MONIKA RATHORE,GWALIOR V. INCOME TAX OFFICER WARD -1, MORENA

ITA 290/AGR/2024

AI Insights

The case involves Monika Rathore, an Indian resident, who worked in Germany and earned salary income, for which she claimed a Foreign Tax Credit (FTC) under Section 90 of the Income Tax Act, 1961. The credit was initially denied by the Revenue during the processing of her return under Section 143(1), citing non-compliance with the procedural requirement of filing Form No. 67 within the due date specified under Rule 128 of the Income Tax Rules, 1962. The assessee contested this decision, arguing that the filing of Form No. 67 is directory and not mandatory, and that the substantive provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Germany should prevail. The ITAT Agra Bench, referencing several precedents, agreed with the assessee's position and directed the AO to process the FTC claim.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473654 (ITAT-AGRA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Other Referred Cases: Suchi Agarwal v. ITO, Vinodkumar Lakshmipathi v. CIT(A), Deepak ShimogaPadmaraju v. ADIT, Shri Subhankar Chakraborty v. ITO, Isha Mago v. Asstt. Director of Income Tax, Rameshwar Prasad Shrivastava v. ITO, Ajay Kumar Mishra v. DCIT, M/s Surendra steel Pvt Ltd Vs CPC, Eastman Industries Ltd. vs. ACIT, Ritesh Kumar Garg Vs ITO, Sanjeev Agarwal Vs DCIT, Vikash Daga vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAILENDRA SRIVASTAVA
• Assessee Lawyers: NITIN GULATI; HOLDING
• Keywords: Set aside; Salary income; Principle of natural justice; Double taxation relief; Non compliance; Residential status; Procedural lapse
• Section: 154; 143(1); 139(1); 13; 80IC; 80IC

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, AGRABENCH, AGRA BEFORE : SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER And SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No. 290/Agr/2024 Assessment Year: 2023-24 Monika Rathore, Suman Kunj, Behind Pitambra Dharam Kanta, Gole Ka Mandir, Gwalior Residency, S.O. GWL DISLARI, Gwalior-474005(M.P.). v. Income-tax Officer, Ward-1, Morena, Madhya Pradesh PAN :ESEPR4702Q (Appellant) (Respondent) ORDER PER RAMIT KOCHAR, AM: This appeal in ITA No. 290/Agr/2024 for the assessment year 2023-24 filed by the assesseehas arisen from the appellate order dated 11.06.2024[DIN & Order No. ITBA/APL/S/250/2024-25/1065529909(1)], passed by learned ADDL/JCIT(A)-3, Bengaluru, which appeal in turn has arisen from the intimation order No. CPC/2324/A2/418115720 dated 30.04.2024 passed by CPC, Bengaluru u/s. 143(1) of the Income-tax Act, 1961. Assessee by Sh. Nitin Gulati, Advocate Revenue by Sh. Shailendra Srivastava, Sr. DR Date of hearing 09.01.2025 Date of pronouncement 06.02.2025 ITA No.290/Agr/2024 2 | P a g e 2. Grounds of Appeal raised by the assessee in the memo of appeal filed with theIncome Tax Appellate Tribunal, Agra Bench, Agra, reads as under : “1 That appellant craves leave to add, alter, amend, or withdraw any of the grounds of appeal at or before the time of hearing. 2 THAT appellant is aggrieved by the intimation under Section 143(1) dated April 30, 2024 (DIN: CPC/2324/A2/418115720, Demand Reference Number: 2024202337247266003T), wherein the Foreign Tax Credit of Rs. 10,95,293 claimed under Section 90/90A of the Income Tax Act, 1961, has been denied. This denial is erroneous and contrary to the provisions of the Act. 3. That appellant has duly complied with the provisions of Section 90/90A of the Income Tax Act, 1961, and the relevant Double Taxation Avoidance Agreement (DTAA) between India and Germany. The salary income earned for services rendered in Germany during the period from October 15, 2022, to March 31, 2023, has been offered to tax in India, and the foreign tax credit has been claimed appropriately. 4. That appellant has submitted all necessary documents to substantiate the claim of FTC, including: Form 67 for claiming FTC Proof of taxes paid in Germany Salary slips from Google Germany Tax Residency Certificate (TRC) from Germany Other supporting documents as required. 5. That denial of the FTC without providing a reasonable opportunity to the appellant to explain and substantiate the claim is a violation of the principles of natural justice. 6. That denial of FTC has resulted in the erroneous computation of the total tax liability of the appellant. The appellant’s total income for the assessment year 2023-24 has been correctly declared at Rs.53,51,596/- and the FTC of Rs.10,95,293 has been rightly claimed to avoid double taxation.” 3. The assessee filed her return of income for the impugned assessment year on 31.08.2023 in ITR-2, which is a belated return of income, declaring income of Rs.53,51,596/-. The assessee claimed relief u/s. 90 of the Act of the pre-paid taxes(FTC) to the tune of Rs.10,95,293/. ITA No.290/Agr/2024 3 | P a g e The Revenue processed the return of income vide intimation dated 30.04.2024 u/s. 143(1), wherein the income was assessed at the returned income Rs.53,51,600/-, but credit of prepaid taxes(FTC) claimed by the assessee to the tune of Rs.10,95,293/- u/s. 90 of the Act was denied by the Revenue to the assessee while processing return of income u/s 143(1). 4. Assessee being aggrieved, filed first appeal with ld. CIT(Appeals) and submitted that the assessee is an ordinarily resident in India for the impugned assessment and had filed return of income u/s. 139(4), declaring total income of Rs.53,51,596/-. The assessee submitted that she worked with Google, Germany for the period from October 15, 2022to March 31, 2023 ,and offered to tax salary income for services rendered in Germany and claimed FTC of Rs.10,95,293/- u/s. 90 of the Act, which was denied by Revenue while processing return of income u/s 143(1). The assessee submitted before ld. CIT(A) that she had filed Form No. 67 on 02.05.2024 before filing of appeal before ld. CIT(A), but which is after the processing of the return of income u/s. 143(1) by CPC. Assessee submitted that filing of form No. 67 is not mandatory, but directory requirement. Rule 128(8) and 128(9) of the IT Rules, 1962 were referred to by the assessee, and it was submitted that although it stipulates that Form-67 is to be filed on or before the due date for filing of return of income u/s. 139(1), but the said requirement is directory in nature and prayers ITA No.290/Agr/2024 4 | P a g e were made to grant relief for FTC on the salary income earned in Germany. Ld. CIT(Appeals) dismissed the appeal of the assessee by holding that if law stipulates certain thing to be done in a particular manner then the same has to be done in that particular manner and not otherwise. 5. Still aggrieved, the assessee has filed second appeal with ITAT and at the outset, ld. Counsel for the assessee submitted that the assessee has duly filed Form-67 on 02.05.2024 wherein there was a credit of Rs.10,95,293/- claimed by the assessee towards FTC. It was submitted that the assessee was working with Google, Germany and was ordinarily resident in India during the year under consideration. Foreign Tax of Rs.10,96,674/- was deducted and an amount of Rs. 10,95,293/- was claimed u/s. 90 of the Act as tax relief, as the total global income was declared by the assessee in return of income filed in India with Revenue. There was tax deducted on dividend earned from USA to the tune of Rs.604/- apart from tax deducted by Google Germany on salary earned in Germany from 15.10.2022 to 31.03.2023, which was also declared in Form No. 67 filed on 02.05.2024 and total FTC of Rs.10,95,293/- was claimed but both the authorities below have denied the credit of the aforesaid foreign tax credit. Assessee relied upon the decision of ITAT, Delhi Bench in the case of Suchi Agarwal v. ITO (ITA No. 601/Del/2024 assessment year 2020-21) order dated 31.05.2024. Assessee also relied upon the ITA No.290/Agr/2024 5 | P a g e appellate order passed by ITAT, Bangalore in the case of Vinodkumar Lakshmipathi v. CIT(A) (2022) 145 taxmann.com 235, appellate order passed by ITAT, Bangalore Bench in the case of Deepak ShimogaPadmaraju v. ADIT reported in (2024) 162 taxmann.com 96 (Bang.-Trib) and appellate order passed by ITAT, Bangalore Bench in the case of Shri Subhankar Chakraborty v. ITO (ITA No. 1088/Bang/2022) dated 19.01.2023. It is also submitted that Form No. 67 is placed in the paper book at page No. 12 & 13 filed with the ITAT. 5.2 Learned Sr. DR submitted that the return of income was filed belatedly by the assessee on 31.08.2023 u/s 139(4), while the due date of filing the return of income for impugned assessment year was 31.07.2023. The return of income was processed by CPC on 30.04.2024 u/s 143(1). It was submitted that it is only after the processing of ITR on 30.04.2024, the assessee came forward and filed Form-67 on 02.05.2024. Attention was drawn to Rule 128(8) and 128(9) of the 1962 Rules. It was submitted that it is mandatory to file Form No. 67 as per IT Rules within time provided by the said Rule. Word used in Rule 128 is “shall”, whichreflects that it is mandatory to file form No. 67 within the stipulated time. Ld. Sr. DR submitted that in case of Suchi Agarwal vs. ITO (supra), proceedings were conducted u/s. 154 of the Act while present proceedings have been ITA No.290/Agr/2024 6 | P a g e initiated from the intimation u/s. 143(1) and the same ratio cannot be applied. 5.3 Learned counsel in rejoinder submitted that form No. 67 is procedural in nature. It was submitted that the provisions of DTAA shall prevail over the normal provisions of the 1961 Act. Form-67 was duly filed prior to filing of appeal with the ld. CIT(Appeals). 6. We have considered rival contentions and perused the material on record. We have observed that the assessee is resident and ordinarily resident in India. The assesseefiled its return of income declaring total income of Rs.53,51,596/- on 31.08.2023. The said return of income was filed belatedly by the assessee u/s 139(4). The assessee has declared income from salary to the tune of Rs.53,51,596/-. The assessee has claimed that she worked in Germany with Google Germany for the period from October 15 , 2022 to March 31,2023. Assessee claimed credit of foreign prepaid taxes to the tune of Rs.10,95,293/- u/s 90, out of which claim of credit of prepaid taxes u/s. 90 to the tune of Rs.10,94,689/- was made with respect to income from salary to the tune of Rs.35,96,395/- earned from Google Germany. The Revenue has not allowed the claim of deduction towards foreign tax credit u/s. 90 of the Act on the ground that Form-67 was not filed on or before the due date of filing of return of income as prescribed u/s 139(1), by relying on Rule 128(8) and 128(9) of the 1962 ITA No.290/Agr/2024 7 | P a g e Rules. Return of income was filed by assessee belatedly on 31.08.2023, which was processed by the Revenue vide intimation u/s 143(1) dated 30.04.2024. Due date of filing the return of income was 31.07.2023. The assessee is resident and ordinarily resident in India under the provisions of 1961 Act. 6.2 The assessee had not filed form No. 67 prior to due date of filing the return of income as is prescribedu/s 139(1) and the same was filed on 02.05.2024 after the return of income was processed by CPC, Bengaluru u/s. 143(1). Both the authorities below have denied FTC claimed by the assessee. We have observed that ITAT in the case of Suchi Agarwal v. ITO (supra), Vinodkumar Lakshmipathi v. CIT(supra) Deepak ShimogaPadmaraju v. ADIT(supra) and Shri Subhankar Chakraborty v. ITO(supra) has held that filing of Form-67 is directory in nature and not mandatory. The conclusion reached by ITAT in the case of Suchi Agarwal vs. ITO (supra) is reproduced as hereunder : “8. During the course of hearing, the Ld. AR humbly prayed that the impugned order dated 30.12.2023 passed by Ld. CIT(A) should be set aside and the present appeal filed by the assessee should be allowed and in support of his argument / claim, Ld. AR relied on orders of the co-ordinate Benches of ITAT, as follows: • Order dated 04.04.2024 in the case of Isha Mago vs. Asstt. Director of Income Tax, Central Processing Centre in ITA No. 173/Del/2024. • Order dated 11.09.2023 in the case of Rameshwar Prasad Shrivastava vs. ITO, in ITA No. 1839/Del/2023. ITA No.290/Agr/2024 8 | P a g e • Order dated 14.06.2023 in the case of Vikash Daga vs. ACIT in ITA No. 2536/Del/2022. • Order dated 17.04.2023 in the case of Ajay Kumar Mishra vs. DCIT in ITA No. 1835/Del/2022. 8.1 For the ease of ready reference we reproduced the decisions of the Co-ordinate Benches of ITAT, as under: In the case of Isha Mago vs. Asstt. Director of Income Tax (supra), held as under: “5.2. It is also noticed that under similar facts and circumstances the ITAT Delhi Bench 'B' in the case of Eastman Industries Ltd. vs. ACIT (supra) has adjudicated identical issue, observing as under: \"7. Since in the present case the. claim of the assessee was denied on this technical aspect without going into the merits of the FTC, therefore, we deem it fit to restore the issue to the files of the AO. The AO is directed to decide the claim of foreign tax credit as per the provisions of the law after admitting / accepting form -67. This common grievance is also allowed for statistical purpose. In the case of Rameshwar Prasad Shrivastava vs. ITO (supra), held as under:- “5. That the claim of FTC was made by the assessee in terms of section 90 of the Income Tax Act. It is a settled principle that where is there is special agreement/ DTAA signed by the government, the specific provisions made in such agreement shall prevail over the general provisions contained in the Income Tax Act. The CBDT vide its Circular No. 333 dated 02/04/1982 has held that:- SECTION 90. AGREEMENT WITH FOREIGN COUNTRIES [CORRESPONDING TO SECTION 40A OF THE 1922 ACT] 627. Specific provisions made in double taxation avoidance agreement Whether it would prevail over general provisions contained in Income- tax Act 1. It has come to the notice of the Board that sometimes effect to the provisions of double taxation avoidance agreement is not given by the Assessing Officers when they find that the provisions of the agreement are not in conformity with the provisions of the Income-tax Act, 1961. 2. The correct legal position is that where a specific provision is made in the double taxation avoidance agreement, that provisions will prevail over the general provisions contained in the Income-tax Act. In fact that ITA No.290/Agr/2024 9 | P a g e the double taxation avoidance agreements which have been entered into by the Central Government under section 90 of the Income-tax Act, also provide that the laws in force in either country will continue to govern the assessment and taxation of income in the respective countries except where provisions to the contrary have been made in the agreement. 3. Thus, where a double taxation avoidance agreement provides for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the Income-tax Act. Where there is no specific provision in the agreement, it is basic law, i.e., the Income-tax Act, that will govern the taxation of income. Circular: No. 333 [F. No. 506/42/81-FTD] dated 2-4-1982. 6. 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 overrides the provisions of the Act, 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. In other words, we would like to submit 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 only 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. 7. That the lower authorities intends to disallow the claim of the assessee in terms of Rule 128(9), however as stated above, the provisions laid down in the Income Tax Rules shall stand to be overridden by the specific provisions mentioned in the DTAA more so to the extent that the same is beneficial to the tax payer. And as such, since the DTAA does not specifically state to disallow the claim of FTC on mere delay in filing of Form 67, we would submit that the disallowance made by the CPC and further confirmed by the CIT(A) is arbitrary, unjustified and fit to be deleted. 8. That lastly, we would like to contend that this being a debatable issue, the disallowance made by CPC was uncalled as the same cannot be termed as an adjustment in terms of section 143(1). In a similar matter before the Hon'ble ITAT Kolkata Bench in the case of M/s Surendra steel Pvt Ltd Vs CPC in ITA No. 78/Kol/2022 dated 20/05/2022, it was held as below:- We have duly considered rival contentions and perused the material available on record. To our mind there are two issues involved. First being the procedural irregularity and second the legitimate quantification for disallowance. If the adjustment has been made on the basis of first defect i.e., for procedural irregularity then according to the decisions referred by the Id. Counsel for the assessee, this irregularity is not fatal ITA No.290/Agr/2024 10 | P a g e enough to deny the claim of deduction u/s 80IC of the Act. More so, when in response to the first proposed adjustment, the assessee has reiterated submission of Form 10CCB. As far as the arguments raised by the Id. D/R is concerned, if a disallowance is to be made after filing of Form 10CCB, then it is a debatable issue and the same is not permissible u/s 143(1) in a prima facie adjustment and the assessee should have been given a notice for that. In other words, if a disallowance is required to be established by arguments and long drawn process of reasoning on points, which there may conceivably be two opinions about, then the case should have been selected for scrutiny assessment. In view of the above discussion, we delete the disallowance of deduction u/s 80IC of the Act, made by the Assessing Officer and upheld by the Ld. CIT(A) and allow the appeal of the assessee. As such, we would like to contend that the CPC was not right in disallowing the claim of FTC solely on the ground that Form 67 was filed belated. 9. That in support of our above contentions above, we would like to rely upon the following decisions of the coordinated Benches of ITAT:- * Vinod Kumar Lakshmipati Vs CIT(NFAC) Delhi - 145 taxmann.com 235 - ITAT Bangalore - It was held that:- Section 90, read with section 90A, of the Income-tax Act, 1961 and ride 128 of the Income-tax Rules, 1962 Double Taxation Relief - Where agreement exists (Foreign tax credit) Assessment year 2018- 19- Assessee claimed foreign tax credit under section 90/90A Assessing Officer disallowed claim, on ground that assessee had not filed Form No. 67 along with return Assessee filed Form No. 67 before Commissioner (Appeals) Commissioner (Appeals) held that since assessee had failed to file Form No. 67 within due date specified for filing return under section 139(1), Assessing Officer had rightly disallowed claim for foreign tax credit - It was noted that Bangalore Bench of Tribunal on identical issue in case of Ms. Brinda Ramakrishna v. ITO [2022] 135 taxmann.com 358/193 ITD 840 held that non- furnishing of Form No. 67 before due date specified for furnishing return under section 139(1) was not fatal to claim for foreign tax credit - Whether Assessing Officer was to be directed to give credit for foreign tax as per Form No. 67 filed before Commissioner (Appeals) Held, yes [Paras 5 and 6] [In favour of assessee] * Ritesh Kumar Garg Vs ITO in ITA No. 261/JP/2022 dated 15/09/2022 - ITAT Jaipur Bench held that:- Held that filing 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. There are no conditions prescribed in DTAA that FTC can be disallowed for non compliance of any procedural provision, ITA No.290/Agr/2024 11 | P a g e 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. * Sanjeev Agarwal Vs DCIT in ITA No. 71/JP/2023 dated 10/05/2023 - ITAT Jaipur bench held that:- Form 67 filed by the respective assessees, even after the end of the relevant assessment year makes the assessee entitled to claim FTC. Therefore, considering the facts of the present case, the FTC deserves to be allowed to the assessee even if Form 67 was filed by the assessee after the due date of filing the return under section 139(1) of the IT Act, 1961, and in our view not allowing foreign tax credit by AO (CPC) was nothing, but a mistake apparent on record. Therefore, we direct the revenue to allow the claim of the assessee. In the case of Vikash Daga vs. ACIT (supra), held as under:- “8. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assessee holds a foreign tax credit certificate for Rs.1887114/-. In our considered opinion filing of form 67 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. We accordingly direct the AO to allow the credit of FTC and hold that rule 128(9) of the Rules does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act.” 9. In the light of foregoing discussions, we are of the opinion that filing of Form 67 is a directory not mandatory and violation of procedural norm does not adversely affect the substantive rights or claims. 10. On the basis of discussion, submissions and abovementioned binding precedents, we set aside the orders of authorities below and restore the matter to the file of Ld. AO with the direction to verify the assessee’s claim in respect of foreign tax credit as per law after admitting / accepting Form 67 and decide the issue in accordance with law. 11. Consequently, the appeal of assessee is allowed as indicated above for statistical purpose.” 6.3 Respectfully following the aforesaid decisions, we hold that the filing of form no. 67 is directory and not mandatory ad violation of procedural norms ITA No.290/Agr/2024 12 | P a g e does not adversely affect the substantive rights or claims. Thus, the assessee is eligible for FTC and the matter is restored back to the file of ld. AO with the direction to verify assessee’s claim in respect of Foreign Tax Credit as per law after admitting/accepting Form No. 67 and to decide the issue as per law. We order accordingly. 7. In the result, the appeal of the assessee is allowed for statistical purposes as indicated above. Order pronounced in the open court on 06.02.2025 Sd/- Sd/- (SUDHIR KUMAR) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 06.02.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra "