Foreign Tax Credit cannot be denied if Form 67 prescribed under Rule 128 of Income Tax Rules not filed

Sonakshi Sinha 49A Vs CIT (ITAT Mumbai)

Conclusion: The ITAT observed that Foreign Tax Credit cannot be disallowed in case of not filing Form 67 prescribed under Rule 128 of Income Tax Rules, 1962. Thus, by this observation ITAT have not denied the substantive benefit in case of procedural lapse.

Facts: The present appeal is filed by assessee against appellate order passed by National Faceless Appeal Centre (NFAC)[ learned CIT (A)] for assessment year 2018 – 19 on 27/4/2022 denying foreign tax credit of ₹ 2,921,327/-. Assessee is in individual who is an actor acting in films and provides services for promotion and marketing of brands of goods, services, and events. Assessee filed her return of income on 22/9/2018 at total income of ₹ 185,390,330/-. The case was selected for scrutiny under the limited scrutiny criteria for the issue of double taxation relief u/s 90/91. The requisite notice u/s 143 (2) of the act was issued.

The learned AO found that assessee has claimed foreign tax credit amounting to ₹ 2,921,327/- however from the filing portal it was noted that assessee has uploaded form number 67 for claiming foreign tax credit on 20/1/2020. Fact that assessee has filed her return of income on 22/09/2018, within the due date as per provisions of Section 139 (1) of the act. Thus, the issue is that form number 67, required to be filed for claiming foreign tax credit on or before the date of filing of the return terms of rule 128 (9) of the Income Tax Rules 1962, was filed belatedly. This is also confirmed by notification number 9 on 19 September 2017. Therefore the AO was of the view that assessee has failed to comply with letter and spirit of the instruction number 9 dated 9/9/2017 as well as the provisions of rule 128 of the Income Tax Rule, 1962 and therefore foreign credit claimed by the assessee is not allowable. It was further noted by the AO that notice u/s 143 (2) was issued to the assessee on 29/9/2019 showing specifically for examination of the double taxation relief u/s 90/91 and further notice was issued on 10/1/2020 and therefore after 2 notices served on the assessee, form number 67 was then uploaded. Accordingly assessment order u/s 143 (3) read with Section 143 (3A) and 143 (3B) of the act dated 3/2/2021 was assessed and total income of the assessee was assessed at ₹ 185,390,330/- but the foreign tax credit of ₹ 2,921,327/- was not allowed.

On appeal, the learned CIT (A) held that for the purpose of claiming foreign tax credit relief, form number 67 was notified on 27 June 2016, is required to be furnished on or before the due date specified for furnishing the return of income.

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