The case between Rita N. Patwardhan and the DCIT Circle 1(1)(1), International Taxation, focuses on the disallowance of foreign tax credit (FTC) under Section 90 of the ITA, 1961 for the assessment year 2020-21. The dispute involves the procedural adherence to the filing of Form 67 and its implications on the eligibility for FTC.
Rita N. Patwardhan, a non-resident individual, filed her income tax return in India claiming an FTC of Rs.2,04,643. However, the Central Processing Centre denied this claim due to the delayed submission of Form 67, which was filed after the tax return but before the assessment was processed. The appeal to the CIT(A) was unsuccessful as the CIT(A) upheld the original decision, emphasizing the mandatory nature of timely filing Form 67, as dictated by Rule 128.
The ITAT, upon reviewing the case, disagreed with the lower authority’s strict interpretation. It acknowledged that while the rules stipulate the filing of Form 67 with the return of income, the practical application and the intent behind the law suggest a more lenient approach towards procedural lapses that do not affect the substance of the claims. The ITAT referenced several precedents which support the view that procedural requirements should not override substantive rights, especially in the context of tax treaties.
The Tribunal’s decision to allow the appeal and direct the AO to accept the FTC claim underscores a significant perspective in tax jurisprudence, highlighting the balance between procedural compliance and substantive tax rights. This case serves as a pertinent example for similar disputes and illustrates the evolving interpretations of tax laws concerning international taxation and FTC claims.
Rita N. Patwardhan vs. DCIT Circle 1(1)(1), International Taxation – ITA 2537/DEL/2022
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