purpose of income tax he was treated as a resident. The assessee/appellant, during the said previous year, has voluntarily disclosed gross total income of Rs. 1,46,04,863/- arising out of his salary income of Rs. 1,30,21,582/-, H.P. income of Rs. 61,797/-, Other Source Income of Rs. 10,64,132/- and Capital Gains of Rs. 4,57,352/-. Since, the salary income was from Singapore, taxes were paid in Singapore and relief under Section 90 of the Act was claimed by the assessee, who is an Indian resident, since India has entered into a Double Taxation Avoidance Agreement (for short 'DTAA') with Singapore from where he had earned income. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made in the return of income and the same was not accompanied by the Form No 67 which is mandated by the law. However, the appellant claimed that on 26.12.2020 he had submitted the Form 67 after receiving communication from the e-Filing Team, Income Tax Department on 25.12.2020. But, during the appellate proceedings, the appellant could not submit the Form no 67 which according to him was originally filed on 26.12.2020. Accordingly, the CPC processed the return of income without allowing the credit for foreign tax deduction. Afterwards, the appellant filed a rectification request on 21.05.2022 and on 07.06.2022, the CPC, Bengaluru passed the rectification order, rejecting the claim as there was no legally valid Form 67 available at that point of time. Later on, as per the submission filed by the appellant, he filed the Form No 67 on 03.07.2022 which is beyond the due date for filing the return of income under section 139(1) the Income-tax Act, 1961 under sub-rule (9) of rule 128 of the Income-tax rules, 1962 and hence, non-est as per law." 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed this appeal before the Tribunal. 5. Before us, the assessee reit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the assessee filed form 67 before the AO. In our opinion the credit in respect of foreign tax cannot be denied to the assessee for the technicality of not filing the form 67 within the due date of return u/s 139(1) of the Act. The case of the assessee finds support from the decision of Coordinate Benches in the case of Atanu Mukherjee Vs. ITO in ITA No. 439/KOL/2022 for AY 2020-21 order dated 20.12.2022 and Sobhan Lal Gangopadhyay Vs. ADIT in ITA No. 782/KOL/2022 for AY 2020-21 order dated 09.05.2023. 6. In the result, the appeal filed by the assessee is allowed." 8. Further, in the case of Deepak Shimoga Padmaraju Vs. Assistant Director of Income Tax (supra), relying upon the case of Brinda Rama Krishna in ITA No. 454/Bang/2021 for AY 2018-19, order dated 17.11.2021 it has been held that Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67. The relevant extract of the aforesaid order read as under: "(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, nonfurnishing of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allan for payment of tax where the payment has been made by the assessee; (B) proof 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such lax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule: Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India" 8. We further note that section 90 of the Act provides that Government of India can enter into Agreement with other countries for granting relief in respect of income on which taxes are paid in country outside India and such income is also taxable in India. Article 25 of DTAA between India and USA provides for credit for foreign taxes. Article 25(2)(a) is relevant in the present context. Same is extracted below: "Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in the Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the nonobservance of all conditions irrespective of the purposes they were intended to serve." 12. Further, in the case of Engineering Analysis Centre of Excellence Private Limited vs the Commissioner of Income -tax & Anr. Civil Appeal Nos. 8733-8734 of 2018 & Ors. Hon'ble Supreme Court have held as under that the provisions of DIAA shall override the provisions of the Income-tax Act unless they are more beneficial to the assessee: 165. The conclusions in the aforestated paragraph have no direct relevance to the facts at hand as the effect of section 902) of the Income Tax Act wat explanation 4 thereof, is to treat the DTAA provisions as the low that must be followed by Indian courts, notwithstanding what may be contained in the Income Tax Act to the contrary, unless more beneficial to the assessee. 13. We have gone through the decisions of the coordinate Benches and concur with their findings in this regard that filing of Form No. 67 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrides the provisions of the Act and the Rules cannot be contrary to the Act. 9. In the result, the appeal filed by the assessee is allowed. 15. Similarly, in the case of Ashish Agrawal Vs. Income Tax Officer, Ward-12(1), Hyderabad ITA No. 337/Hyd/2023 ITAT HYDERABAD BENCHES "B", have held vide order dated 26/09/2023 that: 11. As far as the issue of FTC is concerned, learned AR placed reliance on the decision in the case of Ms. Brinda Rama Krishna (supra) in the case of Ms Brinda Rama Krishna (supra), the Bench considered the issue in the light of the provisions of DTAA, section 295(1) of the Act, the decisions of the Hon'ble Apex Court in the case of Mangalore Chemicals & Fertilizers Ltd. Vs. Deputy Commissioner (1992 Supp (1) SCC 21), Sambhaji Vs. Gangabai (2008) 17 SCC 117 and a lot many decisions of the Hon'ble Apex Court including the case m Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC) etc. and reached a conclusion that since Rule 128(9) of the Rules does not provide for disallowance of FTC in the case of delay in filing Form 67 and such filing within the time allowed for filing the return of income under section 139(1) of the Act is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition before the Hon'ble Madras High Court. It was stated by the respondent- department that rule 128 is mandatory and cannot be considered as directory in nature. The petitioner referred to the judgment of the Hon'ble Supreme Court in the case of CIT vs. G.M. Knitting Industries (P) Ltd. Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015 The Hon'ble High Court allowed the Writ Petition in favour of the assessee by holding as under. "11. The law laid down by the Hon'ble Apex Court in Commissioner of Income Tax, Maharashtra v. G.M. Knitting Industries (P) Limited in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015, which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without FIC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature This is what the Hon'ble Supreme Court had held in the above cases when the returns were filed without furnishing Form 3A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Singapore, India shall allow as a deduction from the tax on the income of that resident an amount equal to the Singapore tax paid, whether directly or by deduction. Where the income is a dividend paid by a company which is a resident of Singapore to a company which is a resident of India and which owns directly or indirectly not less than 25 per cent of the share capital of the company paying the dividend, the deduction shall take into account the Singapore tax paid in respect of the profits out of which the dividend is paid. Such deduction in either case shall not, however, exceed that part of the tax (as computed before the deduction is given) which is attributable to the income which may be taxed in Singapore." 11. Since the provision of DTAA override the provision of Section 90 of the Act as they are more beneficial to the assessee, in view of judicial pronouncements in this regard and since Rule 128(a) does not preclude the assessee from the claiming credit for FTC in case of delay in filing the return of income as the credit for FTC is a vested right of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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