SHISHIR AGARWAL, GURGAON V. ADIT, CPC, CPC, BENGALURU

ITA 3029/MUM/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4513 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 20-12-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 27-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Tax effect; Revised return
• Section: 90; 154; 2; 139; 234B; 139(5); 143(1); 250; 139(1); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM AND SHRI GAGAN GOYAL, AM ITA No. 3029/MUM/2023 (Assessment Year: 2020-21) Shishir Agarwal M3M, Golf Estate, FW1-12B, Sector 65, Gurgaon, Haryana 122101 Vs. Assistant Director of Income Tax CPC Bengaluru, Karnataka - 560500 PAN/GIR No. ADAPA2606D (Assessee) : (Respondent) Assessee by : Shri Ketan Ved Respondent by : Shri Mahesh Parwani Date of Hearing : 21.12.2023 Date of Pronouncement : 22.12.2023 O R D E R Per Narender Kumar Choudhry, J M: This appeal has been preferred by the Assessee against the order dated 28.6.2023 impugned herein passed by the learned Commissioner of Income Tax (Appeals)-55, Mumbai ( in short „Ld. Commissioner ‟), under Section 250 of the Income Tax Act, 1961 (in short „ the Act‟) for the Assessment Year (in short „AY‟) 2020-21. 2. In the instant case, the Assessee filed its original return of income for assessment year under consideration on 27.11.2020 u/s 139 (1) of the Act, which was subsequently revised u/s 139(5) of the Act on 29.3.2021. 2 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC 3. Subsequently the Assessee received a rectification order u/s 154 of the Act, dated 11.2.2022 issued by the Assistant Director of Income Tax, Centralized Processing Centre (in short „CPC‟) wherein it has been stated that an intimation u/s 143(1) of the Act was issued on 6.8.2021 which the Assessee claimed to has not received the same. In the order dated 11.2.2022 u/s 154 of the Act, demand was raised to the tune of Rs.5,95,840. Therefore, being aggrieved, the Assessee filed a rectification application with the CPC on 8.3.2022. Somehow the Assessee has received another rectification order dated 8.3.2022 issued by the CPC u/s154 of the Act. The Assessee claimed that though the Assessee has claimed the amount of Rs.24,07,948/- under Foreign tax credit, however, the CPC has granted relief to the extent of Rs.19,32,575 only, which resulted into denial of relief of Rs.4,75,373. Therefore being aggrieved the Assessee preferred first appeal before the Ld. Commissioner, before whom the Assessee claimed that though it has filed its original return of income in November, 2020 declaring its total income of Rs.3,54,14,238 including the income earned from United State of America (in short „USA‟) from September 2016 to 2018 but somehow omitted to take full credit for the taxes paid on the foreign income. However, the Assessee in March 2021 by realizing the mistake that it has omitted to claim such credit of the foreign income, on dated 28-03-2021 filed Form No.67 along with the revised return of income declaring total income of Rs.3,57,93,960/-. The revised return filed by the Assessee was processed u/s. 139(1) of the Act and further rectified u/s. 154 of the Act in which the foreign tax relief of Rs.19,32,575 3 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC was granted instead of Rs.24,07,948/- as claimed by the Assessee. The Assessee further claimed that in the revised return of income , the Assessee has included the income of Rs.1,02,71,213/- earned from Russia and USA and relevant tax on such income was paid in Russia and USA. Therefore as per Article 23 of India-US DTAA, the foreign tax credit of Russia & USA equivalent to Rs.24,07,948/- in full is allowable to the Assessee u/s 90 of the Act. Even otherwise requirement of filling of Form 67 is procedural and non-compliance of such procedural requirement should not result into denial of “Foreign Tax Credit” The Assessee in support of its contentions also relied on various judgments including by the Jurisdictional Tribunal at Mumbai in the case of Sonakshi Sinha V/s CIT [(2022) 142 taxman.com 414(Mumbai)(Tribunal), dated 20.9.2022, (ITA No. 1704/MUM/2022) ] . 4. The Ld. CIT though considered the claim of the Assessee however, but by not following the judgment passed in case of Sonakshi Sinha V/s CIT by the tribunal, ultimately denied the foreign tax credit by concluding as under: “....The decision of the Hon’ble ITAT, Mumbai in the case of Sonakshi Sinha v/s CIT is the decision of the jurisdiction ITAT and it has to be usually followed. The appellant has also relied upon the decisions of Bangalore Tribunal in the case of Ms. Brinda Rama Krishna v Income Tax Officer and Mr. Vinodkumar Ladshimipati v CIT(A), NFAC Delhi. However, taking strength from the ratio laid down by the Hon’ble Supreme Court in the case of Bharat Hari Singhania v/s CIT(Supra) and Muralikrishna Vaddi v/s ACIT(supra) and also the express provisions of Sec 90 of the 4 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC I.T. Act providing for making rules for implementation of agreement between the central government and foreign government with respect to credit of foreign tax, the decision of the Hon’ble Mumbai ITAT in the case of Sonakshi Sinha v/s CIT (supra) and decisions of Bangalore Tribunal in the case of Ms. Brinda Rama Krishna v Income Tax Officer and Mr. Vinodkumar Ladshmipati v CIT(A), NFAC Delhi is not followed. As discussed above, the appellant filed return of income for A.Y.2020-21 on 27.11.2020. The appellant omitted to claim credit for the Russia & USA taxes in the original return of income for A.Y.2020-21. The appellant filed a revised return for A.Y.2020- 21 on 29.3.2021 in which the taxes paid on Russia and USA income of Rs.24,07,948/- was claimed. The appellant filed form No.67, as prescribed under Rule 128 of the IT Rules on 29.3.2021 and claimed foreign tax relief of Rs.24,07,948/-. Thus, the appellant failed to furnish form No.67 to claim foreign tax credit on or before the due date of filing of return u/s.139(1) of the Act. Therefore, the appellant has not followed the Rule 128 prescribing filing form no.67on or before the due date of filing the return of income for relevant assessment year. Therefore, the denial of foreign tax credit of Rs.4,75,373/- (2407,948 – 19,32,575) by the AO, CPC in the order passed u/s154 is justified....” 5.1 The Assessee being aggrieved preferred the instant appeal and raised the following grounds of appeal as mentioned in column no. 10 of Form 36 and reiterated its claim as raised before the AO: Grounds of Appeal 10 Grounds of Appeal Tax effect relating to each ground of appeal 5 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC (see note below) 1 Denial of full relief u/s.90 of the Income Tax Act, 1961 vis-à- vis the credit for foreign taxes paid 475373 2 Interest u/s 234A has been levied in excess 19016 3 Interest u/s 234B has been levied in excess 66402 Interest u/s 234C has been levied in excess 35064 Total Tax Effect Rs.5,95,855 5.2 On the contrary, the Ld. DR vehemently supported the orders passed by the authorities below And claim that impugned order specifically do not suffers from any perversity, impropriatory and illegality. 6. Heard the parties and perused the material available on record. Ground no. 1 pertains to denial of full relief u/s.90 of the Income Tax Act, 1961 vis-à-vis the credit for foreign taxes paid therefore the sole issue emerge “where the Assessee has not filed Form No.67 to claim foreign tax credit, before the due date as prescribed for filling of return of income u/s 139(1) of the Act but filled on or before completion of the assessment proceedings, then the Assessee is entitled for the credit of foreign tax relief or not? We observe that the Hon‟ble High Court of Madras in the case of Duraiswamy Kumaraswamy Vs. Principal Commissioner of Income Tax-8 (2023)156 taxmann.com 445(Madras) (06.10.2023) has dealt with the identical issue and ultimately held that where the Assessee claims foreign tax credit vide Form No.67 after the due date specified for furnishing the return of income u/s.139(1) of the Act or before completion of the assessment proceedings and intimation u/s 143(1) is issued after filing of Form No.67, then 6 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC rejection of Assessee‟s claim for foreign tax credit is not proper. We further observe that the Hon‟ble High Court of Madras while coming to the conclusion also considered the judgment of the Hon‟ble Apex Court in the case of Commissioner of Income Tax, Maharashtra v/s. G.M. Knitting Industries (P) Limited in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015, wherein it was held that Form No.3AA is required to be filed along with return of income to avail the benefit and even if it is not filed but the same is filed during the assessment proceedings or before the date of passing the final order of assessment is made that would amount to sufficient compliance. Though in the instant case, the issue involved is not qua Form 3AA as was involved in the case before Hon‟ble Apex Court true spirit of dictum laid down by the Hon‟ble Apex Court is „pari materia' and therefore equally applicable to the instant case. 6.1 Coming to the judgment of Mumbai Tribunal in the case of Sonakshi Sinha v/s. CIT (supra) wherein the identical issue has also been dealt by the Hon‟ble Bench and ultimately held that if the Form No.67 is filed before the completion of assessment though not filed in accordance with the Rule 128(9) of the Income Tax Rules, 1962 (in short „Rules‟) which provides that such form shall be filed on or before the due date of filing of returns of Income, still the Assessee is entitled to claim foreign tax credit. For clarity and ready reference conclusion drawn by the Hon‟ble bench is reproduced below: 012. We have carefully considered the rival contention and perused the orders of the lower authorities. Short question in this appeal is whether assessee is entitled to foreign tax credit even when form number 67 required to be filed according to the provisions of rule 128 (9) of the Income Page | 8 ITA 7 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC No.1704/Mum/2022 Sonakshi Sinha; AY 18-19 Tax Rules on or before the due date of filing of the return of income, not complied by the assessee, but same was filed before the completion of the assessment proceedings. Precisely, the fact shows that assessee filed return of income u/s 139 (1) of the income tax act. In such a return of income, she claimed the foreign tax credit. However, form number 67 was filed during the course of assessment proceedings and not before the due date of filing return. Rule 128 (9) of the Income Tax Rules 1962 provides that 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 sub-section (1) of section 139, in the manner specified for furnishing such return of income. We find that coordinate bench in 42 Hertz Software India (P.) Ltd v. ACIT [2022] 139 taxmann.com 448 (Bangalore - Trib.) wherein following its earlier order in the case of Ms. Brinda Rama Krishna v.ITO [2022] 135 taxmann.com 358 (Bang - Trib) it was held that "one of the requirements of Rule128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns and that this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No. 67. Same view is also taken by a coordinate division bench in Vinodkumar Lakshmipathi V CIT(A) NFAC ITA No.680/Bang/2022 06.09.2022. It is Page | 9 ITA No.1704/Mum/2022 Sonakshi Sinha; AY 18-19 well settled that while laying down a particular procedure, if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Admittedly, Rule 128 does not prescribe denial of credit of FTC. Further the Act i.e. section 90 or 91 also do not prescribe timeline for filing of such declaration on or before due date of filing of ROI. Further rule 128 (4) clearly provides the condition where the foreign tax credit would not be allowed. Rule 128 (9) does not say that if prescribed form would not be filed on or before the due date of filing of the return no such credit would be allowed. Further by the amendment to the rule with effect from 1 April 2022, the assessee can file such form number 67 on or before the end of the assessment year. Therefore, legislature in its own wisdom has extended such date which is beyond the due date of filing of the return of income. Further , the fact in the present case is quite distinct then the issue involved in the decision of the honourable Supreme Court in case of Wipro Ltd (supra). Here it is not the case of violation of any of the provisions of the act but of the rule, which does not provide for any consequence, if not complied with. 8 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC Therefore, respectfully following the decisions of the coordinate bench on this issue, we hold the assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income Tax Rules, which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground number 2 of the appeal of the Assessee is allowed. 6.2 Even otherwise in the order of CPC, we do not find any plausible reason for allowing the foreign tax credit of Rs.19,32,575 and denying the credit of remaining amount of Rs.4,75,373/- only and therefore on this reason itself, the Assessee is liable to be succeeded in his case. 6.3 Hence considering peculiar facts and circumstances in totality and respectfully following the judgment referred above, wherein the Hon‟ble Courts dealt with the identical issue and by analyzing the relevant facts and circumstances, provisions of law and various judgments on the issue in hand, ultimately decided “ if the Form No.67 is filed, may be belated, but before finalization of the assessment, then the foreign tax credit can be availed”, we are inclined to allow the credit of foreign tax to the tune of Rs. 4,57,373/- to the Assessee, which is under consideration before us, thus the AO is directed accordingly. Resultantly Ground no. 1 stands allowed. 7. Ground No.2 to 4 relates to the levy of interest u/s. 234(A), (B) and (C) of the Act, as we have already allowed the credit of Rs.4,75,373/- qua foreign tax, hence the AO is directed to re- compute the interest accordingly in view of our judgment. Resultantly Grounds no. 2 to 4 are allowed for statistical purposes. 9 ITA No.3029/MUM/2023 (A.Y 2020-21) Shishir Agarwal Vs. ADIT, CPC 8. In the result, the appeal filed by the Assessee stands allowed partly for statistical purposes. Order pronounced in the open court on 22 /12 /2023. Sd/- sd/- ( Gagan Goyal ) (Narender Kumar Choudhry) Accountant Member Judicial Member Mumbai; Dated : 12.2023 Mini, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai