Income Tax Appellate Tribunal - Kolkata
Anindya Sarkar, Kolkata vs A.D.I.T., Cpc, Bengaluru, Bengalru on 26 July, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH KOLKATA
BEFORE SHRI SANJAY GARG JUDICIAL MEMBER
AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER
ITA No. 1345/KOL/2024
Assessment Year: 2020-21
Anindya Sarkar, Assistant Director of Income
11D1 Loch Tower, Hiland Park, Tax, CPC, Bangaluru
1925, Chakgaria, Vs
Kolkata - 700094
(PAN: AJTPS5051K)
(Appellant) (Respondent)
Present for:
Appellant by : Shri C.M. Roy, C.A.
Respondent by : Shri Subhro Das, Addl. CIT, Sr. DR
Date of Hearing : 11.07.2024
Date of Pronouncement : 26.07.2024
ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), Kolkata-22, (hereinafter referred to as "the Ld. CIT(A)" passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for AY 2020-21 dated 17.05.2024 passed against the rectification order u/s. 154 of the Income-tax Act, 1961 (hereinafter referred to as the "Act") by the Assistant Director of Income Tax, CPC, Bengaluru, dated 07.06.2022.
2. The grounds of appeal raised by the assessee are reproduced as under:
"1. That the learned CIT(A) has erred in disallowing the foreign tax credit due to delay in submission of Form 67.2 ITA No. 1345/Kol/2024
Anindya Sarkar : AY: 2020-21
2. That the learned CIT(A) has failed to appreciate the fact that in case of delayed filing of Form 67 by way of foreign tax credit which is deducted in foreign country would be denied (sic).
3. For that the assessee craves leave to add, alter or withdraw any ground/s of appeal before or at the time of hearing."
3. Brief facts of the case as noted from Form No. 35 filed before the Ld. CIT(A) are that the assessee is an individual and during the previous year 2019-20, he was employed with M/s Finmechanics Pte. Ltd., #23-09,20, Cecil Street, Singapore - 049705. He had to stay in India for more than 108 days, hence for the purpose of income tax he was treated as a resident. The assessee/appellant, during the said previous year, has voluntarily disclosed gross total income of Rs. 1,46,04,863/- arising out of his salary income of Rs. 1,30,21,582/-, H.P. income of Rs. 61,797/-, Other Source Income of Rs. 10,64,132/- and Capital Gains of Rs. 4,57,352/-. Since, the salary income was from Singapore, taxes were paid in Singapore and relief under Section 90 of the Act was claimed by the assessee, who is an Indian resident, since India has entered into a Double Taxation Avoidance Agreement (for short 'DTAA') with Singapore from where he had earned income. The claim of Foreign Tax Credit was not allowed as Form No. 67 was filed late. The rectification applications under Section 154 of the Act were filed on two occasions i.e. on 10.01.2022 and 21.05.2022 but the same were processed without any change in the original intimation issued under Section 143(1) of the Act. A demand notice for AY 2020-21 with the tax demand of Rs. 17,71,860/- was sent on 07.06.2022. Accordingly, the rectification order dated 07.06.2022 of the CPC Bengaluru was appealed against before the Ld. CIT(A). Before the Ld. CIT(A), it was claimed that the AO ought to have accepted the payment of tax on salary income in Singapore for foreign tax credit as the same was permitted under the mechanism of claiming deduction or credit on taxes paid in source country against the tax liability in country of residence by virtue of Article 25 of the India-Singapore of DTAA. The 3 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 assessee had vested right under the DTAA for allowance of tax credit. And procedural delay in filing of Form 67 cannot take away the right vested under the sovereign agreement between India and Singapore signed under Section 90 of the Act as double taxation of the same income under two tax jurisdiction amounts to violation of spirit of Section 90 and the consequent DTAA between two countries. Before the Ld. CIT(A), the assessee could not succeed and the appeal was dismissed by mentioning as under:
"On perusal of the intimation u/s 143(1) dated 24.12.2021 and rectification order dated 07.06.2022, it is observed that the claim of tax relief of Rs. 13,28,903/- Under Section 90/90A of the IT Act was disallowed due to non-filing of the form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act.
It is pertinent to mention here that the CBDT also through its Notification No. 9 dated 19 September 2017 categorically mandates that for claiming credit of any taxes in a country or territory specified outside India, the assessee shall file Form No. 67 under sub-rule (9) of rule 128 of the Income-tax rules, 1962 before the due date for filing the return of income under section 139(1) the Income-tax Act, 1961 and also mandates that filing of Form No. 67 shall precede the filing of the return.
In the instant case, the Form No 67 was not filed along with the return of income.
Although a claim of foreign tax credit was made in the return of income and the same was not accompanied by the Form No 67 which is mandated by the law. However, the appellant claimed that on 26.12.2020 he had submitted the Form 67 after receiving communication from the e-Filing Team, Income Tax Department on 25.12.2020. But, during the appellate proceedings, the appellant could not submit the Form no 67 which according to him was originally filed on 26.12.2020. Accordingly, the CPC processed the return of income without allowing the credit for foreign tax deduction. Afterwards, the appellant filed a rectification request on 21.05.2022 and on 07.06.2022, the CPC, Bengaluru passed the rectification order, rejecting the claim as there was no legally valid Form 67 available at that point of time.
Later on, as per the submission filed by the appellant, he filed the Form No 67 on 03.07.2022 which is beyond the due date for filing the return of income under section 139(1) the Income-tax Act, 1961 under sub-rule (9) of rule 128 of the Income-tax rules, 1962 and hence, non-est as per law."
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed this appeal before the Tribunal.
5. Before us, the assessee reiterated the submission made before the Ld. CIT(A) in support of the claim that the provision of DTAA override the 4 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 provision of the Act and therefore, the credit for foreign tax paid in Singapore should be allowed. The assessee also relied upon the decision in the case of Mahua Bagchi Vs. ACIT, Circle 61, Kolkata, ITA No. 3/Kol/2023, AY 2017-18, dated 19.07.2023 as also the decision in the case of Deepak Shimoga Padmaraju Vs. Assistant Director of Income Tax, ITO, CPC, Bangalore, AY 2021-22, ITA No. 239/Bang/2024, dated 17.04.2024.
6. The Ld. DR supported the order of the Ld. CIT(A).
7. We have gone through the rival contention and also examined the facts. It was submitted before the Ld. CIT(A) by the assessee that the rerun of income was filed on 25.12.2020 and on 26.12.2020 he had submitted the Form No. 67 after receiving the communication from the e- filing team, Income Tax Department on 25.12.2020 that the return of income was not accompanied by Form No. 67 as mandated by law. Subsequently, since the credit was not allowed, he filed rectification application and Form No. 67 on 03.07.2022 and prior to that rectification requests on 21.05.2022 and on 07.06.2022 were also filed. The credit was not allowed since From No. 67 was filed beyond the date for filing the return of income under Section 139(1) of the Act. In the case of Mahua Bagchi Vs. ACIT (supra) relied upon by the assessee, it is held as under:
"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 5 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 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."
8. Further, in the case of Deepak Shimoga Padmaraju Vs. Assistant Director of Income Tax (supra), relying upon the case of Brinda Rama Krishna in ITA No. 454/Bang/2021 for AY 2018-19, order dated 17.11.2021 it has been held that Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67. The relevant extract of the aforesaid order read as under:
"(ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Therefore, nonfurnishing of Form No.67 before the due date u/s 139(1) of the Act is not fatal to the claim for FTC. The findings of this Tribunal are reproduced below: "
2. The Assessee is an individual and during the previous year relevant to AY 2018- 19 an ordinary resident in India. The Assessee worked with Ernst & Young Australia from 20.11.2017 till 16.05.2019. Since her global income was taxable in India, the Assessee offered to tax salary income earned for services rendered in Australia for the period from December 2017 to March 2018 to tax in India. The Assessee claimed foreign tax credit ("FTC") for taxes paid in Australia.
3. There is no dispute that the Assessee is entitled to claim FTC. Rule 128 of the Income Tax Rules, 1962 (Rules) provides for giving FTC and reads thus: "Foreign Tax Credit. 128. (1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule: Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India." One of the requirements of Rule 128 for claiming FTC is provided by Rule 128 (8) & (9) of the Rules and the same reads thus: "(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely:--
(i) a statement of income from the country or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein; (ii) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,-- (a) from the tax authority of the country or the specified territory outside India; or
(b) from the person responsible for deduction of such tax; or (c) signed by 6 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 the assessee: Provided that the statement furnished by the assessee in clause (c) shall be valid if it is accompanied by,-- (A) an acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee;
(B) proof of deduction where the tax has been deducted. (9) The statement in Form No.67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under subsection (1) of section 139, in the manner specified for furnishing such return of income."
4. The Assessee claimed FTC of Rs. 4,73,779/- u/s. 90 of the Act read with Article 24 of India Australia tax treaty ("DTAA") in a revised return of income filed on 31.8.2018. The Assessee had not filed the Form 67 before filing the return of income. On realising the same, the Assessee filed Form 67 in support of claim of foreign tax credit on 18.04.2020. The revised return of income was processed by Centralized Processing Centre (CPC) electronically and intimation u/s 143(1) of the Act on 28.05.2020 was passed disallowing the claim of FTC.
5. The Assessee filed a rectification application before the AO on 15.06.2020 & 25.02.2021 and submitted that credit for FTC as claimed in the return should be given. In the rectification order dated 10.03.2021, the AO upheld the action on the ground that the Assessee has failed to furnish Form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act which is mandatory according to Rule 128(9) of the Rules.
6. On appeal by the Assessee, the CIT(A) vide Order dated 03.09.2021 confirmed the Order of AO. The CIT(A) held that the Assessee has not filed Form 67 before the time allowed under section 139(5) of the Act, and therefore Form 67 is nonest in law. The CIT(A) also held that provisions of Rule 128 are mandatory in nature. The CIT(A)rejected the contention of the Assessee that filing of Form 67 is a procedural requirement and noncompliance thereof does not disentitle the Assessee of the FTC.
16. I have given a careful consideration to the rival submissions. I agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. I am of the view that the issue was not debatable and there was only one view possible on the issue which is the view set out above. I am also of the view that the issue in the proceedings u/s.154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee's application u/s.154 of the Act was not on the ground that the issue was debatable but on merits. I therefore do not agree with the submission of the learned DR in this regard."
7 ITA No. 1345/Kol/2024Anindya Sarkar : AY: 2020-21
9. Further, similar issue arose in the case of Sukhdev Sen Vs. ACIT, Circle -1, Kolkata (ITA No. 78/Kol/2014, dated 26.03.2024). The relevant extract of the aforesaid order is as under:
"7. Before proceeding further, we would like to reproduce rule 128 of the Income - tax Rule s, 1962 (the Rules) which relates with foreign tax credit as under:
"Foreign Tax Credit. 128 (1) An assessee, being a residen t shall be allo wed credit for the amount of any foreign tax p aid by him in a coun try or specif ied territory outside India, by way of deduction or o therwise, in the year in which the income corresponding to such lax has been offered to tax or assessed to tax in India, in the manner and to the extent as specif ied in this rule:
Provided th at in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one ye ar, credit of foreign tax shall be allowed across those years in the s ame propor tio n in which the income is offered to tax or assessed to tax in India"
8. We further no te that sec tion 90 of th e Act provides that Government of India can enter in to Agreement with other coun tries for gran ting relief in respe ct of income on which taxes are paid in coun try outs ide India and such income is also taxable in India . Ar ticle 25 of DTAA between India and USA provides for credit for foreign taxes. Article 25(2)(a) is relev ant in the present con text. Same is extr acted belo w:
"Where a res ident of India derives income which, in accordance with the prov isions of this Convention, may be taxed in the United States, India sh all allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in the United States, whe ther direc tly or by deduction. Such deduc tion shall no t, however, exceed that part of the income-tax ( as computed before the deduction is given) which is attributable to the income which may be taxed in the Unite d States"
9. Thus, Section 90 of the Act read with Article 25(2)(a) of the DTAA provides th at tax paid in USA shall be allowed as a credit ag ains t the tax pay able in India bu t limited to the proportion of Indian tax Neither section 90 nor the DTAA provides that FTC shall be dis allo wed for non - compliance with any procedural requirement. Foreign Tax Credit is an assesser's vested right as per Ar ticle 25[2](a) of the DNA ro ad wat Sec tion 90 and same c annot be disallowed for non-compliance with procedural requirement th at is prescribed in the rules.
10. Further, we wo uld like to men tion th at rule 128(9) provides th at Form No. 67 should be filed on or before the due date of filing the 8 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 return of income as prescribed u/s 139(1) of the Act. However, the rule no where provides that if the said Form No. 67 is no t filed within the required time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. It is therefore evident that if th e in tention of the legislature were to deny the foreign tax credit, either the Act or the rules would have specifically provided that the forei gn tax credit would be dis allo wed if the assessee does not file Form No. 67 within the due date pres cribed under section 139(1) of the Act. We further no te that Filing of Form No. 67 is a procedural/directory requirement and is no t a mandatory requirement and violation of procedural norm do es not ex tinguish the substan tive righ t of claiming the credit of FTC. In suppor t of the claim, the assessee has relied upon several decis ions including the following decision:
i. CIT vs. G.M. Knitting Indus tries (P) Ltd. 71 Tuxmann. com 35(SC) ii. Brinda Ramakrishna us. IPO 193 ITD 840 (Bang) iii. 42 Hertz Sof tware India Pv t. L td vs Asst. C IT. Ita No. 29.
H ang/2001 iv. Durais wamy Kumaraswamy vs. PC IT, W.P No.5834 of 2022
11. Hon'ble Supre me Court, in the case of Mang alore Chemicals & Fertilizers L td. v. Deputy Commissioner, [1992 Supp (1) Supreme Court Cases 21) in resp ect of compliance with the procedural requirements have observed that:
"The mere f ac t th at it is statu tory does not m atter one way of th at o ther. There are conditions and conditions. Some may be subs tan tive, mandatory and based on considerations of policy and some o thers may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non - observ ance of all conditions irrespec tive of the purposes they were intended to serve."
12. Further, in the case of Eng ineering Analysis Centre of Excellence Priv ate Limited vs the Commissioner of Income - tax & Anr. Civ il Appe al Nos. 8733 -8734 of 2018 & Ors. Hon'ble Supreme Court h ave held as under that the provisions of DIAA shall override the provis ions of the Income -tax Act unless they are more beneficial to the assessee:
165. The conclus ions in the aforestated paragraph have no direc t relev ance to the f acts at hand as the effect of sectio n
902) of the Income Tax Ac t wat explanation 4 thereof, is to tre at the DTAA provis ions as the low that must be followed by Indian courts, no twiths tan ding wh at may be contained in the Income Tax Act to the contrary, unless more beneficial to the assessee.
13. We have gone through the decisions of the coordin ate Benches and concur with their findings in this reg ard that f iling of Form No. 67 is directory and no t mand atory and the credit for foreign taxes paid canno t be denied merely on the delay in f iling th e Form No. 67. In the case of M/s 42 Hertz Sof tware India Pv t Ltd. Vs the Assistan t 9 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 Commiss ioner of Income Tax, Circle 3 (1)(1), Bang alore, ITA No. 29/Bang/2021 ITAT. BANGALORE it is held that:
6. There is no dispute that the Assessee is entitled to claim FTU On perus al of provisions of Rule 128 (8) & (9), it is clear th at, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the re turns. In our view, this requirement canno t be treated as mand atory, rather it is direc tory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in f iling Form No 67 This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms. Brindu Kumar Krishna us. ITO in ITA no. 454/ Bang/2021 by order dated 17/11/2021.
7. It's a trite law that DTAA overrides the provisions of the Act and the Rules, as held by various H igh Courts, which has also been approved by H on'ble Supreme Court in c ase of Engineering Analys is Centre of Excellence (P) Ltd reported im (2021) 432 ITR 471.
8. We accordingly, hold that FTC cannot be denied to the assessee. Assessee is directed to f ile the relev an t de tails /evidences in suppor t of its cl aim. We thus remand this issue back to the Ld.AO to consider the claim of assessee in accordance with l aw, based on the verification c arried out in respect of the supporting documen ts filed by assessee.
14. In Vik as h Dag a Vs AC IT Circle -3 (1) Gurg aon ITA No.2536/Del/2022, the ITAT DE LH I BENCH 'H', NEW DELH I vide order dated 14/06/2023 have held that:
8 We have given a thoughtful consideration to the orders of the au thorities belo w. The undisputed f act is that the assessee holds a fore ign tax credit cer tif icate f or Rs. 1887114/ - In our considered opinion filing of form 67 is a procedural / directory requirement and is not a mandatory requiremen t Therefore, violation of procedural norms does not extinguish the subs tan tive right of claiming the credit of FTC We accordingly direc t the AO to allow the credit of FTC and hold th at rule 128(9) of the Rules 3 do es not provide for disallowance FTC in case of delay filing of form 67 is not mand atory het directory requirement and DTAA overrides the provisions of the Act and the Rules canno t be contrary to the Act. 9. In the result, the appe al filed by the assessee i s allowed.
15. Similarly, in th e case of Ashish Agrawal Vs. Income Tax Officer, Ward-12(1), Hyderab ad ITA No. 337/Hyd/2023 ITAT HYDERABAD BENCHES "B", hav e held vide order dated 26/09/2023 that:
11. As f ar as the issue of FTC is concerned, learned AR placed reliance on the decision in the case of Ms. Brinda Ram a Krishna (supra) in the case of Ms Brinda Rama Krishna (supr a), the Bench cons idered the issue in the light of the provisions of 10 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 DTAA, section 295(1) of the Act, the decisions of the Hon'ble Apex Court in the case of Mang alore Chemicals & Fertilizers Ltd. Vs. Deputy Commissioner (1992 Supp (1) SCC 21), Sambhaji Vs. Gang abai (2008) 17 SCC 117 and a lot many decis ions of the Hon'ble A pex Court including the case m Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC) e tc.
and re ached a conclusion th at since Rule 128(9) of the Rules does no t prov ide for disallowance of FTC in the case of delay in filing Form 67 and such filing with in the time allowed for filing the re turn of income under section 139(1) of the Act is only dire ctory, s ince DTAA over rides the Ac t, and the Rules canno t be con trary to the Ac t.
12. We find from Article 25(2)(a) of the DTAA th at where a resident of India derives income which, in accordance with the provis ion of the convention, may be taxed in the United States, India shall allo w as a deduction from the tax on the income of the res ident an amount equal to the income tax paid in the United State s, whether directly or by deduction in view of this provis ion over riding the provisions of the Act, according to us, Rule 128(9) of the Rules has to be read down in conformity thereof Rule 12 8(9) of the Rules cannot be read in isolation. Rules mus t be re ad in the contex t of the Ac t and the DTAA imp acting the righ ts, liabilities and disabilities of the parties.
13. In the case of Purushothama Reddy V ankıreddy (supra) also the Co-ordinate Bench of the Tribunal, in the similar circums tances, allowed the appeal of assessee for FTC claim. Respectfully follo wing the same, we are of the considered Page 6 of 8 ITA No. 3 37/Hyd/2023 opinion th at the decisions relied upon by the assessee are applicable to the f ac ts of the case and the grounds raised by the assessee are accordingly allo wed.
14. In the result, appeal of the assessee is allowed ."
16. We have also gone through the decision of the Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy us. PCIT (supra) and found that the f acts are identical to the f ac ts of the c ase of the assessee and the decision is squarely applicable to the f ac ts of the case of the assesse e. In that case, the petitioner was resident of India and had f iled Indian ITR and claimed benef it of FTC u/s 90/91 of the Act ro w. Article 24 of the India -Keny a DTAA. During the year, he had inco me of both Keny a and India bu t while filing the Indian ITR for the impugned assessment year 2019 -20, th e Form No. 67 prescribed in rule 128 of the rules for claiming FTC was inadver te ntly no t uplo aded along with the ITK which was uploaded on 02.02.2021 The re turn was processed on 2 6.03.2021, however, the credit of FTC was no t given effect to and the request made to the CPC to give effect to the FTC was not accep ted and intimation along with no tices of demand was received. The assessee also could no t succeed with the rectif ic ation ap plication f iled and approached the CIT u/s 264 of the Ac t and at the same time filed a writ petition before the Hon'ble Madras H igh Court. It was s tated by the respondent- depar tment th at rule 128 is mandatory and canno t be 11 ITA No. 1345/Kol/2024 Anindya Sarkar : AY: 2020-21 considered as dire ctory in n ature. The petitioner referred to the judgment of the Hon'ble Supreme Court in the case of CIT vs. G.M. Knitting Indus tries (P) Ltd. Civil Appe al Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015 The Hon'ble High Court allowe d the Writ Petition in f avour o f the assessee by holding as under.
"11. The law laid down by the Hon'ble Apex Court in Commiss ioner of Income Tax, Maharash tra v. G.M.Knitting Indus tries (P) Limited in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015, which was referred above, would be squarely applicable to the present case. In the present case, the re turns were filed withou t F IC, however the same was filed before pass ing of the fin al assess ment order. The filing of FTC in terms of the Rule 128 is only direc tory in nature. The rule is only for the implemen t ation of the provisions of the Act and it will always be direc tory in nature This is what the Hon'ble Supreme Court had held in the above cases when the re turns were filed without furnishing Form 3AA and the same can be filed the subsequent to the p assing of assessment order. W P. No 5834 of 2022 .
12 Further, in the present case, the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the PTC was rejec ted by th e respondent, which is not proper and the s ame is no t in accordance with l aw. Therefore, the impugned order is liable to be set aside.
13. Accordingly the impugned order dated 25.01.2022 is se t as ide. While se tting aside the impugned order, this Cour t remits the matter back to the respondent to make reassessment by taking into cons ideration of the FTC filed by the petitioner on 02.02.2021. The respondent is direc ted to give due credit to the Kenya income of the petitioner and pass the fin al assessment order. Further, it is made clear th at the impugned order is se t wade only to th e extent of disallowing of FTC clam made by the pe titioner un d hence, the first respondent is direc ted to consider only on the aspect of rejection of FTC clam with in a period of 8 weeks from the date of receip t of copy of this order"
17. Respectf ully follo wing the order of the Hon'ble Madr as High Court in the case of Durais wamy Kumaraswamy vs. PCIT (supra) and concurring with the views held by the coordinate Benches of the Tribunal (supra), we hold that merely because the assessee could n o t file Form No. 67 within the prescribed time limit as per the provisions of rule 128(9) of the Income -tax rules, 1962, as it stood during the year under cons ideration, will not preclude the assess ee from claiming the benefit of the foreign tax credit in respect of taxes p aid outs ide India. Therefore, the claim of the assessee is allowed and the Assessing Officer is direc ted to g ive benefit of foreign tax credit in respect of tax paid outside India by the assessee in accordance with law and the DTAA between India and the USA. Accordingly, grounds no. 2,3,4 of the appeal are allowed."
12 ITA No. 1345/Kol/2024Anindya Sarkar : AY: 2020-21
10. The relevant extract of Article 25 of India Singapore Do uble Taxation Avoidance Agreement (DTAA) is as under:
"1. The laws in force in either of the Contracting States shall continue to govern the taxation of income in the respective Contracting States except where express provision to the contrary is made in this Agreement.
2. Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Singapore, India shall allow as a deduction from the tax on the income of that resident an amount equal to the Singapore tax paid, whether directly or by deduction. Where the income is a dividend paid by a company which is a resident of Singapore to a company which is a resident of India and which owns directly or indirectly not less than 25 per cent of the share capital of the company paying the dividend, the deduction shall take into account the Singapore tax paid in respect of the profits out of which the dividend is paid. Such deduction in either case shall not, however, exceed that part of the tax (as computed before the deduction is given) which is attributable to the income which may be taxed in Singapore."
11. Since the provision of DTAA override the provision of Section 90 of the Act as they are more beneficial to the assess ee, in view of judicial pronouncement s in this regard and since Rule 128(a) does not preclude the assessee from the claiming credit for FTC in case of delay in filing the return of income as the credit for FTC is a vested right of the assessee and since form 67 was filed in response to the query received from CPC as contended by the assessee, therefore, there was no justification for not allowing the credit for FTC. Hence, respectfully following the decision cited in preceding paragraphs, Ground Nos. 1 and 2 of the appeal are allowed and the AO is directed to allow the FTC in accordance with DTAA between India & Singapore and as per law.
12. Ground No. 3 is general in nature and does not require separate adjudication.
13. In result, the appeal of the assessee is allowed.
13 ITA No. 1345/Kol/2024Anindya Sarkar : AY: 2020-21 Order pronounced in the open court on 26 t h July, 2024.
Sd/- Sd/-
(Sanjay Garg) (Rakesh Mishra)
Judicial Member Accountant Member
Dated: 26 t h July, 2024
AK, P.S.
14
ITA No. 1345/Kol/2024
Anindya Sarkar : AY: 2020-21
Copy to:
1. The Appellant:
2. The Respondent.
3. CIT(A)
4. The CIT,
5. DR, ITAT, Kolkata Bench, Kolkata
//True Copy// By Order
Assistant Registrar
ITAT, Kolkata Benches, Kolkata