Case Law Details
Isha Mago Vs ADIT (ITAT Delhi)
In the appeal of Isha Mago vs. ADIT (Income Tax Appellate Tribunal, Delhi), the primary issue concerned the disallowance of foreign tax credit (FTC) by the CPC and subsequently upheld by the CIT(A), due to the assessee’s late filing of Form 67 in relation to the assessment year 2018-19. Here’s a comprehensive summary of the case:
Background: The assessee filed an appeal against the order of the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 20th November 2023, which affirmed the CPC’s decision to disallow FTC amounting to Rs. 6,64,166/- on the grounds of late filing of Form 67. The CPC, in its intimation under section 143(1) of the Income-tax Act, 1961, disallowed the claim as Form 67 was filed after the due date for filing the return under section 139(1) of the Act.
Grounds of Appeal:
- The assessee contended that the CIT(A) erred in law and in fact by upholding the disallowance of FTC solely on the ground of late filing of Form 67.
- It was argued that the filing of Form 67 beyond the due date was a procedural requirement and not a mandatory one, and thus, should not lead to the denial of substantive rights.
- The appeal also raised objections against the denial of credit for Indian TDS without sufficient reasoning.
Arguments Before ITAT: The counsel for the assessee argued that the issue had already been settled in favor of the assessee by previous decisions of the ITAT, specifically citing the cases of Vikas Daga vs. ACIT (ITA no. 2536/Del/2022) and Eastman Industries Ltd. vs. ACIT (ITA nos. 2990, 2991 & 2992/Del/2022). These cases established that the filing of Form 67 should be viewed as a procedural or directory requirement rather than a mandatory one. The counsel emphasized that such procedural lapses should not override substantive rights to claim FTC, especially considering the provisions of the Double Tax Avoidance Agreement (DTAA) which prevail over domestic procedural rules.
ITAT’s Decision: After considering the submissions and precedents cited, the ITAT Delhi bench concurred with the arguments presented by the assessee. The tribunal reiterated the principle laid down in Vikas Daga’s case that the filing of Form 67 is procedural and does not extinguish the substantive right to claim FTC. The tribunal emphasized that Rule 128(9) of the Income-tax Rules does not provide for the disallowance of FTC in cases of delayed filing of Form 67. Moreover, it underscored that DTAA provisions take precedence over domestic procedural rules.
Conclusion: Accordingly, the ITAT set aside the orders of the lower authorities and remanded the matter back to the Assessing Officer (AO) with directions to reconsider the assessee’s claim for FTC in accordance with law after admitting and accepting Form 67. The appeal of the assessee was allowed for statistical purposes, affirming the right of the assessee to claim FTC despite the procedural lapse of filing Form 67 beyond the due date.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 20.11.2023, pertaining to the assessment year 2018-19. The assessee has raised following grounds of appeal:
“1. That the Ld. CIT(A) erred in law and on facts in confirming the IT order not allowing the foreign tax credit of Rs 664166 on the ground that assessee has filed Form -67 beyond the due date in respect of claim of foreign tax credit.
2. That the Ld. CIT(A) erred in law and on facts in confirming the denial of Foreign Tax Credit by the Ld. AO on the ground that the Assessee has filed Form-67 beyond the due date in respect of the claim of foreign credit.
3. That the Ld. CIT (A) erred in law and on facts in confirming the IT order confirming the filing of Form 67 been mandatorily to be filed within the time allowed u/s 139(1) of the act ignoring the fact that the filing of the Form 67 was a procedural requirement and the same could have been filed at any time before the passing of the IT order.
4. That the Ld. CIT(A) erred in law in on facts in wrongly not allowing credit of Indian TDS tax of Rs. 10,522 without giving any reason for denial of credit of Indian TDS to the Appellant.
5. That the order of Ld. CIT (A) and of Ld. AO is bad in law and against the facts of the case.
6. That the Ld. CIT(A) erred in law and on fact in confirming the AO order dismissing the credit of Foreign Tax to assessee ignoring the fact that in assessment u/s 143(1) an addition can be made which is disputable in nature.”
2. The solitary grievance of the assessee is with regard to disallowance of foreign tax credit amounting to Rs. 6,64,166/-. It is noticed that the CPC vide intimation u/s 143(1) of the Income-tax Act, 1961 (the “Act”), disallowed the assessee’s claim of foreign tax credit on the ground that in this case Form-67 was filed late along with the return, beyond the due date for filing the return u/s 139(1) of the Act. Aggrieved against it the assessee appealed to the learned CIT(A), who also affirmed the action of the CPC. Aggrieved against it the assessee is in appeal before this Tribunal.
3. Learned counsel for the assessee at the outset submitted that the issue in question is squarely covered in favour of the assessee by earlier decisions of the Tribunal. In support of his contention, learned counsel filed copies of orders of ITAT in the cases of Vikas Daga vs. ACIT [ITA no. 2536/Del/2022 (A.Y. 201920) – order dated 14.06.2023]; and Eastman Industries Ltd. vs. ACIT [ ITA nos. 2990, 2991 & 2992/Del/2022 (A.Y. 2018-19, 2019-20 & 2020-21) – order dated 16.08.2023].
4. Learned DR opposed the submissions and relied on the orders of authorities below.
5. I have heard rival submissions and perused the material available on record. Learned DR could not controvert the fact that the issue in question is squarely covered in favour of the assessee by earlier decisions of the Tribunal in the cases referred to by the learned counsel for the assessee.
5.1 It is noticed that in the case of Vikas Daga vs. ACIT (supra), the Tribunal has adjudicated identical issue, holding as under:
“8. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assessee holds a foreign tax credit certificate for Rs.1887114/-. In our considered opinion filing of form 67 is a procedural / directory requirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantive right of claiming the credit of FTC. We accordingly direct the AO to allow the credit of FTC and hold that rule 128(9) of the Rules does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act.”
5.2 It is also noticed that under similar facts and circumstances the ITAT Delhi Bench ‘B’ in the case of Eastman Industries Ltd. vs. ACIT (supra) has adjudicated identical issue, observing as under:
“7. Since in the present case the claim of the assessee was denied on this technical aspect without going into the merits of the FTC, therefore, we deem it fit to restore the issue to the files of the AO. The AO is directed to decide the claim of foreign tax credit as per the provisions of the law after admitting / accepting form -67. This common grievance is also allowed for statistical purpose.”
5.3 Therefore, respectfully following the binding precedent, I set aside the orders of authorities below and restore the matter to the file of AO with direction to verify the assessee’s claim in respect of foreign tax credit as per the provisions of the law after admitting / accepting form -67 and decide the issue in accordance with law. Grounds are allowed for statistical purposes.
6. Appeal of the assessee is allowed for statistical purposes.
Order pronounced in open court on 4th April, 2024.
Author Bio
