Pradeep Lankapalli Vs DCIT (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, considered an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals) dated 26 July 2021, challenging the denial of Foreign Tax Credit (FTC) claimed under Section 90 of the Income-tax Act, 1961 and Article 25 of the India–US Double Taxation Avoidance Agreement (DTAA).
The assessee, a Green Card holder of the United States and an employee of Thomson Reuters India Pvt. Ltd., filed the original return of income on 7 August 2018 under Section 139(1), declaring total income of ₹9,08,20,122 and claiming foreign tax credit of ₹2,95,156 for taxes paid in the United States. Subsequently, the assessee filed a revised return under Section 139(5), declaring total income of ₹9,04,62,460 and enhancing the foreign tax credit claim to ₹18,83,129. The case was selected for limited scrutiny, and the assessment was completed on 18 March 2021 by accepting the revised income but denying the enhanced foreign tax credit claimed under Section 90.
The assessee challenged the assessment before the Commissioner of Income Tax (Appeals). The CIT(A) observed that, under Section 90(2), Article 25 of the India–US DTAA, and Rule 128 of the Income-tax Rules, the assessee was entitled to foreign tax credit only upon complying with the prescribed procedural requirements. Referring to Rule 128(9), the CIT(A) held that Form 67, along with foreign tax deduction certificates, proof of tax payment, and other prescribed documents, was required to be furnished on or before the due date for filing the return under Section 139(1). According to the CIT(A), the assessee failed to establish that these documents had been furnished before filing the original return. The appellate authority recorded that Form 67 had been filed on 30 March 2019, one day before filing the revised return, and not before the original return in which foreign tax credit had initially been claimed. The CIT(A) also held that the judicial precedents relied upon by the assessee were distinguishable because they related to double taxation of foreign income and predated the introduction of Rule 128 with effect from 1 April 2017. Consequently, the CIT(A) concluded that the assessee had not complied with Rule 128 and was therefore not entitled to foreign tax credit.
