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TMI Blog2025 (3) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2024 (DIN: CPC/2324/A2/418115720, Demand Reference Number: 2024202337247266003T), wherein the Foreign Tax Credit of Rs. 10,95,293 claimed under Section 90/90A of the Income Tax Act, 1961, has been denied. This denial is erroneous and contrary to the provisions of the Act. 3. That appellant has duly complied with the provisions of Section 90/90A of the Income Tax Act, 1961, and the relevant Double Taxation Avoidance Agreement (DTAA) between India and Germany. The salary income earned for services rendered in Germany during the period from October 15, 2022, to March 31, 2023, has been offered to tax in India, and the foreign tax credit has been claimed appropriately. 4. That appellant has submitted all necessary documents to substantiate the claim of FTC, including: Form 67 for claiming FTC Proof of taxes paid in Germany Salary slips from Google Germany Tax Residency Certificate (TRC) from Germany Other supporting documents as required. 5. That denial of the FTC without providing a reasonable opportunity to the appellant to explain and substantiate the claim is a violation of the principles of natural justice. 6. That denial of FTC has resulted in the erroneous computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee submitted that the assessee has duly filed Form-67 on 02.05.2024 wherein there was a credit of Rs. 10,95,293/- claimed by the assessee towards FTC. It was submitted that the assessee was working with Google, Germany and was ordinarily resident in India during the year under consideration. Foreign Tax of Rs. 10,96,674/- was deducted and an amount of Rs. 10,95,293/- was claimed u/s. 90 of the Act as tax relief, as the total global income was declared by the assessee in return of income filed in India with Revenue. There was tax deducted on dividend earned from USA to the tune of Rs. 604/- apart from tax deducted by Google Germany on salary earned in Germany from 15.10.2022 to 31.03.2023, which was also declared in Form No. 67 filed on 02.05.2024 and total FTC of Rs. 10,95,293/- was claimed but both the authorities below have denied the credit of the aforesaid foreign tax credit. Assessee relied upon the decision of ITAT, Delhi Bench in the case of Suchi Agarwal v. ITO (ITA No. 601/Del/2024 assessment year 2020-21) order dated 31.05.2024. Assessee also relied upon the appellate order passed by ITAT, Bangalore in the case of Vinodkumar Lakshmipathi v. CIT(A) (2022) 145 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/- earned from Google Germany. The Revenue has not allowed the claim of deduction towards foreign tax credit u/s. 90 of the Act on the ground that Form-67 was not filed on or before the due date of filing of return of income as prescribed u/s 139(1), by relying on Rule 128(8) and 128(9) of the 1962 Rules. Return of income was filed by assessee belatedly on 31.08.2023, which was processed by the Revenue vide intimation u/s 143(1) dated 30.04.2024. Due date of filing the return of income was 31.07.2023. The assessee is resident and ordinarily resident in India under the provisions of 1961 Act. 6.2 The assessee had not filed form No. 67 prior to due date of filing the return of income as is prescribed u/s 139(1) and the same was filed on 02.05.2024 after the return of income was processed by CPC, Bengaluru u/s. 143(1). Both the authorities below have denied FTC claimed by the assessee. We have observed that ITAT in the case of Suchi Agarwal v. ITO (supra), Vinodkumar Lakshmipathi v. CIT(supra) Deepak ShimogaPadmaraju v. ADIT(supra) and Shri Subhankar Chakraborty v. ITO(supra) has held that filing of Form-67 is directory in nature and not mandatory. The conclusion reached by ITAT in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the provisions of double taxation avoidance agreement is not given by the Assessing Officers when they find that the provisions of the agreement are not in conformity with the provisions of the Income-tax Act, 1961. 2. The correct legal position is that where a specific provision is made in the double taxation avoidance agreement, that provisions will prevail over the general provisions contained in the Income-tax Act. In fact that the double taxation avoidance agreements which have been entered into by the Central Government under section 90 of the Income-tax Act, also provide that the laws in force in either country will continue to govern the assessment and taxation of income in the respective countries except where provisions to the contrary have been made in the agreement. 3. Thus, where a double taxation avoidance agreement provides for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the Income-tax Act. Where there is no specific provision in the agreement, it is basic law, i.e., the Income-tax Act, that will govern the taxation of income. Circular: No. 333 [F. No. 506/42/81-FTD] dated 2-4-1982. 6. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it is a debatable issue and the same is not permissible u/s 143(1) in a prima facie adjustment and the assessee should have been given a notice for that. In other words, if a disallowance is required to be established by arguments and long drawn process of reasoning on points, which there may conceivably be two opinions about, then the case should have been selected for scrutiny assessment. In view of the above discussion, we delete the disallowance of deduction u/s 80IC of the Act, made by the Assessing Officer and upheld by the Ld. CIT(A) and allow the appeal of the assessee. As such, we would like to contend that the CPC was not right in disallowing the claim of FTC solely on the ground that Form 67 was filed belated. 9. That in support of our above contentions above, we would like to rely upon the following decisions of the coordinated Benches of ITAT:- * Vinod Kumar Lakshmipati Vs CIT(NFAC) Delhi - 145 taxmann.com 235 - ITAT Bangalore - It was held that:- Section 90, read with section 90A, of the Income-tax Act, 1961 and ride 128 of the Income-tax Rules, 1962 Double Taxation Relief - Where agreement exists (Foreign tax credit) Assessment year 2018- 19- Assessee claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee holds a foreign tax credit certificate for Rs. 1887114/-. In our considered opinion filing of form 67 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. We accordingly direct the AO to allow the credit of FTC and hold that rule 128(9) of the Rules does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act." 9. In the light of foregoing discussions, we are of the opinion that filing of Form 67 is a directory not mandatory and violation of procedural norm does not adversely affect the substantive rights or claims. 10. On the basis of discussion, submissions and abovementioned binding precedents, we set aside the orders of authorities below and restore the matter to the file of Ld. AO with the direction to verify the assessee's claim in respect of foreign tax credit as per law after admitting / accepting Form 67 and decide the issue in accordance with law. 11. Consequently, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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