Case Number: ITA 1835/DEL/2022
Appellant: Ajay Kumar Mishra, Gurgaon
Respondent: DCIT, Circle-1(1), Gurgaon
Assessment Year: 2018-19
Result: Final Tribunal Order
Case Filed on: 2022-08-16
Date of Order: 2023-04-17
Pronounced on: 2023-04-17
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IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI “A” BENCH: NEW DELHI
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER &
SHRI M BALAGANESH, ACCOUNTANT MEMBER
ITA No.1835/Del/2022
[Assessment Year : 2018-19]
Ajay Kumar Mishra,
B-12, The ICON, DLF City,
Phase-5, Gurgaon,
Haryana-122009.
PAN-AOWPM7493R vs DCIT,
Circle-1(1),
Gurgaon.
APPELLANT RESPONDENT
Appellant by Shri D.K.Pandey, CA &
Shri Manish Pandey, CA
Respondent by Shri Kanv Bali, Sr. DR
Date of Hearing 11.04.2023
Date of Pronouncement 17.04.2023
PER KUL BHARAT, JM:
The present appeal filed by the assessee for the assessment year 2018-19 is directed against the order of Ld. CIT(A), National Faceless Appeal Centre (“NFAC”), Delhi dated 17.06.2022.
2. The assessee has raised the following grounds of appeal:
1. “On the facts and circumstances of the case, the final assessment order passed by the learned Assessing Officer under Section 143(3) read with Section 144B of the Act is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in passing the order without considering the foreign tax credit merely due to a procedural lapse of filing of Form 67 is clear violation of the principle of natural justice.
3. (i) On the facts and circumstances of the case, the learned AO has erred both on facts and in law in making the disallowance of Rs. 35,02,850/- on account of foreign tax credit claimed by the assessee in respect of taxes paid in the USA and availed the relief from the double taxation as per the treaty between India and USA.
(ii) That the above said disallowance has been made despite the submissions and explanation along with the evidences brought on record justifying the claims made by the assessee.
(iii) That the above disallowance has been made ignoring the settled position of law that the foreign taxes paid by the assessee, shall be allowed as a credit against the Indian Tax, payable by a resident Indian to give him relief from double taxation on the same income.
4. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in charging the interest under section 234A, 234B and 234C of the Income Tax Act.
5. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
3. Facts giving rise to the present appeal are that in this case, the assessee filed its return of income electronically in ITR-3 on 31.08.2018, disclosing total income of INR 1,08,66,510/-. The case was taken up for limited scrutiny on the issue of Double Taxation Relief u/s 90/91 of the Income Tax Act, 1961 (“the Act”). While framing assessment, the Assessing Officer (“AO”) had disallowed claim of Foreign Tax Credit (“FTC”) of INR 35,02,850/- in terms of Rule 128 of the Income Tax Rules, 1962 (“the Rules”).
4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal of the assessee and sustained the action of AO.
5. Aggrieved against the order of Ld.CIT(A), the assessee has preferred the appeal before the Tribunal.
6. At the outset, Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. For the sake of clarity, the written submissions of the assessee are reproduced as under:
Ground No.1, 4 & 5:
These grounds are of routine nature and may be dealt with accordingly.
Ground No.2 and 3:
Ground No.2:
That on the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) (hereafter called CIT(A)), has erred both on facts and in law in passing the order without considering the foreign tax credit merely due to procedural lapse of filing of Form 67 is clear violation of the principle of natural justice.
Ground No.3:
(i) On the facts and circumstance of the case, the Ld. A.O. has erred both on facts and in law in making the disallowance of Rs. 35,02,850/- on account of Foreign Tax Credit (FTC) claimed by the assessee in respect of taxes paid in the USA and availed the relief from the double taxation as per the treaty between India & USA.
(ii) That the above said disallowance has been made despite the submission and explanation along with the evidences brought on record justifying the claims made by the assessee.
(iii) That the above disallowance has been made ignoring the settled position of law that the FTC paid by the assessee, shall be allowed as a credit against the Indian Tax, payable by a resident Indian to give him relief from double taxation on the same income.
In respect to the above grounds of appeal, we would like to draw your kind attention that the Ld. A.O./NFAC has accepted the total income of the assessee at Rs.1,08,66,510/- as declared by him in his tax return and disallowed only the relief claimed under section 90 of the Income Tax Act, 1961 for FTC, on the ground of delay in filing of Form 67 by the assessee as required under Rule 128 of the Income Tax Rules, 1962.
We would like to reproduce the Rule 128 of the Income Tax Rules, 1962 (Rules) which provides the provisions related with FTC and reads thus:
“Foreign Tax Credit.
128. (1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax 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.”
One of the requirements of Rule 128 for claiming FTC is provided by Rule 128 (8) & (9) of the Rules and the same reads thus:
“(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:–
(i) a statement of income from the country or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein;
(ii) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,–
(a) from the tax authority of the country or the specified territory outside India; or
(b) from the person responsible for deduction of such tax; or
(c) signed by the assessee:…”
7. The FTC is available in respect of the taxes paid outside India which is governed by Rule 128 of the Income Tax Rules, 1962. Under the said Rule, the foreign tax credit shall be available against the amount of tax, surcharge and cess payable under the Act but not in respect of any sum payable by way of interest, fee or penalty. As per the provisions of the Act, the assessee is required to furnish Form 67 on or before the due date of filing of return u/s 139(1) of the Act in order to claim FTC.
8. However, the procedural requirement of filing of Form 67 is directory in nature and the same cannot be made the basis for disallowing the legitimate claim of FTC to the assessee.
9. It is pertinent to note that the Co-ordinate Bench of ITAT Bangalore in ITA No.883/Bang/2021 in the case of 20 Cube Logistics Pte Ltd. vs. ITO has categorically held that the filing of Form 67 as required under Rule 128 of the Rules, within the time limit prescribed under section 139(1) of the Act, is not mandatory but directory in nature. Therefore, the assessee is entitled to avail the benefit of FTC in respect of taxes paid outside India despite the delay in filing of Form 67.
10. Similarly, the Hon’ble Delhi ITAT in ITA No. 1400/Del/2021 in the case of Mr. Vinod Jhawar vs. ITO has held that the procedural requirement cannot prevail over the substantial claim of FTC.
11. Considering the above submissions, we would like to draw your kind attention to the fact that the assessee is entitled to claim the benefit of FTC in respect of taxes paid in the USA despite the delay in filing of Form 67.
12. In view of the above, we humbly request the Tribunal to kindly delete the disallowance made by the Ld. AO and upheld by the Ld. CIT(A) and grant the relief claimed by the assessee.
13. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee had filed the return of income for the year under consideration on 31.08.2018 disclosing the total income of INR 1,08,66,510/- and while framing assessment, the AO disallowed claim of FTC of INR 35,02,850/- in terms of Rule 128 of the Income Tax Rules, 1962. The assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal of the assessee and sustained the action of AO.
14. We have also perused the decision of Hon’ble ITAT Bangalore in ITA No. 883/Bang/2021 in the case of 20 Cube Logistics Pte Ltd. vs. ITO, wherein it was held that the filing of Form 67 as required under Rule 128 of the Rules, within the time limit prescribed under section 139(1) of the Act, is not mandatory but directory in nature. Therefore, the assessee is entitled to avail the benefit of FTC in respect of taxes paid outside India despite the delay in filing of Form 67. Similarly, the Hon’ble Delhi ITAT in ITA No. 1400/Del/2021 in the case of Mr. Vinod Jhawar vs. ITO has held that the procedural requirement cannot prevail over the substantial claim of FTC.
15. Therefore, respectfully following the said decisions, we are of the view that the assessee is entitled to claim FTC in respect of taxes paid in the USA despite the delay in filing of Form 67. Hence, we direct the AO to delete the disallowance made on account of FTC and grant the relief claimed by the assessee.
16. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 17th April, 2023.
…
Ajay Kumar Mishra vs DCIT, Circle-1(1), Gurgaon – ITA No. 1835/DEL/2022
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