In the case of Sanjiv Gopal . [1] (Taxpayer), the issue before the Bangalore Income Tax Appellate Tribunal (Tribunal) pertained to eligibility to claim credit for foreign taxes (FTC) paid on overseas income against the Indian tax liability where the return of income (ROI), as well as relevant statutory form (Form No. 67) for making such claim, was filed beyond the prescribed date as per the Income Tax Rules, 1962 (Rules).
While India taxes the worldwide income of ordinary residents, the relevant provisions of law. [2] permit a credit for foreign taxes paid on overseas income against Indian tax liability of such income. However, such credit is subject to the taxpayer furnishing, within its due date of filing ROI, a statement in Form No. 67 providing particulars pertaining to the overseas income and foreign taxes paid thereon as prescribed.
In the case before the Tribunal, the Taxpayer (an individual ordinarily resident in India) earned salary income for services rendered in The Netherlands, in respect of which FTC was sought to be claimed to the extent of foreign taxes paid in The Netherlands. However, the ROI, along with Form No. 67, was filed belatedly after the statutorily prescribed due date.
Thereafter, the Taxpayer’s ROI was processed under Section 143(1) of the Income Tax Act (ITA) by the tax authority, wherein an intimation was issued to the Taxpayer denying the FTC relief on the grounds that the Rules require filing of Form No. 67 within the ROI filing due date.
The Tribunal held that:
- Rule 128(9) prescribing filing of Form No. 67 within the above specified time limit, does not provide for disallowance of FTC in case of delay in filing Form No. 67.
- Filing of Form No. 67 is not mandatory but a directory requirement.
- The double taxation avoidance agreement overrides the provisions of the ITA and the Rules cannot be contrary to the provisions of the ITA.
In doing so, the Bangalore Tribunal also distinguished an unfavorable Visakhapatnam Tribunal ruling in the case of Muralikrishna Vaddi. [3] , which had denied belated FTC claim since, in the said case, Form No. 67 was filed along with the return of income after the commencement of the scrutiny proceedings by the tax authority after a delay of more than two years.
