Abhinav Jhalani, Jaipur V. Deputy Commissioner of Income tax(Int. Tax.), Jaipur

ITA 527/JPR/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5831 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-09-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 13-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SWETA SABOO
• Keywords: Residential status; Rectification of order; Salary income; Double taxation relief; Non compliance; Revised return; TDS; Set aside
• Section: 90; 154; 143(1); 139(1); 119; 22

Judgement Text

vk;djvihyh; vf/kdj.k] t;iqjU;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A ” JAIPUR JhlaanhixkslkbZ]U;kf;dlnL; ,oaJhjkBksMdeys'kt;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihy la-@ITA. No. 527/JP/2023 fu/kZkj.ko"kZ@AssessmentYear :2020-21 Abhinav Jhalani 60, Bhagirath Apartment, Ganesh Nagar A, New Sanganer Road, Near HDFC Bank, Near Metro Pillar No. 106, Jaipur- 302 019 cuke Vs. The ACIT (Int. Tax), Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFGPJ 3819 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Ms. Sweta Saboo, CA jktLo dh vksjls@Revenue by : Shri A.S. Nehra, Addl.CITa lquokbZ dh rkjh[k@Date of Hearing : 26/09/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 31 /10/2023 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against the order of ld. CIT(A) dated 16-06-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2020-21 wherein the assessee has raised the following grounds of appeal. 1. On the facts and in the circumstances of the case in law, the learned commissioner of Income tax (Appeals) erred in dismissing the appeal by disallowing the Foreign tax credits under section 90/90A stating that withholding tax at Singapore was known to 2 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR appellant before filing the income tax return without considering the fact that tax was not withheld on salary by employer paid between January 2020 to March 2020 and the same was assessed at the time of filing Singapore Income tax return on 14th June, 2021. 2. On the facts and in the circumstances of the case in law, the learned commissioner of Income tax (Appeals) erred in dismissing the appeal as there is no doubt about the genuineness of taxes paid in Singapore still the benefit of foreign tax credits under section 90/90A was denied in the absence of claim made in the Return of Income. 3. On the facts and in the circumstances of the case in law, the learned commissioner of Income tax (Appeals) erred in dismissing the appeal by disallowing the foreign tax credits under section 90/90A stating that foreign tax credit was never claimed in original return without considering the fact that declaration of not claiming complete foreign tax credit was explicitly mentioned in the Form 67 filed on 30th December, 2020 due to non- availability of tax proofs back then. 4. On the facts and in the circumstances of the case in law, the learned commissioner of Income tax (Appeals) erred in dismissing the appeal mere on the violation of procedural norms inspite of accepting the genuineness of tax payment in foreign country.’’ 2. All the grounds so raised by the assessee are related to the solitary issue of related to the denial of relief u/s 90/90A of the Income Tax vis a vis credit for foreign taxes paid amounting to Rs.4,56,453/- by the ld. CIT(A). In this case, it is noted that the AO vide order dated 21-01-2023 passed the rectification order u/s 154 of the Act and thus disallowed a sum of Rs.4,56,453/- being foreign tax credit/ relief u/s 90 of the Act. The brief facts of the case on hand is that the assessee being resident of India during F.Y. 2019-20 has filed ITR for A.Y. 2020-21 on 08- 01-2021 having acknowledgement number 132849670080121 by declaring total income of Rs.87,35,760/-. Total income consists of 1. Salary income from India 3 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR Rs.41,34,778/-, 2. Salary from overseas employment of Rs.61,45,520/-, 3. Short term capital gain from unquoted shares of Rs.1,192/-, 4. Income from other sources of Rs.29,743/-. Total tax paid including interest amount is Rs.30,81,238/- out of which adjustment of tax relief u.s 90 of Rs.77,679/- and TDS of Rs.7,45,838/-. The assesee went to Singapore in November 2020 and joined In Mind Cloud Pte. Limited. He has earned salary income from November 2019 to March 2020 to the tune of Rs.61,45,520/-(1,20,000 Singapore Dollars). The tax year in Singapore is the calendar year (January to December) i.e. an individual income from a preceding calendar year is assessed to tax in the following calendar year (i.e. year of assessment). In the present case, salary income from November 2019 to December 2019 of Rs.27,25,400/- (54000 Singapore dollars) has been assessed by inland Revenue Authority of Singapore on 01-07-2020. Based on Singapore tax assessment, the assessee has filed Form 67 for AY 2020-21 as declaration required under Indian Income Tax Authority on 30-12-2020, declaring entire salary income of Rs.61,45,520/-(1,20,000 Singapore Dollars) from November 2019 to March 2020 with Foreign Tax Credits of only 2 months i.e. November 2019 and December 2019 of Rs. 77,679/- Singapore Dollars 1,449.5) based on Singapore tax assessment for calendar 2019 in Form 67 filed on 30-12- 2020 with attachments for year under reference as Annexure A. Foreign Tax 4 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR Credit (FTC) pertains to January 2020 to March 2020 of Rs.4,56,453/- (8435.664 Singapore dollars) could neither be claimed in Form 67 nor in Income tax return of AY 20-21, since the proof of payment of tax was not available at the time of filing form 67 and ITR, which has been mentioned in the declaration as well. Further the salary income earned from January 2020 to March 2020 of Rs. 34,20,120/- (66,000 Singapore Dollars) has been offered for Singapore tax assessment in the following calendar year. On 14-06-2021, the assessee was assessed by Inland Revenue Authority of Singapore for tax year January 2020 to December 2020. Based on Singapore tax assessment, the assessee has filed revised Form 67 for AY 2020-21 on 18th May,2022 with additional FTC of Rs.4,56,453/- (8435.664 Singapore dollars) and also enclosed copy of Form 67 filed on 18-05-2022 for ready reference as Annexure B. By the time tax assessment done by Inland Revenue Authority of Singapore for calendar year 2020 on 14 June, 2021 observed that the time period to file Revised Indian Income Tax Return (ITR) for A.Y. 2020-21 was already expired i.e. on 31 March, 2021. It is noted that the assessee has filed rectification return, explaining the reason for filing revised Form 67 but none of these arguments, however impressed the learned Asst. director of Income Tax-CPC and it has passed an order u/s 154 without giving benefit of additional tax relief u/s 90 of Income tax Act 1961. 5 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR 3. Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who dismissed the appeal of the assessee with following narration. ‘’16. It is undisputed fact that the appellant had paid taxes of withheld by its employer in Singapore. The genuineness of tax payment is not doubted by the AO, CPC in the rectification order. Since there is a genuineness in the tax payment the same cannot be allowed unless a suitable claim is made in the return of income by following the due procedures within the time limits allowed by the Income Tax Act. There are some other ways through which the assessee could have vented out his grievance to obtain the relief as per the provision of the Act. The same will be discussed in the subsequent paragraphs. 17...... 18. Without going to much debate, the DTAA cannot allow the assessee to make a claim beyond time allowed. If such a claim is allowed the person not claiming the FTC, similar benefits has to be extended to the appellant also. DATA come into the picture only when the return is filed by the appellant with rightful claim as per the provisions of law. DTAA is not specifying any different compliance date or relaxation to make claims beyond time allowed u/s 139...... The assessee could have made such applicationsince he is having a genuine claim but time limit specified under S 139 is prohibiting to file the revised return. According to the provisions of S. 119 of the Act, the CIT(A) is not having the powers to relax such time limitation. It is unjustified if any relief is granted against the provisions of S 139. Therefore,, this argument also not having any force to reckon. 19. Further more, the appeal is filed against the order u/s 154. There is no mistake found from the record in the rectification order. The mistake apparent from the record crept in order u/s 143(1) was already rectified by the AO. The new claim made with submission of additional evidences cannot be entertained by the AO during the rectification proceedings. Therefore, all the arguments put forth by the appellant are debatable and argumentative. The case laws of Hon’ble Apex Court quoted by the assessee are not delivered in the context of adjudicating the order u/s 154. The decisions ITAT relied on by the assessee are also not on the similar facts of the case. The issue involved in the decision of ITAT relied on by the assessee that the taxpayer filed the return in time and claimed the relief without filing the Form No. 67 in time as per the Rule 128. As already stated several times in the order, the relief claimed by the appellant is not part of the return of income. Therefore, all the grounds raised on the single issue of not allowing the additional claim of FTC are dismissed. 6 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR 20.0 In the result, the appeal filed by the appellant Shri Abhinav Jhalani for the A.Y 2020-21 against the order passed u/s 154 of the Act is dismissed.’’ 4. Feeling dissatisfied with the appeal result the assessee carried the matter with this tribunal. The ld. AR of the assessee in support of the grounds reiterated the contentions raised before the ld. CIT(A). The ld. AR further submitted that the assessee reiterated that if a claim thoughavailable in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times as there is neither any fraud nor malpractice alleged by the assessee. Based on the fundamental rule of the law of taxation that unless otherwise expressly provided, income cannot be taxed twice as it is neither valid nor just to tax the income twice. Therefore, the benefit of DTAA should be given to the assessee in the form of tax relief u/s 90 of Income tax Act 1961 as the income has been offered for tax in both the country i.e. Singapore and India.Further a procedural law should not ordinarily be construed as mandatory, theprocedural law is always subservient to and is in aid to justice. It is submitted thatfiling of Form 67 as per the provisions of section 90/90A read with Rule 128(9) is a procedural law and should not control the claim of Foreign Tax Credit (FTC) as there are no conditions prescribed in DTAA that FTC can be disallowed for non 7 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR compliance of any procedural provision, therefore, the provisions of DTAA override the provisions of the Act. 5. On the other hand, the ld. DR relied on the order of the ld. CIT(A). 6. We have heard both the parties and perused the materials available on record. The bench noted that the assessee has filed the return of income and at the time of filling the ITR the assessee was not available with the information of the claim of taxes paid in the ITR and the consequential proof to claim the said foreign tax paid credit. Even the filling the revised ITR time was not available to the assessee when the assessee got the information for the foreign tax credit to be claimed on the same income offered in the Indian tax return. So the assessee moved the rectification application which was rejected even though the assessee filed the form no.67 to claim the credit on the ground that the claim is not in the ITR filed. The ld. CIT(A) also noted that the assessee has not filed the claim even in the revised return and therefore, holding that there is no power to allow the claim which has not been claimed in the return of income. The ld. CIT(A) also noted that the appeal of the assessee was against the rejection of rectification of mistake and since there is no mistake on record, he confirm the finding of the ld. AO. Considering the claim of the assessee a fresh is decided in the judgment of the 8 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR co-ordinate bench in the case M/s. Rajasthan State Seeds and Organic Production certificate Agency Vs. DCIT in ITA No. 741/JP/2013. The relevant finding of the co-ordinate bench is as under: 2.6 We have heard the rival contentions and perused the materials available on record. It is observed that the assessee society is registered u/s 12A of the Act and enjoys its benefits. In our considered view the Id. CIT(A) being an appellate authority ought to have considered the assessee's claim which was purely legal in nature and the reservation as contemplated by the Hon'ble Supreme Court in the Goetze India Ltd. vs. CIT (supra) is applicable to AO and not to the appellate authority. We are of the view that assessee's claim should have been considered and appropriate relief in accordance with law may be provided. In view thereof, we set aside the matter to the file of the Id. AO to consider the assessee's claim afresh by providing adequate opportunity of being heard. If some compliance is further required, the assessee may be allowed to make the same and decide the grounds of appeal in accordance with law. Thus the appeal of the assessee is allowed for statistical purposes." On being consistent with the said finding and considering the peculiar facts of the present case that the assessee has filed the form no. 67 on 30.09.2020 and there is no dispute about the eligibility of the assessee for the foreign tax credit and the same have been rejected merely on the ground that the same is not claimed in the 9 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR original return of income. The Jaipur bench has decided vide order dated 27-09- 2023 in IT(IT)A No. 12/JP/2023 for the assessment year 2021-22 in the case of Juan Miguel Guerrero Ferrer vs DCIT wherein the relevant observation as made by this bench is reproduced as under:- 5. We have heard the ld. Counsels of both the parties. We have also perused the material placed on record and also judgments cited by the respective parties. Under this ground of appeal, the assessee has filed Form 67 for claiming relief under section 90 of the IT Act. The said form was filed by the assessee on 28.12.2022 and the Income Tax Return was filed as on 08.09.2021 claiming relief under section 90/90A of the IT Act of Rs. 37,41,228/-. It is an undisputed fact that the assessee has got salary from his employer in Spain and due tax has been deducted by the employer. As per Article 15 of Double Taxation Avoidance Agreement (DTAA) with country Spain, the tax payable by assessee in that country is eligible for relief under section 90 of the Income Tax Act, 1961 to the assessee. The said relief was denied by the revenue authorities on the ground that the return for the year under consideration was filed by the assessee on 08.09.2021. However, the form 67 was filed on 28.12.2022 and not along with the return of income filed on 08.09.2021. Since according to revenue the said form 67 was filed after the due date of filing the return of income for the year under consideration, therefore, the assessee was rightly found not eligible for the credit of that amount. 6. We find that the case of assessee is fully covered by the recent decision of the ITAT Jaipur Bench, adjudicated exactly on similar issue in the case of Ritesh Kumar Garg vs. ITO in ITA No. 261/JP/2022 dated 15.09.2022, wherein the claim of Foreign Tax Credit (FTC) was allowed by observing in para 5.1 to 6 as under :- “ 5.1. After having meticulously gone through the facts of the present case, we are of the view that there is no dispute that assessee is entitled to claim relief under section 90 of the IT Act but the disallowance was confirmed on the sole ground that the relevant form 67 prescribed under section 128(8) was not filed within the time stipulated under sub rule 9 of Rule 128. It is important to mention here that section 90 of the Act provides that Government of India can enter into Agreement with other countries for granting relief in respect of income 10 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR on which taxes are paid in country outside India and such income is also taxable in India. In this regard Article 22 of India Finland DTAA provides for credit for foreign taxes. The relevant portion of sub clause (2) of Article 22 is reproduced below :- “ 2. In India double taxation shall be eliminated as follows :- Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Finland, India shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in Finland. Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in Finland.” And since as per section 90 of the Act read with Article 22 sub clause (2) provides that Finland Income Tax paid shall be allowed as a credit against the Indian Tax but limited to proportion of Indian tax. In my view, neither section 90 nor DTAA provides that FTC shall be disallowed for non compliance with any procedural requirements. Since FTC is assessee’s vested right as per Article 22(2) of the DTAA read with section 90 and thus same cannot be disallowed for non compliance of procedural requirement that is prescribed in the Rules. 5.2. In my view, section 295 sub section (1) of the Act provides powers to the CBDT to prescribe Rules for various purposes. Section 295 sub section (2) sub clause (ha) gives power to the Board to issue Rules for FTC. The relevant extract is as follows :- “ (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters :- ..................... (ha) the procedure for granting of relief or deduction, as the case may be, of any income-tax paid in any country or specified territory outside India, under section 90 or section 90A or section 91, against the income-tax payable under this Act;” Thus, in this way the Board has power to prescribe procedure for granting FTC. Therefore, in my view the procedure prescribed in Rule 128 should be interpreted in this context. Therefore, Rule 128 is a procedural provision and not a mandatory provision. The said rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed under section 139(1) of the Act. However, the said Rule nowhere provides that if the said Form 67 is not filed within the above stated time frame, the relief as sought 11 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR by the assessee under section 90 of the Act would be denied. In case the intention of the Act or Rule was to deny the FTC, then in that eventuality 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. Thusfiling of Form 67, in my view, is a procedural/directory requirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantive right of claiming the credit of FTC. While reaching to this conclusion, we draw strength from the decision of Hon’ble Supreme Court of India in the case of Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner, (1992) Supp (1) Supreme Court Cases 21 wherein the Hon’ble Supreme Court has held as under :- “ 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 may 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.” Apart from the above decision, I further rely upon the decision of Hon’ble Supreme Court in the case of Sambhaji &Ors. vs. Gangabai&Ors., (2008) 17 SCC 117 (SC) wherein it was 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. According to Hon’ble Supreme Court, the procedures are handmaid and not the mistress. It is a lubricant and not a resistance. Thus, a procedural law should not ordinarily be construed as mandatory. The procedural law is always subservient to and is in aid to justice. Even otherwise, since there are no conditions prescribed in DTAA that FTC can be disallowed for non compliance of any procedural provision, therefore, the provisions of DTAA override the provisions of the Act. As the assessee has vested right to claim the FTC under the tax treaty and the same cannot be disallowed for mere delay in compliance of a procedural provision. 5.3. Even otherwise, the said Form 67 filed by the assessee before the tax authorities was available before the AO when the intimation under section 143(1) of the Act dated 25.11.2021 was passed. Therefore, in such circumstances, in my view, there were no reasons with the tax authorities for making disallowance when the said Form 67 was very much available with the AO at the time of framing the assessment order. While reaching to this conclusion, I further strengthen my view by relying upon the decision in the case of Brinda Rama Krishna vs. ITO 135 taxmann.com 358 wherein the Coordinate 12 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR Bench of the Bangalore Tribunal had directed the Revenue to allow relief of FTC under section 90 of the Act, wherein Form 67 was filed after the prescribed due date. The ratio of the said decision in the case of Brinda Rama Krishna vs. ITO (supra) was further followed in another case decided by the Coordinate Bench of the Bangalore Tribunal in the case of 42 Hertz Software India Pvt. Ltd. vs. ACIT in IT Appeal No. 29 of 2021. On the contrary, I respectfully with all humility disagree with the view taken by the Visakhapatnam Bench of the Tribunal in the case of Muralikrishna Vaddi (supra) while relying upon the decision of Hon’ble Supreme Court and also of the decisions of Coordinate Benches of the Tribunal in the cases of Brinda Rama Krishna vs. ITO (supra) and 42 Hertz Software India Pvt. Ltd. vs. ACIT (supra). Therefore, considering the totality of facts and legal position as discussed above, I am of the view that assessee is entitled for the credit of FTC under section 90 of the Act. Thus, I, accordingly direct the AO to allow the relief of FTC under section 90 of the Act in the case of assessee. 6. In the result, appeal of the assessee is allowed.” We, therefore, following the coordinate bench decision referred herein above, wherein case laws cited was considered and reliance was placed on the judgment of the Hon’ble Supreme Court, allow the claim of Foreign Tax Credit (FTC) in favour of the assessee. The AO is accordingly directed to allow relief to the assessee. The order of the ld. CIT (A) is set aside.’’ 7. Since the issue of the claim of foreign tax credit is considered at this stage based on the decision of M/s. Rajasthan State Seeds and Organic Production certificate Agency Vs. DCIT (Supra) considering the decision to the case of Juan Miguel Guerrero Ferrer vs DCIT(supra), therefore, the decision taken therein shall apply mutatis mutandis in the case of the assessee also. Thusthe AO is accordingly directed to allow relief to the assessee. The order of the ld. CIT (A) is set aside. 13 ITA NO. 527/JP/2023 ABHINAV JHALANI VS DCIT (INT. TAX.), JAIPUR 8. In the result, the appeal of the assessee is allowed as indicated hereinabove. Order pronounced in the open court on 31 /10/2023 Sd/- Sd/- ¼laanhi xkslkbZ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (SANDEEP GOSAIN) (RATHOD KAMLESH JAYANTBHAI) U;kf;dlnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31/10/2023. Mishra vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Shri Abhinav Jhalani, Jaipur 2. izR;FkhZ@The Respondent- DCIT (Int. Tax.), Jaipur 3. vk;djvk;qDr@CIT 4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 5. xkMZQkbZy@Guard File {ITA No. 527/JP/2022} vkns'kkuqlkj@ By order, lgk;diathdkj@Asst. Registrar