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TMI Blog2025 (3) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... is 'directory' and not mandatory, as was held by various legal fora, including the Apex Court, particularly in the light of the fact that the quantum of relief claimed u/s 90/90A at Rs. 1, 29, 14, 123/- was not disturbed in any manner by the AO in the assessment order passed u/s 143(3) and also that DTAA should take precedence over domestic laws. 3. The CIT(A) ought to have appreciated that it is not mandatory to file Form 67 before filing return of income under section 139(1) to claim Foreign tax credit as Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67 and that filing of Form No.67 is not mandatory but a directory requirement. 4. The assessee referring to the decision of the Bangaluru Bench of the Tribunal in the case of M/s. 42 Hertz Software India Pvt. Ltd vide ITA No.29/ Bang/2021 order dated 07.03.2022 for AY 2017-18 submitted that the Tribunal relying on various decisions has held that as per rule 128 for claiming Foreign Tax Credit Form No.67 to be submitted by the assessee before filing of the return is not mandatory but is directory in nature. He further submitted that the Tribunal in the said decision h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orandum on 17.11.2014 stating that frivolous additions or high-pitched assessments without proper basis should not be made. The assessee also filed written submission. The Ld. CIT(A) examined the material at hand including the submission of documents. The Ld. CIT(A) observed that the assessee could not submit the copy of full set of intimation order dated 11.06.2020 in the course of the appeal but provided some pages of the said order from which it was not clear whether the said claim of tax relief was rejected or not. However, from the submission of the assessee it could be assumed that the said tax credit had not been given to the assessee. The Ld. CIT(A) has also mentioned that the foreign tax credit for the impugned year could only be given to the assessee if Form No. 67 was filed on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act. Since in this case the original return had been filed after the due date and u/s 139(4) of the Act on 29.03.2019 and Form No. 67 was filed on the same date i.e. 29.03.2019, he has reproduced, thereafter, Rule 128 of the Income Tax Rules, 1962 and has held that since in the present case the return of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im in a country or specified 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 non-observance 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 DTAA 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 directory and not mandatory and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary 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 in 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 directory, since DTAA over rides the Act, and the Rules canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt- 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 3AA and the same can be filed the subsequent to the passing of assessment order. W P. No 5834 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. GSR 992(E), dated 20-12-1990, which is also discussed in the case of Sukhdev Sen Vs. ACIT, Circle-1, Kolkata (ITA No. 78/Kol/2014, dated 26.03.2024) relied upon in the case of Jaspal Singh Bindra (supra) is once again reproduced as under: "ARTICLE 25 RELIEF FROM DOUBLE TAXATION 1. In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a resident or citizen of the United States as a credit against the United States tax on income- (a) the income-tax paid to India by or on behalf of such citizen or resident ; and (b) in the case of a United States company owning at least 10 per cent of the voting stock of a company which is a resident of India and from which the United States company receives dividends, the income-tax paid to India by or on behalf of the distributing company with respect to the profits out of which the dividends are paid. For the purposes of this paragraph, the taxes referred to in paragraphs 1(b) and 2 of Article 2 (Taxes Covered) shall be considered as income taxes. 2. (a) Where a resident o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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