SONIA SHARMA, NOIDA V. ITO WARD 5(3)(4), Noida

ITA 316/DEL/2023

AI Insights

Sonia Sharma, the appellant, contested the denial of Foreign Tax Credit (FTC) relief by the Income Tax Officer (ITO) and the subsequent dismissal of her appeal by the CIT(A). The primary contention was the non-filing of Form No.67, which was required under Rule 128 of the Income Tax Rules, 1962, for claiming FTC under sections 90/91 of the Income Tax Act, 1961. The assessee argued that the requirement to file Form No.67 was directory and not mandatory, supported by various judicial precedents. The Tribunal agreed with the assessee's position, citing similar cases and Supreme Court judgments, and remanded the issue back to the ITO for compliance with the legal provisions regarding FTC.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131119 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-04-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 08-02-2023
• Other Referred Cases: Ms. Brinda RamaKrishna vs. ITO, 42 Hertz Software India Pvt. Ltd. Vs ACIT, PCIT-III, Bengaluru vs Wipro Ltd., Engineering Analysis Centre of Excellence (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Double taxation relief; Principle of natural justice; Question of law; Revised return; Set aside
• Section: 154; 10B; 143(1); 250; 139(1)

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA No.316/Del/2023 [Assessment Year : 2020-21] Sonia Sharma, A-132, Sector-40, Noida, Gautam Budh Nagar, Uttar Pradesh-201301. PAN-BOSPS3283Q vs ITO, Ward-5(3)(4), Noida. APPELLANT RESPONDENT Appellant by Shri Manoj Kumar, CA & Ms. Sonia Sharma (Assessee in person) Respondent by Shri Om Parkash, Sr.DR Date of Hearing 25.04.2023 Date of Pronouncement 27.04.2023 ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year 2020-21 is directed against the order of Ld. CIT(A), National Faceless Appeal Centre (“NFAC”), Delhi dated 15.12.2022. The assessee has raised following grounds of appeal:- 1). “That assessee is not agreeing with the default order u/s 250 of the Income Tax Act as framed by the CIT(A) is bad-in- eyes of the law and fact. 2) That the CIT(A) did not provide reasonable and adequate opportunity of being heard to the assessee to know his view and point before dismissed the appeal. 3). That the assessee is a salary person. She submitted own ITR self as a salary income. She did not have proper knowledge of Income Tax. That time she submitted ITR self. She received intimation u/s 143(1) on-line dated 15.03.2021, after that she check this intimation and found a demand created by department. After that she meet proper income tax officer and discussed they told, Please submitted Page | 2 rectification u/s 154 after that she submitted rectification. The rectification processed date 01.07.2022 and our rectification request is rejected due to not furnish Form-67.This is a genuine reason for delay submitted of CIT(A) appeal. 4) That time due to corona environment our supreme court extended the limitation time period dated 28 February 2022. She afraid due to corona, Because that time environment was not right for meet any person. This is next reason for delay submitted of CIT(A), So this dismissed appeal order is bad-in-eyes of the law and void-ab-initio. 5) That the dismissed appeal order is bad in the eyes of law and is liable to be set aside. 6) That the assessee has right to add, delete and modify grounds at the time of hearing. Relief Claimed: It is most humbly prayed that a) To quash the order passed by the assessing officer and delete the demand of tax, interest and penalty. b) Any other Relief, whichever this Hon'ble officer deems fit and proper in the interest of natural justice and fairness.” 2. Facts giving rise to the present appeal are that impugned order dated 15.12.2022 passed u/s 143(1) of the Income Tax Act, 1961 (“the Act”). The Assessing Officer (“AO”) declined to give Foreign Tax Credit (“FTC”) relief to the assessee. 3. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal of the assessee on account of FTC relief u/s 90/91 of the Act. Ld.CIT(A) observed that as per Rule 128(1) of the Income tax Rules, 1962 (“the Rules”) mandates that statement in Form No.67 is required to be furnished on or before due date specified for Page | 3 furnishing the return of income. On perusal of the intimation shows that assessee filed her return of income within due date i.e. 10.01.2021 and the original return of income was filed on 30.12.2020. Thereafter, the assessee revised return of income on 09.02.2021 and claimed FTC relief u/s 90/91 of the Act. It is also observed that the assessee did not file Form No.67 for the claim as all the required conditions have not been made, Foreign Tax Credit relief could not be allowed to the assessee. 4. Aggrieved against this, the assessee filed appeal before this Tribunal. 5. Ld. Counsel for the assessee reiterated the submissions as made in the written submissions. For the sake of clarity, the relevant contents of the written submissions are reproduced asunder:- Respected Sir, “During the course of the above-mentioned appeal, I am CA Manoj Kumar a representative of Sonia Sharma (PAN BOSPS3283Q). 1). That appellant had been service holder at NEC Technologies India Private Limited at New Delhi and That year appellant worked at Japan Branch same company. 2). That appellant submitted ITR with in time that year with a claim a relief of tax paid outside India U/s 90191 DTAA Rs.330400.00,which is outside income earn as a salaries Rs.1158615.00. 3). That the CPC processed return 15.12.2021 and created a demand with interest vide demand reference no. 2021202037028767250T. CPC did not consider our relief u/s 90191 DTAA Rs.330400.00. 4). That the CPC without given any intimation, any default notice, any mistake or any missing of your return, create a defective order, demand order, computation of tax. CPC without provide any opportunity for Page | 4 furnishing form 67, processed our ITR. This is against nature of justice. This is bad-in-eyes of the law and fact. 5). That the appellant is a cooperative nature and submitted ITR with in time, to lack of knowledge of Income tax Act appellant did not furnish form 67. After receiving intimation order appellant met assessing officer and provide necessary information regarding this case. Than Income-Tax officer advised for submit rectification u/s 154. 6). That the appellant submitted rectification u/s 154 and claimed relief u/s 90/91 of Rs.330400.00 DTAA. The rectification processed dated 01.07.2022 and disallowed our claim on the ground, that the appellant 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 and suggested to file appeal against intimation order 143(1) to CIT(A). 7). That the appellant submitted a appeal to CIT(A) vide ack. no. 416819290080822 dated 08.08.2022. Our learnt officer dismissed appeal without given any notice for haring, without provide any adequate opportunity of being heard to the appellant to know his view and point before dismissed the appeal. 8). There is no dispute that the appellant is entitled to claim FTC. On perusal of provisions of Rule 128, it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by appellant before filing of the returns. In our view, this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128 does not provide for disallowance of FTC in case of delay in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms. Brinda RamaKrishna vs.ITO in ITA no.454/Bang/2021 by order dated 17/11/2021. Similar decision of Tribunal in case of 42 Hertz Software India Pvt. Ltd. Vs ACIT in ITA No. 29/Bang/2021 by order dated 07.03.2022. 9) That the It's a trite law that DTAA overrides the provisions of the Act and the Rules, as held by various High Courts, which has also been approved by Page | 5 Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471. 10) That the CIT(A) framed order u/s 250 in para no. 5.6 says, "On the above issue, decision of Hon'ble Supreme court in the case of PCIT-III, Bengaluru vs Wipro Ltd. in CIVIL APPEAL NO. 1449 OF 2022 (Arising out of SLP(Civil) No. 7620/2021) order dated 11/07/2022 held as under:- "14. In view of the above discussion and for the reasons stated above, we are of the opinion that the High Court has committed a grave error in observing and holding that the requirement of furnishing a declaration under Section 10B (8) of the IT Act is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The same is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act. We hold that for claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 1139(1) are to be satisfied and both are mandatorily to be complied with. Accordingly, the question of law is answered in favour of the Revenue and against the assessee. The orders passed by the High Court as well as ITAT taking a contrary view are hereby set aside and it is held that the assessee shall not be entitled to the benefit under Section 10B (8) of the IT Act on noncompliance of the twin conditions as provided under Section 10B (8) of the IT Act, as observed hereinabove. The present Appeal is accordingly allowed." As per my view and accordingly above case is belong to section 10B of Income Tax Act. As per section 10B(8) is override only this section.(For your reference copy of 10B and above case is attached). 10B(8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for Page | 6 furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment year. 11) That the 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 provision of the income tax Act, the appellant has vested right to claim the FTC under the tax treaty the same cannot be disallowed for mere delay in compliance of procedural provision. 12) That the there is no dispute the appellant is entitled to claim FTC on perusal of provisions of Rule 128(8) & (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is the form 67 is to be submitted by appellant before filing of the returns. In our view, 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 in case of delay in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms. Brinda Ramakrishna vs. ITO in ITA No. 454/Bang/2021 by order dated 17/11/2021. 13) That the It's a trite law that DTAA overrides the provisions of the Act the Rules, as held by various High Courts, which has also been approved by Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471. 14) That the we accordingly, hold that FTC cannot be denied to the appellant. Appellant is directed to file the relevant details/evidences in support of its aim. We thus remand this issue back to the Ld. AO to consider the claim of appellant in accordance with law, based on the verification carried out in respect of the supporting documents filed by appellant. It is most humbly prayed that a) To quash the order passed by the CPC and delete the demand of tax and Interest. Page | 7 b) To quash the order passed by the CIT(A) and deleted the demand of tax and Interest. c) Any other relief, whichever this Hon'ble officer deems fit and proper in the interest of natural of justice and fairness.” 6. On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. He submitted that the assessee was required to furnish Form No.67 as envisaged under Rule 128 of the Rules. Therefore, there is no infirmity in the order of the lower authorities, declining the claim of the assessee on account of Foreign Tax Credit. 7. We have heard Ld. Authorized Representatives of the parties and perused the material available on record. The contention of the assessee is that it is well settled for requirement of furnishing Form No.67 is directory in nature. The assessee should not be made to suffer when he is entitled for Foreign Tax Credit merely because Form No.67 could not be filed. In this regard, the assessee has placed reliance upon the decisions of Co-ordinate Benches of the Tribunal and the judgement of Hon’ble Supreme Court in the case of PCIT vs M/s Wipro Limited in Civil Appeal No.1449 of 2022 order dated 11.07.2022. It is contended that Ld.CIT(A) has submitted that reliance is misplaced. The assessee has placed reliance on the judgement of Hon’ble Supreme Court rendered in the case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471 (SC). The Co-ordinate Bench of the Tribunal in ITA No.29/Bang/2021 in the case of 42 Hertz Software India Pvt.Ltd. vs ACIT order dated 07.03.2022 wherein the Tribunal has observed as under:- 6. “There is no dispute that the assessee is entitled to claim FTC. On perusal of provisions of Rule 128(8) & (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be Page | 8 submitted by assessee before filing of the returns. In our view, 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. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda 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 High Courts, which has also been approved by Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. reported in (2021) 432 ITR 471. 8. We accordingly, hold that FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/ evidences in support of its claim. We thus remand this issue back to the Ld.AO to consider the claim of assessee in accordance with law, based on the verification carried out in respect of the supporting documents filed by assessee. Accordingly the grounds raised by assessee stands allowed for statistical purposes.” 8. In the present case, the claim of the assessee was declined by Ld.CIT(A) purely on the basis that Form No.67 was required to be filed online before due date of filing of return of income. It is stated by the Ld. Counsel for the assessee that Form No.67 could not be uploaded alongwith revised return of income as the system did not open for accepting the same. We are unable to sustain this finding of Ld.CIT(A) as the Co-ordinate Bench of the Tribunal after examining the law and relying upon the judgement of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. (supra) has allowed FTC. Therefore, in the light of above binding precedents, we hereby direct the AO to allow benefit of Foreign Trade Credit to the assessee in accordance with law, Page | 9 after condoning the delay in filing of Form No.67. Ground raised by the assessee are hence, allowed for statistical purposes. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 27 th April, 2023. Sd/- Sd/- (PRADIP KUMAR KEDIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI