Prakash Singh Yadav, Banglore V. The ITO, Ward-4(1)(7), Vadodara

ITA 285/AHD/2021

AI Insights

The case revolves around the denial of Foreign Tax Credit (FTC) to the assessee, Prakash Singh Yadav, by the CPC due to the belated filing of Form No. 67. The assessee, employed with Shell India Marketing Pvt. Ltd., had claimed an FTC of Rs. 5,83,550 in his income tax return for the Assessment Year 2019-20. The CPC and subsequently the National Faceless Appeal Centre (NFAC) upheld the denial, citing a violation of Rule 128(9) of the Income Tax Rules, which mandates the timely filing of Form No. 67. The assessee contested this decision, referencing a similar case (Ms. Brinda RamaKrishna vs. ITO) where the Tribunal had ruled that such procedural requirements are directory and not mandatory, thus not justifying the disallowance of FTC.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114307 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-04-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 31-10-2021
• Other Referred Cases: Ms. Brinda RamaKrishna vs. ITO
• Laws Referred To: Income Tax Act, 1961, India - Netherlands Double Taxation Avoidance Agreement
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Double taxation relief
• Section: 90; 143(1); 207; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Prakash Singh Yadav PH-4 Wing, Ahad Euphoria, Near Wipro Office, Sarjapur, Bangalore, Karnataka- 560035 PAN: ADNPY5235B (Appellant) Vs The ITO, Ward-4(1)7), Vadodara (Respondent) Assessee Represented: Ms. Amrin Pathan, A.R. Revenue Represented: Shri Pravin Verma, Sr.D.R. Date of hearing : 18-04-2023 Date of pronouncement : 21-04-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the order dated 03.09.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “NFAC”), arising out of the Intimation passed under section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2019-20. ITA No. 285/Ahd/2021 Assessment Year 2019-20 I.T.A No. 285/Ahd/2021 A.Y. 2019-20 Page No Prakash Singh Yadav vs. ITO 2 2. The brief facts of the case is that the assessee is employed with Shell India Marketing Pvt. Ltd. (SIMPL) and derived salary income. The assessee filed its Return of Income on 27.03.2020 declaring total income of Rs. 64,07,910/-. The assessee claimed relief on account of Foreign Tax Credit (FTC) of Rs. 5,83,550/- u/s. 90 of the Act. The Computer Processing Centre (CPC), Bangalore while processing the return denied the claim of FTC on the ground that the return was filed belatedly. 3. Aggrieved against the same, the assessee filed an appeal before Ld. NFAC. The assessee filed detailed submissions before Ld. NFAC. However the NFAC confirmed the order of the CPC stating that Form No. 67 is filed belatedly on 26.03.2020 by the assessee which is violation of Rule 128(9) of the I.T. Rules. Therefore the assessee is not eligible to claim for FTC and thereby the appeal was also dismissed. 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of appeal: Ground No. 1: Non grant of Foreign Tax Credit (FTC) of Rs. 5,83,550/- On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in confirming the action of the Ld. Assessing Officer, CPC (Ld. AO) of making the adjustment in the intimation under Section 143(1) of the Act of not allowing Foreign Tax Credit (FTC) of Rs. 5,83,550 allowable as per Section 90 of the Income-tax Act, 1961 (Act') read with Article 23(4) of the India - Netherlands Double Taxation Avoidance Agreement ('DTAA). It is prayed that the Ld. Assessing Officer be directed to allow the FTC of Rs. 5.83.550. Ground No. 2: Non-grant of FTC is not a permissible adjustment under Section 143(1) of the Act I.T.A No. 285/Ahd/2021 A.Y. 2019-20 Page No Prakash Singh Yadav vs. ITO 3 On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in holding that the non-grant FTC of Rs. 5.83.550 is a permissible adjustment under Section 143(1) of the Act. It is prayed that the Ld. Assessing Officer be directed to allow the FTC of Rs. 5,83,550. The Appellant craves leave to add, amend, alter, substitute, and withdraw all or any of the above Grounds of Appeal anytime either before or during the hearing of the Appeal. 4.1. At the time of hearing of the appeal, Ld. Counsel Ms. Amrin Pathan filed a Paper Book and compilation of case laws and strongly argued that this issue is attained finality by the decision of the Co-ordinate Bench of the Bangalore Tribunal in the case of Ms. Brinda RamaKrishna vs. ITO reported in 135 taxmann.com 358 wherein it is categorically held that Rule 128(9) of I.T. Rules does not provide for disallowance of Foreign Tax Credit in case of delay in filing Form No. 67 and filing of Form No.67 is not mandatory but only a directory requirement . Therefore assessee was eligible to FTC, following the above judicial precedents. Thus the Ld. Counsel pleaded that the assessee’s appeal be allowed. 5. Per contra, the Ld. D.R. appearing for the Revenue supported the order passed by the Lower Authorities but no contra judgments placed before us. 6. We have given our thoughtful consideration and perused the materials available on record. It is settled principle of law that denial of Foreign Tax Credit for the sole ground that Form No. 67 is filed belatedly. The Co-ordinate Bench of the Bangalore Tribunal has considered the above issue which has been followed by various other benches of the Tribunal and allowed the FTC in favour of the assessee. The operative portion of the decision of the Bangalore I.T.A No. 285/Ahd/2021 A.Y. 2019-20 Page No Prakash Singh Yadav vs. ITO 4 Tribunal in the case of Ms. Brinda RamaKrishna (cited supra) is reproduced as follows: 9. It was submitted that the Board has power to prescribe procedure to granting FTC. However, the Board does not have power to prescribe a condition or provide for disallowance of FTC. The procedure prescribed in Rule 128 should therefore be interpreted in this context. Rule 128 is therefore a procedural provision and not a mandatory provision. 10. It was further submitted that Rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed u/s 139(1) of the Act. However, the Rule nowhere provides that if the said Form 67 is not filed within the above stated time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. The learned counsel for the Assessee submitted that in case the intention was to deny the FTC, either the Act or the Rules would have specifically provided that the FTC would be disallowed if the assessee does not file Form 67 within the due date prescribed under section 139(1) of the Act. It was submitted that that there are many sections in the Act which specifically deny deduction or exemption or relief in case the return is not filed within prescribed time. Reference was made to section 80AC, 80-IA(7), 10A(5) and 10B(5). Such language is not used in Rule 128(9). Therefore, such condition cannot be read into Rule 128(9). 11. It was further submitted that Filing of Form 67 is a procedural/directory requirement and is not a mandatory requirement. It was submitted that violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC. Reliance was placed on the decision of the Hon’ble Supreme Court, in the case of Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, (1992 Supp (1) Supreme Court Cases 21) wherein it observed that: "The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve." Further reliance was placed on the decision of the Hon’ble Supreme Court, in the case of Sambhaji and Others v. Gangabai and Others, reported in (2008) 17 SCC 117, wherein it has been held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. It was submitted that filing of Form 67 as per the provisions of section 90 read with Rule 128(9) is a procedural law and should not control the claim of FTC. 12. It was further submitted that even in the context of 80IA(7), 10A(5) etc, wherein there is specific provision for disallowance of deduction/exemption if audit report is not filed along with the return, various High Courts have taken a view that filing of audit report is directory and not mandatory. Reliance in this regard was placed on the following cases:  CIT vs Axis Computers (India) (P.) Ltd [2009] 178 Taxman 143 (Delhi)  PCIT, Kanpur vs Surya Merchants Ltd [2016] 72 taxmann.com 16 (Allahabad) I.T.A No. 285/Ahd/2021 A.Y. 2019-20 Page No Prakash Singh Yadav vs. ITO 5  CIT, Central Circle vs American Data Solutions India (P.) Ltd [2014] 45 taxmann.com 379 (Karnataka)  CIT-II vs Mantec Consultants (P.) Ltd [2009] 178 Taxman 429 (Delhi)  CIT vs ACE Multitaxes Systems (P.) Ltd [2009] 317 ITR 207 (Karnataka). 13. It was submitted that as per the provisions of section 90(2) of the Act, where the Central Government of India has entered into a DTAA, the provisions of the Act would apply to the extent they are more beneficial to a taxpayer. Therefore, the provisions of DTAA override the provisions of the Act, to the extent they are beneficial to the assessee. Reliance in this regard is placed on the following cases and circulars: *Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 (SC) *CIT v Eli Lily & Co (India) P Ltd (2009) 178 Taxman 505 (SC) *GE India Technology Centre P Ltd v CIT (2010) 193 Taxman 234 (SC) * Engineering Analysis Centre of Excellence P Ltd v CIT (2021) 125 taxmann.com 42 (SC) (Pg 106-109 of PB 2-Para 25 & 26) *CBDT Circular No 333 dated 2/4/82 137 ITR (St.) It was submitted that when there is no condition prescribed in DTAA that the FTC can be disallowed for non-compliance of any procedural provision. As the provisions of DTAA override the provisions of the Act, the Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision. 14. The learned DR reiterated the stand of the revenue that rule 128(9) of the Rules, is mandatory and hence the revenue authorities were justified in refusing to give FTC. He also submitted that the issue was debatable and cannot be subject matter of decision in Sec.154 proceedings which are restricted in scope to mistakes apparent on the face of the record. 15. In his rejoinder, the learned counsel for the Assessee submitted that Form No.67 was available before the AO when the intimation u/s.143(1) of the Act dated 28.5.2020 was passed. He pointed out that the AO or the CIT(A) did not dismiss the Assessee application for rectification u/s.154 of the Act on the ground that the issue was debatable but rather the decision was given that the relevant rule was mandatory and hence non furnishing of Form No.67 before the due date u/s.139(1) of the Act was fatal to the claim for 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. 17. In the result, the appeal is allowed. I.T.A No. 285/Ahd/2021 A.Y. 2019-20 Page No Prakash Singh Yadav vs. ITO 6 7. Respectfully following the above decision of the Bangalore Tribunal, we have no hesitation in setting aside the order passed by NFAC and we direct CPC to give credit for Foreign Tax Credit as per Form No. 67 filed by the assessee after due verification. Thus the grounds raised by the Assessee is hereby allowed. 8. In the result, the appeal filed by the Assessee is allowed for statistical purpose. Order pronounced in the open court on 21-04-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 21/04/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद