Mere failure to file Form No. 67 cannot result in the denial of credit for taxes paid
Facts and Issue of the case
The assessee, an individual, filed return of income for Assessment Year 2018-19 declaring a total income of Rs.14,29,490/-. The assessee is a salaried employee. The assessee has income under the head – salary, income from house property, capital gain and income from other sources including foreign dividends. In the return of income, the assessee claimed credit for taxes paid in USA on dividends received in USA, under section 90 of the Income Tax Act, 1961 (hereinafter called ‘the Act’), of a sum of Rs.1,56,820/-. Apart from denying credit for tax paid in USA, on dividend income earned in USA, the AO also made 3 other adjustments to the total income returned by the assessee in the intimation dated 28.05.2020 under section 143(1) of the Act. One of the adjustment so made, resulting in an addition of Rs.2,35,108 to the total income declared by the Assessee, is an addition on account of difference in figures between Schedule SI (Income that are subject to a special rate of tax) and Schedule CG (capital gain) and Schedule OS (Other source). The action of the AO was confirmed by the First Appellate Authority. Hence, this appeal by the assessee, before the Tribunal.
As already stated, learned Counsel for the assessee pressed for adjudication of only the variation to the total income on account of difference in figures between schedule – SI and Schedule CG and Schedule OS. Apart from the above, learned Counsel for the assessee also prayed that the assessee should be allowed tax credit under section 90 of the Act in respect of dividend income received in USA.
Observation by the court
The AO has considered schedule – SI and has found discrepancy in the figures as set out in schedule – SI as compared to schedule – CG and schedule – OS. In doing so, the AO has ignored schedule BFLA (Brought Forward Loss Adjustment). In Schedule CG the STCG on Shares/Units on which STT was paid which is to be taxed only at 15% is shown as Rs.1,41,384 whereas this figure after BFLA of Rs.33,007 is Rs.1,08,733. Similarly in Schedule SI, LTCG on others of Rs.5,52,538 is claimed as taxable at 20% and the corresponding figure in Scheudle CG is shown at Rs.7,62,220. This figure after BFLA of Rs.2,09,682 is Rs.5,52,538. Thus it is clear that if schedule BFLA is considered then there will not be any discrepancy. The assessee did not participate in the proceedings before CIT(A) and could not explain this aspect. I am of the view that this aspect requires examination by the AO and therefore the issue has to be set aside to the AO for fresh consideration. The AO will look into the schedule BFLA also and thereafter decide the issue afresh after affording the assessee opportunity of being heard.
In so far as the credit for taxes paid in US is concerned, one of the requirements is that the assessee has to file Form 67 which was filed before the AO only after the date of intimation under section 143(1) of the Act. Filing of Form No.67 is only a procedural requirement and therefore that cannot be the basis to deny credit for taxes paid in US. I am of the view that the AO shall consider the claim of the assessee for credit for taxes paid in USA also in the set aside proceedings. The AO will afford opportunity of being heard to the assessee in the set aside proceedings.
The appeal of the assessee is allowed by the court for statistical purposes.Shri.-Vardhan-Vishwanath-Vijaya-Vs-ITO-ITAT-Bangalore