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December 6, 2022

Mere delay in filing Form 67 cannot be reason for denial of Foreign Tax Credit

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Mere delay in filing Form 67 cannot be reason for denial of Foreign Tax Credit

Fact and Issue of the case

The brief facts of the case as emanating from the record are: The assessee is an individual. The assessee filed her original return of income under section 139(1) of the Act on 20/08/2019. Thereafter, the assessee filed a revised return of income under section 139(5) of the Act on 26/08/2020, declaring a total income of Rs. 60,58,060, along with the computation of income and Form No.67 for claiming foreign tax credit. The revised return filed by the assessee was processed vide intimation dated 08/03/2021 issued under section 143(1) of the Act, whereby the foreign tax credit of Rs. 11,79,796, claimed under section 91 of the Act was denied. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee on the basis that Form No.67, was filed after the due date for filing the return of income under section 139(1) of the Act. Being aggrieved, the assessee is in appeal before the tribunal.

Observation of the Tribunal

The tribunal has considered the rival submissions and perused the material available on record. In the present case, the assessee filed the revised return of income under section 139(5) of the Act on 26/08/2020, and claimed the foreign tax credit of Rs. 11,79,796. It is the claim of the assessee that she has received certain income amounting to Rs. 48,10,498, from foreign sources, on which tax was already paid in Ghana. Due to certain factors beyond her control, the assessee received Form No.67, after some delay. However, as soon as the assessee received the aforesaid Form, she filed a revised return of income under section 139(5) of the Act. In the present case, both the original return of income and revised return of income were filed by the assessee before the due date and there is no dispute on this aspect by the Revenue. The ACIT, CPC, Bengaluru, while processing the revised return of income vide intimation issued under section 143(1) of the Act denied the foreign tax credit of Rs. 11,79,796, claimed by the assessee under section 91 of the Act. In the impugned order it has been held that Form no.67 was filed by the assessee after the due date of filing the return of income under section 139(1) of the Act and thus the assessee is not entitled to the claim of the foreign tax credit.

The Tribunal found that under Rule 128(9), as it stood during the year under consideration, provided that 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. Thus, during the year under consideration, the assessee was required to furnish Form No. 67 on or before the due date of filing the return of income under section 139(1) of the Act, as per the provisions of Rule 128(9). In the present case, the assessee though filed her original return of income within the extended time granted vide order dated 23/07/2019, passed by the CBDT under section 119 of the Act, however, furnished Form No.67 along with her revised return of income on 26/08/2020. We further find that Rule 128(9) has recently been substituted by the Income-tax (Twenty-seventh Amendment) Rules, 2022, w.r.e.f. 01/04/2022.

Thus with effect from 01/04/2022, the time period for furnishing statement in Form No. 67 has been extended till the end of the assessment year in which the corresponding income has been offered/assessed to tax and the return of such assessment year has been furnished within the time specified under 139(1) or 139(4) of the Act.

Tribunal further find that in another decision in Anuj Bhagwati vs DCIT, in ITAs No.1844 and 1845/Mum./2022, the coordinate bench of the Tribunal vide order dated 20/09/2022, while deciding a similar issue held that section 90/91 of the Act has not been amended insofar as grant of foreign tax credit is concerned and Rules cannot override the Act and therefore filing of Form No. 67 is not mandatory but it is directory. Thus, respectfully following the aforesaid decisions of the coordinate bench of the Tribunal, the considered opinion is that mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as they stood during the year under consideration, will not preclude the assessee from claiming the benefit of foreign tax credit in respect of tax paid outside India. Since in the present case, the claim of the assessee was denied on this technical aspect without going into the merits, therefore, we deem it appropriate to direct the jurisdictional Assessing Officer to decide the claim of the foreign tax credit on merits, after accepting the Form No. 67 and other related documents filed by the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

Conclusion

The Tribunal ruled in favour of the assessee and directed the jurisdictional Assessing Officer to decide the claim of the foreign tax credit on merits, after accepting the Form No. 67 and other related documents filed by the assessee.

Nirmala-Murli-Relwani-Vs-ADIT-ITAT-Mumbai-1

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