NICDC NEEMRANA SOLAR POWER LIMITED,JEEVAN BHARTI BUILDING V. DCIT, CIRCLE SEVEN(ONE)

ITA 4184/DEL/2024

AI Insights

NICDC Neemrana Solar Power Limited appealed against the decision of the Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre, which had upheld the disallowance of a Foreign Tax Credit claim of Rs. 74,46,166. The credit was initially denied by the Assessing Officer due to the late submission of Form No. 67, required under Rule 128 of the Income Tax Rules, 1962. The Tribunal examined whether the procedural delay in filing Form No. 67 should affect the substantive right to claim FTC under Section 90 of the Income Tax Act, 1961, read with Article 23 of the Indo-Japan Double Taxation Avoidance Agreement (DTAA).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473149 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2018-2019
• Other Referred Cases: Sumedha Arora vs ITO [2023] 154 taxmann.com 535, Sonia Sharma vs ITO in ITA No. 316/Del/ 2023 dated 27-04-2023, Manoj Kumar Srivastava vs ACIT [2024] 163 taxmann.com 296 {Delhi-Trib}
• Laws Referred To: Income Tax Act, 1961, Indo Japan DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANDEEP PANWAR
• Assessee Lawyers: S R.S. SINGHAVI RAJAT GARG
• Keywords: Set aside; TDS; Double taxation relief; Non compliance
• Section: 143(3); 142(1); 139(1); 90

Judgement Text

" ITA No.4184/Del/2024 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’, NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER ITA No.4184/Del/2024 Assessment Year: 2012-13 NICDC NEEMRANA SOLAR POWER LIMITED 8th Floor tower -1 Jeevan Bharti Building Connaught palace Delhi PAN No. AAECD9888J Vs. DCIT, Circle seven (One) New Delhi (APPELLANT) (RESPONDENT) Appellant by S/Shri R.S. Singhavi Rajat Garg CAs Respondent by Shri Mandeep Panwar, Sr. DR Date of hearing: 09/01/2025 Date of Pronouncement: 29/01/2025 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER: This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)/National Faceless ITA No.4184/Del/2024 2 Assessment Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] vide order dated 14.08.2024 pertaining to assessment year 2018-19 and arises out of the assessment order dated 03.06.2021 under section 143(3) of the IT Act, 1961 of the Income Tax Act 1961 [hereinafter referred as ‘the Act’]. 2. Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us by raising the following grounds: “1.1 That on the fact and circumstances of the case, the CIT(A) was not justified in not accepting the claim of Foreign Tax Credit of Rs. 74,46,166/ based on TDS Certificate u/s 90 of the Income Tax Act, 1961 read with Article 23 of the Indo Japan DTAA made by the Assessing officer in total disregard to the settled legal position. 1.2 That having accepted that Income represented by TDS was duly subjected to tax and the claim of TDS being corroborated from TDS Certificate issued by the Japanese Tax Authorities, the claim of TDS is of a consequential nature and is in accordance with the provisions of section 90 read with Article 23 of India Japan DTAA. 1.3 That filling of Form No. 67 is of procedural nature and having filed the same with the CIT(A), the benefit of TDS should have been allowed by the CIT(A). 1.4 That even otherwise, the delay in filling of Form No. 67 being a genuine mistake, the CIT(A) should have condoned the delay and considered Form No. 67 while adjudicating the grounds on merits. ITA No.4184/Del/2024 3 2.1 That in any case, the Income earned from M/s Hitachi Limited, Japan being already offered to tax in India as per the provisions of Income Tax and DTAA, the action of Assessing Officer in not allowing the credit of Foreign Tax Credit in terms of provisions of Article 23 of the Indo Japan DTAA is arbitrary and unjustified. 2.2 That in fact, the claim of FTC being governed by provisions of DTAA which overrides the Income Tax Act, 1961 as well as the Rules, the A.O. has failed to appreciate that the filling of Form No. 67 is only a directory requirement and as such the disallowance of FTC is illegal and not sustainable under law. 3 That the orders passed by the lower authorities are not justified on facts and same are bad in law. 4 That the appellant craves leave to add, amend, alter or forgo any or all of the grounds as may be necessary and in the interest of justice.” 3. The brief facts of the case are that the assessee Company was engaged in business of providing reliable green energy for industrial units. The assessee company filed its return of income on 18-08-2108 declaring total income of Rs.6,57,68150/- after claiming Foreign Tax Credit of Rs.74,46,166/- under Section 90 of the Act. However, the assessee did not furnish Form 67 before filing the return of ITA No.4184/Del/2024 4 income as required under Rule 128 of the Income Tax rules. The case of the assessee was selected for regular scrutiny on the issues of Double taxation relief under Sections 90/91 of the Act and the Expenditure by way of Penalty or Fine for Violation of any law. A notice under Section 142(1) of the Act was issued and after considering the submission made by assessee company completed the assessment after making the addition of Rs 74,46,166/-on account of disallowance of claim of Foreign Tax credit under Sections 90/91 of the Act. 4. Aggrieved the order of the ld. A.O. the assessee company filed the appeal before the Ld. CIT(A), who vide his order dated 14-08-2024 dismissed the appeal against which the assessee is in appeal before the tribunal. 5. Ld. AR of the assessee has submitted that assessee company sought the time to file the Foreign Tax credit Form due to Covid-19. He also submitted that the assessee company in the considering year has provided the technical services to M/s Hitachi Limited Japan and payment received after deduction of ITA No.4184/Del/2024 5 TDS of Rs 74,46,166/-. He further submitted that TDS deducted in the contracting state i.e. Japan is in accordance with the provisions of section 90 of the Act read with Article 23 of the Double Tax Avoidance Agreement. Form no 67 has been filed by the assessee company. He has further submitted that the filing of the Form No.67 is a directory requirement and the claim cannot be denied that the form was not filed within time. Reliance has placed on the following judgements as under: i- Sumedha Arora vs ITO [2023] 154 taxmann.com 535 ii- Sonia Sharma vs ITO in ITA No. 316/Del/ 2023 dated 27-04-2023 iii- Manoj Kumar Srivastava vs ACIT [2024] 163 taxmann.com 296 {Delhi-Trib}. 6. Rule 128(9) of the Income Tax Rules 1962 provides that Form No 67 should be filed on or before the due date of filing the return of income as prescribed u/s139 (1) of the Act, which is recently amended and provided for filling before the end of the assessment year. However, the rule no where provides that if the said Form No. 67 is not filed within the above stated time frame the relief as sought by the assessee under Section 90 of ITA No.4184/Del/2024 6 the Act would be denied. Filing of Form 67 is a procedural requirement and is not a mandatory requirement. 7. Ld Sr. DR has submitted that the assessee has not provided the Form No 67 within time. He has further submitted that the Form No 67 was filed after 5 years, which cannot be considered at this stage, he sought the appeal be dismissed 8. In the case of Sumedha Arora vs Income -Tax Officer [2023]154 taxmann.com 535 (Delhi-Trib) the Co-ordinate bench held as under: “7. As stated, section 90 of the Act provides that Government of India can enter into agreement with other countries for granting relief in respect of income on which taxes are paid in the country outside India and such income is also taxable in India. Article 24 of India-Italy DTAA provides for credit towards foreign taxes paid for earning income arising from foreign soil. Section 90(2) of the Act provides that provisions of this Act shall apply to the extent they are more beneficial to the assessee. Article 24(3)(a) seeks to provide for method of elimination of Double Tax and the amount of Italian tax payable under the laws of Italy in respect of income from sources within Italy which has been subjected to tax both in India and Italy, shall be allowed as credit against the Indian tax payable in respect of such income. The assessee thus contends that a combined reading of Section 90 of the Act read with Article 24(3)(0) of DTAA provides in no uncertain terms that Italian tax paid shall be allowed as credit ITA No.4184/Del/2024 7 against Indian Tax. Neither Section 90 nor DTAA provides that FTC shall be disallowed for mere non compliance with any procedural requirement of enabling nature. The assessee thus contended that FTC is assessee's vested right as per Article 24(3)(a) of the DTAA r.w. section 90 of the Act and such FTC approved to the assessee cannot be denied on the grounds of non compliance of procedural requirements prescribed in the Rules which are subservient to the Act as well as DTAA. The assessee further contended that provisions of DTAA override the provisions of the Income Tax Act and thus denial of vested right to claim the FTC is in direct infringement of the tax treaty. 8. Rule 128 (8) and (9) provides that the credit for any foreign tax shall be allowed on furnishing of Form 67 on or before due date of filing the return of income as prescribed under Section 139(1) of the Act. The question thus arises as to whether where a substantial compliance has been made and Form 67 has been eventually filed albeit after the due date of filing of return of income under Section 139(1) of the Act, the denial of FTC would be justified. In this regard, the assessee contends that Rule 128 provides machinery for seeking relief and compliance thereof are the procedural formality which has been duly complied with, albeit with some delay. The provisions of sections 90, section 91 and DTAA does not provide for denial of exemption merely on account of delay in filing of certain forms/reports in contrast to other provisions of the Act such as 80AC, 801A(7), 10A(5) and 10B(5) where attendant conditions of compliance are mandatory. 9. In the factual backdrop, we notice that the Co-ordinate Bench of Tribunal in the case of Ms. Brinda Ramakrishna v. ITO [2022] 135 taxmann.com 358/193 ITD 840 (Bang.Trib.) in [ITA No.454/Bang/2021 order dated ITA No.4184/Del/2024 8 17.11.2021] clearly held that filing of Form 67 is a directory requirement and having regard to the position that DTAA overrides the provisions of the Act and Rule cannot be contrary to the Act, the assessee is fully entitled to the FTC. The Tribunal also observed that issue of allow- ability of FTC is not a debatable issue and only one view is possible and thus seeking rectification under Section 154 could be resorted by the assessee. Similar view has been taken in 42 Hertz Software India (P.) Ltd. v. Asstt. CIT [2022] 139 taxmann.com 448 (Bang. Trib.)/[ITA No.29/Bang/2021 order dated 7th March, 2022). A reference is made to another Co-ordinate Bench decision in the case of Vinodkumar Lakshmipathi v. CIT (Appeals) NFAC [2022] 145 taxmann.com 235 (Bang. Trib.), [ITA No.680/Bang/2022 order dated 06.09.2022]; Sonakshi Sinha v. CIT (Appeals) [2022] 142 taxmann.com 414/197 ITD 263 (Mum. Trib.)/[ITA no.1704/Mum/2022 order dated 20th September, 2022] and host of other judgments referred to and relied upon. 10. Having regard to the delineation made and in consonance with the view expressed by the Co-ordinate Benches, we hold that claim of FTC does not get controlled solely by the delay in filing of Form 67 prescribed under Rule 128(9) of the Income Tax Rules. Hence, we set aside the action of the CIT(A) and direct the Assessing Officer to take cognizance of Form 67 so filed and grant FTC as may be entitled to the assessee in accordance with law.” 9. In the present case, the claim of the assessee was declined by the Ld. CIT(A) on the basis that Form No. 67 was filed after a gap of five years. Having regard to the delineation made and in ITA No.4184/Del/2024 9 consonance with the view expressed by the Co-ordinate Benches, we hold that the claim of FTC does not get controlled solely by the delay in filing of Form 67 prescribed under rule 128(9) of the Income Tax Rules. Hence, we set aside the action of the Ld. CIT(A) and direct the Assessing officer to take cognizance of Form No.67 so filed and grant FTC as may be entitled to the assessee in accordance with law. Therefore, following the binding precedents, we here by direct the AO to allow benefit of Foreign Tax Credit subject to such enquiries and verifications as may be considered expedient. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 29.01.2025 Sd/- Sd/- ( PRADIP KUMAR KEDIA ) (SUDHIR KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER *Mohan Lal* Dated: .01.2025 "