Vinay Dube Vs ITO (ITAT Mumbai)
The appeal before the ITAT Mumbai arose from an order passed under Section 250 of the Income Tax Act, 1961 for Assessment Year 2023–24, concerning denial of foreign tax credit (FTC) claimed under Sections 90/90A. The assessee, an individual earning salary, capital gains, and other income in both India and the United States, filed a return declaring total income of ₹5.03 crore and claimed FTC of ₹84.16 lakh against foreign taxes of ₹1.96 crore paid in the USA.
During assessment, the Assessing Officer (AO) sought evidence of foreign taxes paid and the basis for computation of the FTC. The assessee furnished the U.S. tax return for Calendar Year 2022, covering the period from 1 April 2022 to 31 December 2022. However, for the remaining period from 1 January 2023 to 31 March 2023, the return had not yet been filed. The AO held that the assessee had not fully substantiated or quantified the claim and disallowed the entire FTC as being based on estimates without supporting material.
On appeal, the Commissioner of Income Tax (Appeals) held that relief under Sections 90/90A is a substantive right flowing from the tax treaty and cannot be denied merely on procedural grounds once foreign tax payment is evidenced. Since the assessee had produced documentary proof for part of the year, the CIT(A) directed the AO to verify the foreign income and taxes paid for the period covered by the filed U.S. return and grant proportionate relief. Accordingly, the complete disallowance was partly deleted.
