Form-67 Filed Before Issuance of Intimation: Madras HC directs Income Tax Dept to consider FTC Claim [Read Order]

The Madras High Court has directed the Income Tax department to consider the Foreign Tax Credit (FTC) claim as Form 67 filed before the issuance of intimation.

Duraiswamy Kumaraswamy, the petitioner was employed in Kenya during the year 2016-2018 as CEO.  For the financial year 2018-2019, the petitioner was a resident of India, including his Kenya income, he has filed his Indian Income Tax return, and claimed the benefit of Foreign Tax Credit (FTC) under Section 90/91 of the Income Tax Act, 1961, read with Article 24 of the India-Kenya Double Taxation Avoidance Agreement.  

The petitioner has filed the income tax return for the income at Kenya.   According to the petitioner, he is entitled for Foreign Tax Credit (FTC). It was submitted that while filing the Indian ITR for the impugned assessment year 2019-2020, Form-67 prescribed under Rue 128 of the Income Tax Rules, 1962, for claiming FTC was inadvertently not uploaded along with the Indian ITR. 

The petitioner uploaded the said Form-67 along with the TDC certificate. On 26.03.2021, the income tax return was subsequently processed by the Centralized Processing Centre (CPC), Bangalore, under Section 143(1) of the Act for which the petitioner received the intimation through e-mail.  However, the FTC was not given effect to. 

The petitioner made a request to CPC to give effect to the FTC and also requested to the CPC, Bangalore, through e-proceedings to rectify the above intimation by giving effect to FTC.  The petitioner once again requested the CPC through a letter to give effect to FTC and the petitioner has received a rectification order under Section 154 of the Act by e-mail on 21.07.2021 with the similar demand of Rs.29,69,260/-.

The first appellate authority passed the impugned order under Section 264 of the Act rejecting the FTC claim,  wherein it was held that filing of Form-67 along with the return of income under Section 139(1) was statutory obligation which was not complied with and further, a revised return was  not filed and hence FTC could not be granted.  At the same time, the respondent accepted that Form-67 which was uploaded on 02.02.2021 before the Section 143(1) order passed.

The petitioner argued that the procedure under Rule 128 is directory in nature and it is not mandatory.  The Department has rejected the request of the petitioner.  He further contended that even the FTC was filed well before the completion of the assessment proceedings.

The respondent argued that the procedure under Rule 128 is mandatory and and cannot be considered as directory in nature.  The petitioner has filed his return including his Kenya income along with his Indian Income tax and claimed the benefits of FTC. 

A single bench of Justice Krishnan Ramasamy observed that the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC was rejected by the respondent, which is not proper and the same is not in accordance with law.

While setting aside the impugned order, the Court remitted the matter back to the respondent to make reassessment by taking into consideration of the FTC filed by the petitioner on 02.02.2021. The respondent is directed to give due credit to the Kenya income of the petitioner and pass the final assessment order.

To Read the full text of the Order CLICK HERE

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