Foreign Tax Credit cannot be denied for procedural non-compliance as filing Form 67 is a directory requirement, not mandatory, under the Income Tax Act.

ORDER

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:-

This appeal by the Revenue is preferred against the order of the ld. CIT(A)-2, Nagpur dated 10.09.2024 pertaining to A.Y 2020-21.

2. Grounds raised by the Revenue read as under:

1. The Ld. ADDL/JCIT(A)-2, Nagpur, has erred in law and on facts by allowing relief of FTC u/s 90/91 though Form 67 has not been filed by the assessee as prescribed u/s 90 r.w.Rule 128. As per rule 128 (8) it is clearly mentioned that FTC shall be allowed after furnishing Form 67 by the assessee. Further, the case is covered under exception 3.1 of circular 5/2024.

2. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of hearing of the appeal

3. Briefly stated, the facts of the case are that the return of income filed by the assessee was processed by Centralized Processing Centre (CPC) electronically and intimation under section 143(1)/154 of the Income-tax Act, 1961 [the Act, for short] on 25th August, 2022 was passed disallowing the claim of FTC of Rs.25,30,435/-

4. Aggrieved by this order, the assessee went in appeal before the ld. CIT(A). After considering the facts and submissions, the ld. CIT(A)concluded as under:

4.6. In case of Brinda Rama Krishna vs ITO 135 taxmann.com 358 the Hon’ble Bangalore Bench (SMC) of ITAT has directed the revenue to allow relief of FTC u/s 90 where the form 67 was filed after the prescribed due date after holding that- (para 16 of judgment); Rule 128(9) does not provide for disallowance of FTC in case of delay in filing form 67; Filing of form 67 is not mandatory but a directory requirement, and DTAA overrides the provisions of Act and Rules cannot be contrary to the Act. The ratio of the above judgment has been followed in another case decided by Double Bench of Hon’ble Bangalore Bench in case of 42 Hertz Software India (P) Ltd vs ACIT (IT Appeal no 29 of 2021) [2022 Taxpub(DT) 1975]

4.7.The judgment of ITAT Jaipur in the case of Ritesh Kumar Garg Vs ITO, ITA No. 261/JP/2022in para 5.1 stated that- “There is no dispute that the assessee is entitled to claim relief u/s 90 but the disallowance was confirmed on the sole ground that the relevant form 67 prescribed under rule 128(8) was not filed within the time stipulated under sub rule 9 of rule 128. It is submitted that disallowance of FTC is bad in law. The 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 country outside India and such income is also taxable in India. Article 22 of India Finland DTAA provides for credit for foreign taxes. Article 22(2) is relevant in the present context. (PB 27-41) Same is extracted below:

“2. In India double taxation shall be eliminated as follows: Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Finland, India shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in Finland. Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in Finland”.

4.7. The judgement (supra) further quoted that “It is submitted that section 90 of the Act read with Article 22(2) provides that Finland income tax paid shall be allowed as a credit against the Indian tax but limited to proportion of Indian tax. Neither section 90 nor DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirements. FTC is assessee's vested right as per Article 22(2) of the DTAA read with section 90 and same cannot be disallowed for n