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2024 Supreme(Online)(ITAT) 2923
INCOME TAX APPELLATE TRIBUNAL (BANGALORE BENCH)
SHRI GEORGE GEORGE K, VP, SHRI LAXMI PRASAD SAHU, AM
MOOG MOTION CONTROLS PRIVATE LIMITED BANGALORE – Appellant
Versus
ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4(1)(1) BANGALORE – Respondent
ITA No.184/Bang/2024
For the Appellants/Petitioners: Shri. Srinivas K. P, CA
For the Respondents: Shri. V. Parithivel, JCIT(DR)(ITAT)
Disallowance of foreign tax credits based on late filing of procedural forms is deemed inappropriate; procedural requirements under the Income Tax Act are directory, not mandatory.
Headnote:(A) Income Tax Act, 1961 - Sections 90 and 36(1)(va) r.w.s 2(24)(x) - Foreign tax credit - Disallowance of foreign tax credit due to late filing of Form 67 deemed procedural rather than mandatory; substantive rights of taxpayers upheld - Disallowance of employee contribution to provident fund upheld citing relevant Supreme Court judgement. (Paras 1, 3, 27, 31, 36)
(B) Procedural Requirements - Filing of Form 67 considered directory, delay not fatal to rightful claims - No direct consequence for failing compliance with procedural norms established by the rules under section 90. (Paras 9, 21, 22, 25)
Facts of the case:
The assessee filed a return claiming substantial refunds and foreign tax credits which were subsequently disallowed on procedural grounds, despite claiming tax credit was due based upon withholding tax certificates received post deadline and contributions made within a minimal delay. The CIT(A) upheld these disallowances.
Findings of Court:
Court remitted the foreign tax credit claim to the AO for reconsideration and acknowledged procedural violations as insufficient to abrogate the substantive rights of the assessee.
Issues: Whether Forms 67 required for FTC could be considered as merely procedural and to what extent late filings inhibit claims. Also questioned the authority of CPC to make disallowances based on earlier judgements that had not yet been established as principle at the time of the claims.
Ratio Decidendi: The ITAT emphasized that procedural requirements should not negate substantive tax credits accrued through genuine foreign taxation and established that the requirement of timely filing was directory, supporting taxpayer rights to claims despite procedural oversights.
Result: Appeal partly allowed and remitted for verification of claims.
| Table of Content |
|---|
| 1. case background and assessment details. (Para 3 , 4) |
| 2. court views on procedural requirements and implications. (Para 5 , 6) |
| 3. claim for foreign tax credit procedural issues. (Para 7) |
| 4. final decision on the appeal and directives. (Para 8) |
ORDER
Per Laxmi Prasad Sahu, Accountant Member :
This is an appeal filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, (DIN & Order No. ITBA/APL/S/250/2023-24/1058573293(1)) dated 08.12.2023, on the following grounds of appeal:
1. The learned CIT(A) grievously erred by denying the claim for credit in respect of foreign taxes paid to the extent of Rs. 4,86,566/- u/s 90 of the Income Tax Act, 1961 . on the contention that Form 67 was not filed before the time limit specified u/s 139(1), without appreciating that the withholding tax certificates for which relief u/s 90 was claimed was received only after the time limit specified u/s 139(1) had lapsed. The learned CIT(A) also failed to appreciate that delay in filing Form 67 is merely a procedural lapse and ought not to be a hindrance in allowing a claim rightfully due to a taxpayer.
2. The learned CIT(A) grievously erred by sustaining the disallowance made by CPC / AO in respect of employees' contribution to Provident Fund to the extent of Rs. 2,60.000i-u/s 36(1)(va) r.w.s 2(24)(x) of the Income Tax Act, 1961 . by relying on the judgement of the Hon'ble Supreme Court in the case of Checkmate Services, without appreciating that the disallowance ought not to have been made prior to the judgement of the Hon'ble Apex Court on a debatable and controversial issue which is beyond the scope of adjustment under section 143(1).
3. For these and other grounds that may be adduced at the time of hearing. the intimation u/s 143(1) passed by CPC / AO and as sustained by the learned CIT(A) be quashed to the extent appealed against.
2. Brief facts of the case are that assessee filed return of income on 28.11.2019 declaring income of Rs.15,98,97,570/- and claimed refund of Rs.48,31,740/-. Subsequently, the return was revised on 19.03.2020 and declared the same income claiming a refund of Rs.54,16,070/-. The said return was processed on 17.03.2021 by the CPC, Bengaluru, and there was a disallowance made under section 36(1)(va) r.w.s. 2(24)(x) of the Act for the delayed remittance of the employees’ contribution of Rs.2,60,000/- and there was also delayed submission of Form No.67 due to this, the foreign tax credit claimed by the assessee of Rs.5,81,713/- was disallowed which was claimed under section 90 of the Act in the revised return of income.
3. Aggrieved from the above disallowance by the CPC, assessee filed appeal before the CIT(A). The CIT(A) observed that the disallowance for delayed remittance of employees’ contribution as per section 36(1)(va) of the Act has been settled by the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. , and Others Vs. CIT and Others (2022) 448 ITR 518 (SC) dated 12.10.2022 and the grounds were not allowed by the CIT(A). The CIT(A) has also noted that Form No.67 r.w.r. 128 of Income Tax Rules, 1962 should have been filed within the due date of filing of return of income which was filed belatedly on 19.03.2020. Accordingly, the foreign tax credit was not allowed and CIT(A) upheld the disallowance made by the CPC.
4. Aggrieved from the above order of the CIT(A), assessee filed appeal before the ITAT. The learned AR of the assessee reiterated the submissions made before the CIT(A) and he has also filed written synopsis which is as under:
“As regards Ground 1 of the appeal
7. The learned CIT(A) grievously erred by denying the claim for credit in respect of foreign taxes paid to the extent of Rs. 4,86,566/- u/s 90 of the Income Tax Act, 1961 , on the contention that Form 67 was not filed before the time limit specified u/s 139(1).
8. The learned CIT(A) failed to appreciate that delay in filing Form 67 is merely a procedural lapse and ought not to be a hindrance i
