Case Law Details
Mahua Bagchi Vs ACIT (ITAT Kolkata)
Introduction: Mahua Bagchi Vs ACIT (ITAT Kolkata) is a landmark decision that emphasizes the importance of substance over form in tax administration. The case centers on the denial of Foreign Tax Credit (FTC) due to the technicality of late filing of Form 67 under section 139(1) of the Income Tax Act, 1961. The ruling by ITAT Kolkata holds significant implications for taxpayers working abroad, especially in the context of procedural compliance.
Analysis
Background & Facts: The assessee, an employee of Cognizant Technology Solutions, claimed FTC of Rs. 17,72,470 under section 90/90A of the Act. The claim was initially allowed, but subsequently withdrawn by the AO due to the late filing of Form-67.
The Decision of AO & CIT(A): Both the Assessing Officer and Commissioner of Income-tax (Appeals) disallowed the FTC on the grounds of non-compliance with the timelines for filing Form 67.
ITAT Ruling: ITAT Kolkata took a different view, finding that the law does not expressly state that the FTC should be denied for delayed filing of Form-67. Emphasizing substance over procedural technicalities, ITAT allowed the assessee’s appeal and granted the FTC.
Implications & Precedents: The ruling aligns with previous decisions, such as Atanu Mukherjee Vs. ITO and Sobhan Lal Gangopadhyay Vs. ADIT. It sets an essential precedent, reaffirming that procedural lapses should not lead to substantial rights being denied.
Conclusion: Mahua Bagchi Vs ACIT (ITAT Kolkata) is a welcome judgment, emphasizing the importance of justice over procedural technicalities. By allowing the Foreign Tax Credit despite the late filing of Form 67, ITAT has demonstrated a balanced approach that upholds the principles of fairness and equity. This decision will surely resonate with taxpayers and tax practitioners, reinforcing the belief that justice and the intent of the law should prevail over procedural lapses. It underlines the importance of substance in tax law, ensuring that genuine claims are not defeated by minor procedural failures.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal preferred by the assessee is against the order passed by Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi [hereinafter referred to Ld. ‘CIT(A)’] for the Assessment Year (in short ‘AY’) 2017-18.
2. The only issue raised by the assessee is against the order of Ld. CIT(A) confirming the order passed by the Assessing Officer (in short ld. ‘AO’) u/s 154 r.w.s. 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) wherein the claim of foreign tax relief amounting to Rs. 17,72,470/- was not allowed which was claimed u/s 90/90A of the Act.
3. Brief facts of the case are that the assessee is an employee of Cognizant Technology Solutions India Pvt. Ltd. since 1999 and was transferred to UK in May, 2008 and worked in UK till September, 2020. Thereafter the assessee was again transferred to India. The assessee got benefits from the employer in the form of equity shares granted to her under Employee Stock Option Plan (in short ‘ESOP’) and restricted stock. These stocks got vested over a period of four years if the assessee worked for the said employer company under ESOP. The profit which goes to the assessee would be determined on the basis of grant price of $19.66 and the sale price. Accordingly, the tax was deducted in UK amounting to Rs. 17,72,470/- which was claimed by the assessee as foreign tax u/s 90 of the Act. However, Form-67 as required to be filed on or before filing the return of income u/s 139(1) of the Act was not filed. The assessee filed the return of income after the due date and also filed Form-67 with the delay of two and a half years from the date of filing return. The AO CPC passed the order u/s 143(1) of the Act dated 28.03.2019 and the claim was allowed in respect of foreign tax. However, when the assessee filed the form 67 in respect of foreign tax deducted, the AO by passing order u/s 154 of the Act withdrew the foreign tax credit of Rs. 17,72,470/- on the ground that the assessee has filed Form-67 two and a half years after the due date of filing the return.
4. CIT(A) also dismissed the appeal of the assessee of the assessee upholding the order of AO on the ground that form 67 was not filed in term of provisions of Rule 128 of Income Tax Rules,1962 on or before the due date of return of income u/s 139(10 of the Act.
5. After hearing rival contentions and perusing the material on record, we find that the assessee served abroad and some foreign tax to the tune of Rs. 17,72,470/- was deducted in United Kingdom under DTAA between India and UK and provision of Section 90(2) of the Act. We also note that Rule 128 sub-Rule 9 provides that Form-67 should be filed on or before the due date of filing the return of income. However, we note that nowhere it is stated that in case of delayed filing of Form-67 by way of foreign tax credit which is deducted from the assessee in foreign country i.e U.K. would be denied. Accordingly, we are of the considered view that the assessee is entitled to get this foreign tax credit of Rs. 17,72,470/- u/s 90 of the Act. We also note that the claim in respect of foreign tax was allowed in the order passed u/s 143(1) of the dated 28.03.2019 and was withdrawn by the AO by passing order u/s 154 of the Act when the assessee filed form 67 before the AO. In our opinion the credit in respect of foreign tax cannot be denied to the assessee for the technicality of not filing the form 67 within the due date of return u/s 139(1) of the Act. The case of the assessee finds support from the decision of Coordinate Benches in the case of Atanu Mukherjee Vs. ITO in ITA No. 439/KOL/2022 for AY 2020-21 order dated 20.12.2022 and Sobhan Lal Gangopadhyay Vs. ADIT in ITA No. 782/KOL/2022 for AY 2020-21 order dated 09.05.2023.
6. In the result, the appeal filed by the assessee is allowed. Kolkata, the 19th July, 2023.
