Victory in Claiming Foreign Tax Credit: Analysis of Sumedha Arora vs ITO, ITA No. 1399/DEL/2022

Case Overview

In the Income Tax Appellate Tribunal (ITAT) of Delhi, the case of Sumedha Arora vs. Income Tax Officer (ITO), Ward-67(1), New Delhi, marked as case number ITA No. 1399/DEL/2022 for the assessment year 2019-20, reached its conclusion with the tribunal allowing the claim of the appellant, Sumedha Arora. This landmark ruling, delivered by a bench consisting of Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, centered around the denial of Foreign Tax Credit (FTC) claimed by the appellant and highlighted critical aspects of both procedural and substantive tax law.

Background

Sumedha Arora, the appellant, filed an appeal against the order of the Commissioner of Income Tax (Appeals)-XLII, Delhi, following the denial of her claim for FTC, resulting from services rendered in Milan, Italy. The core issue revolved around the late filing of Form 67, a requisite document for claiming FTC under Rule 128 of the Income Tax Rules, 1962, despite having paid the foreign tax and including the income in her Indian tax returns.

Arguments and Analyses

The appellant’s primary contention was the entitlement to FTC as per Section 90 of the Income-tax Act, 1961, read with Article 24 of the India-Italy Tax Treaty. The appellant argued that procedural delays in submitting Form 67 should not invalidate her substantive right to claim FTC, a position challenged by the revenue authorities who emphasized strict compliance with procedural requirements.

The tribunal’s decision was influenced by precedents and interpretations of law which prioritized substance over form, particularly in the context of international tax agreements and the overarching principles of the Income-tax Act. The judgment meticulously dissected the legal provisions concerning FTC, the mandatory nature of procedural compliances, and the rationale behind such requirements, ultimately concluding that the appellant’s late compliance did not nullify her entitlement to the credit.

Conclusion and Impact

The outcome of this case underscores the tribunal’s approach towards balancing strict procedural compliance with the essential principles of equity and justice in taxation. By allowing the claim of FTC in favor of Sumedha Arora, the tribunal not only provided relief to the appellant but also set a precedent that may influence future disputes involving international tax credits and procedural lapses.

This detailed analysis seeks to unravel the complex layers of this case, providing insights into its implications for taxpayers and practitioners alike in the realm of international taxation and procedural compliance.

Victory in Claiming Foreign Tax Credit: Analysis of Sumedha Arora vs ITO, ITA No. 1399/DEL/2022