The Income Tax Appellate Tribunal ( ITAT ),Kolkata, has clarified that the credit of foreign tax cannot be denied solely for not filing Form 67 within due date of the Income Tax Return ( ITR ) under Section 139 (1) of Income Tax Act, 1961.
The brief fact of the case is that the assessee was an employee of Cognizant Technology Solutions India Pvt. Ltd. since 1999 and was transferred to UK in May, 2008 and worked there till September, 2020 before being transferred back to India. Thereafter the assessee was again transferred to India. The assessee got benefits from the employer in the form of equity shares granted to her under Employee Stock Option Plan (in short ‘ESOP’) and restricted stock.
Tax amounting to Rs. 17, 72,470/- was deducted in the UK, which was claimed by the assessee as foreign tax under Section 90 of the Income Tax Act. However, Form-67,required to be filed on or before filing the ITR under Section 139(1) of the Income Tax Act was not filed. The assessee filed the ITR after the due date and also filed Form-67 with the delay of two and a half years from the date of filing return.
The Assessing Officer (AO), CPC, issued an order under Section 143(1) of the Income Tax Act, dated March 28, 2019, wherein the claim related to foreign tax was approved. However, upon the assessee’s submission of Form 67 pertaining to the deducted foreign tax, the AO subsequently withdrew the foreign tax credit of Rs. 17,72,470/- through an order under Section 154 of the Income Tax Act. The grounds for this withdrawal were based on the assessee’s delayed filing of Form-67, which occurred two and a half years after the due date for filing the return.
The Commissioner of Income Tax (Appeals) [CIT(A)] also dismissed the appeal of the assessee upholding the order of AO on the ground that form 67 was not filed in term of provisions of Rule 128 of Income Tax Rules,1962 on or before the due date of return of income u/s 139(10) of the Income Tax Act.
Upon review, the two member bench, comprising Rajpal Yadav (Vice President) and Rajesh Kumar (Accountant Member), noted that foreign tax to the tune of Rs. 17,72,470 was indeed deducted in the UK under the Double Taxation Avoidance Agreement (DTAA) between India and the UK, as per Section 90(2) of the Income Tax Act.
The tribunal observed that while the AO initially allowed the claim, it was later withdrawn due to the delayed filing of Form 67. However, the tribunal opined that denying the credit for foreign tax solely based on a technicality of filing Form 67 beyond the due date under Section 139(1) would be unjust.
Consequently, the ITAT ruled in favor of the assessee, allowing the appeal and reinstating the foreign tax credit.
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