Claim of FTC can’t be disallowed just because Form no. 67 wasn’t filed by due date: ITAT

Case Details: Ms. Brinda RamaKrishna v. Income-tax Officer - [2022] 135 taxmann.com 358 (Bangalore - Trib.)

Judiciary and Counsel Details

• • N.V. Vasudevan, Vice-President
  • Narendra Kumar Jain, Adv. for the Appellant.
  •  Ganesh R. Ghale, Standing Counsel for the Respondent.

Facts of the Case

Assessee was an Individual and an ordinary resident in India during the Assessment Year 2018-19. Assessee worked with E&Y Australia from 20-11-2017 till 16-15-2019. He offered to tax salary income earned for services rendered in Australia as his global income was taxable in India. She claimed foreign tax credit (FTC) for taxes paid in Australia.
Assessee noticed that she didn’t file Form 67 before filing the income-tax return (ITR).

Thus, she filed Form 67 in support of foreign tax credit claim later after filing of ITR. CPC processed the assessee’s return, and the claim of FTC was disallowed.

Assessee filed rectification application before Assessing Officer (AO) asking for FTC claim. However, AO denied it on the ground that the assessee had failed to furnish Form 67 on or before the due date of furnishing of ITR. This is a mandatory requirement to claim the benefit of FTC in accordance with Rule 128(9) of the Income-tax Rules.
CIT(A) upheld the order of AO. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal has granted relief and upheld the contention of the assessee. Neither section 90 nor DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirements. FTC is the assessee’s vested right as per article 24(4)(a) of the DTAA read with section 90. The same cannot be disallowed for non-compliance with the rules’ procedural requirements.

The board has the power to prescribe the procedure to grant FTC. However, it does not have the power to prescribe a condition or provide for disallowance of FTC.
Rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed u/s 139(1). However, the rule nowhere provides that if the said Form 67 is not filed within due date, the benefit of FTC would be denied.

There are many sections in the Income-tax Act that specifically deny deduction or exemption or relief if the return is not filed within the prescribed time. For example, Section 80-IA(7) specifically denies deduction if the audit report is not furnished before the specified date. However, such language is not used in rule 128(9).
Accordingly, the claim of FTC should be allowed to the assessee.

List of Cases Referred to

• • Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner AIR 1952 SC 152 (para 11)
  • Sambhaji v. Gangabai [2008] 17 SCC 117 (para 11)
  • CIT v. Axis Computers (India) (P.) Ltd. [2009] 178 Taxman 143 (Delhi) (para 12)
  • Pr. CIT v. Surya Merchants Ltd. [2016] 72 taxmann.com 16/387 ITR 105 (All.) (para 12)
  • CIT v. American Data Solutions India (P.) Ltd. [2014] 45 taxmann.com 379/223 Taxman 143 (Kar.) (para 12)
  • CIT v. Mantec Consultants (P.) Ltd. [2009] 178 Taxman 429 (Delhi) (para 12)
  • CIT v. ACE Multitaxes Systems (P.) Ltd. [2009] 317 ITR 207 (Kar.) (para 12)
  • Union of India v. Azadi Bachao Andolan [2003] 132 Taxman 373/263 ITR 706 (SC) (para 13)
  • CIT v. Eli Lilly & Co. (India) (P.) Ltd. [2009] 178 Taxman 505/312 ITR 225 (SC) (para 13)
  • GE India Technology Centre (P.) Ltd. v. CIT [2010] 7 taxmann.com 18/193 Taxman 234/327 ITR 456 (SC) (para 13)
  • Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471 (SC) (para 13).