Case Law Details
Vikash Daga Vs ACIT (ITAT Delhi)
Introduction: The ITAT Delhi ruling in the Vikash Daga vs ACIT case shines a light on the balance between procedural norms and substantive rights within the realm of taxation. The case addressed the denial of foreign tax credit due to the late submission of form 67, raising questions on whether procedural lapses can negate the substantive right to claim a foreign tax credit under Section 90 of the Income Tax Act.
Analysis: In this case, the appellant, Vikash Daga, filed a return of income that included earnings made in the USA. He sought to claim a foreign tax credit of Rs. 18,87,114 under Section 90 of the Income Tax Act. However, the claim was denied as form 67, necessary to claim the foreign tax credit, was submitted after the due date of filing the income return. This denial was upheld by the CIT(A), after which the case reached ITAT Delhi.
Upon review, ITAT Delhi determined that while filing form 67 is a procedural requirement, it is not mandatory. This ruling implies that a violation of procedural norms does not nullify the substantive right to claim foreign tax credit. Therefore, ITAT directed the AO to allow the foreign tax credit, emphasizing that procedural requirements should not overshadow substantive rights, and that the Double Taxation Avoidance Agreement (DTAA) overrides both the Act and the Rules.
Conclusion: The Vikash Daga vs ACIT case offers a critical perspective on the intersection of procedural requirements and substantive rights under the Income Tax Act. It underscores the significance of the right to claim foreign tax credit under Section 90, notwithstanding procedural delays. This landmark ruling can serve as a valuable precedent for similar cases, reinforcing that procedural norms should not supersede the fundamental right of a taxpayer to claim legitimate credits.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is preferred against the order dated 18.08.2022 by NFAC, Delhi pertaining to A.Y.2019-20.
2. The solitary grievance of the assessee is that the CIT(A) erred in confirming the action of the AO who denied the foreign tax credit amounting to Rs.18,87,114/- for the reason form 67 was submitted by the assessee after the due date of filing of the return of income.
3. Briefly stated the facts of the case are that the assessee being an individual Indian citizen filed his return of income on his global income that was taxable in India. The return of income was filed on 10.08.2019 declaring total income of Rs.165854280/- which included income earned in USA and claimed foreign tax credit of Rs.18,87,114/- u/s. 90 of the Act. The return was processed u/s.143(1) of the Act wherein the demand of Rs.1262070/-was created for which the assessee filed a rectification application u/s.154 of the Act which was denied by CPC Bangalore.
4. The assessee agitated the matter before the CIT(A) but without any success.
5. Before us the Counsel for the assessee vehemently stated that the return of income was filed on 10.08.2019 as form 67 could not be submitted due to technical issues the same was submitted technically on 16.02.2021 but since form 67 was not submitted alongwith the return of income, the foreign tax credit was denied.
6. The Counsel prayed for allowing the credit for foreign tax.
7. Per contra the DR strongly supported the findings of the lower authorities.
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.
9. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 14.06.2023.
