Section 139(5)– Reduction in time limit for filing revised return

Section 139(5)– Reduction in time limit for filing revised return– Request to bring back erstwhile time limit for filing of revised tax return at least in cases of claim of foreign tax credit

Issue/Justification

The Finance Act 2017 amended section 139(5) to provide that the time for furnishing of revised return shall be available up to the end of the relevant assessment year or before the completion of assessment, whichever is earlier.

This particularly impacts claims for any Foreign Tax Credit (FTC) in respect of the taxes paid by the individual assessee(s) in the overseas tax jurisdiction. Generally the information/ final payment of foreign taxes/ tax return is unlikely to be available within the timeline for filing the revised tax return i.e. by the end of the relevant assessment year.

As an example, USA follows calendar year as their tax year and the first due date of filing a USA income-tax return is April 15th of the following calendar year, meaning thereby, the USA income-tax return for calendar year 2018 will be required to be filed by 15th April, 2019.

In a case of Indian income tax return for tax year 2017- 18, the due date to file a revised return as per the said amendment will be 31st March, 2019.

In the above situation, the assessee may not have his final tax return available with him till 15th April 2019, hence, such assessee will not be able to claim the FTC of the final USA taxes paid by him in his Indian income tax return as he may not have the final USA tax details by 31 March 2019

Suggestion

Keeping in mind the aforesaid hardship of double taxation which may arise to the individual assessee as he may not be able to claim foreign tax credit in the absence of overseas income-tax return, there is a need to retain the time limit for filing of revised tax return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. Therefore, the earlier time limit may be brought back at least in respect of revision required for claiming foreign tax credit.

Source-  ICAI Pre- Budget Memorandum–2018 (Direct Taxes and International Tax)