The Kolkata Bench of the Income Tax Appellate Tribunal ( ITAT ) held that procedural delay of filing form 67 cannot override the objectives of DTAA and directed the Assessing officer to grant Foreign tax credit ( FTC ) to the assessee.
Neethu Agarwal (assessee) is a resident individual who filed her income tax return on 29.12.2021 for the financial year 2020-2021. She discharged her tax liability by virtue of tax deducted at source ( TDS ), self-assessment tax, and Foreign Tax Credit of Rs. 2,25,936. The Assessee belatedly filed form 67 on 25.01.2022 for FTC.
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The AO disallowed the FTC claim of the Assessee stating that it was not filed with her Income Tax Return. Aggrieved by the order, she filed an application for rectification. The rectification order was passed without granting FTC.
Aggrieved by the order, she filed an appeal before the Commissioner of Tax (appeals)[CIT(A)]. The appeal was dismissed so she approached ITAT.
The Counsel of Assessee argued that the assessee had already paid the tax on foreign income in Sri Lanka and contended that AO should have granted FTC under section 90 of the Income Tax Act and Article 23 of the Double Taxation Avoidance Agreement ( DTAA ) between India and Sri Lanka. The counsel also contended that the DTAA between India and Sri Lanka aims to eliminate Double Taxation on income.
The Counsel of Revenue argued that form 67 was not filed on the date of filing the Income Tax Return and stated that it is an essential condition to avail FTC.
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The two-member bench Rajesh Kumar, ( Accountant Member ) and Sonjoy Sarma, ( Judicial Member ) observed that the objective of Article 23 and Section 90 of the Income Tax Act is to eliminate double taxation which cannot be compromised for procedural delay.
So, the Tribunal held that procedural delay in filing form 67 cannot override the objectives of DTAA and directed the AO to grant FTC on foreign tax paid by the assessee. The appeal of the assessee was allowed.
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