Rules cannot override the Act, relief allowable u/s 90 in respect of the Foreign Tax Credit: ITAT [Read Order]

The Mumbai Bench Income Tax Appellate Tribunal (ITAT)has held that Rules cannot override the Act, relief allowable u/s 90 of the Income Tax Act,1961 in respect of the Foreign Tax Credit (FTC).

Anuj Bhagwati, the assessee is an individual and resident of India and also in the USA and derives income from salary and income from other sources. The assessee has filed the return of income for the assessment year 2018-19 on 23/07/2018 disclosing a total income of ₹ 2,07,95,303/- which includes the foreign income of ₹41,26,063/- in the total income disclosed and also a tax of ₹ 14,22,129/- paid in the USA was claimed as Foreign Tax Credit(FTC).

 The assessee is eligible to claim Tax Relief U/sec 90 of the Act as per Double Taxation Avoidance and Agreement (DTAA) with the government of the USA and the return of income was processed under section 143(1) of the Act. The Assessing Officer (A.O.) was not grantedrelief under Section 90 of the Act in respect of the Foreign Tax Credit(FTC) and assessed the total income of ₹. 2,07,95,030/- and passed the order under section 143(3) r.w.s 143(3A) and 143(3B) of the Act dated 21.10.2020. On appeal, the CIT(A) confirmed the action of the A.O. and dismissed the appeal.

It was viewed that Section 90 of the income tax Act allows double taxation relief in respect of agreements with foreign countries or specified territories and also Section 91 of the IT Act deals with the taxability of income where the countries don’t have agreements. Further, there is no amendment in Section 90 of the Act aboutthe claim of FTC and in such cases Rule procedures are directory and not mandatory.

A Coram of Shri Baskaran B R, accountant member&   Shri Pavan Kumar Gadale, the judicial member that there is no amendment on these aspects in Section 90 of the Act and the Rules cannot override the Act and therefore the filing of Form. No 67 is not mandatory but it is a directory.

The Tribunal restored the issue to the file of the CIT(A) to adjudicate afresh on merits and allowed the grounds of appeal of the assessee for statistical purposes.

To Read the full text of the Order CLICK HERE

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