ITAT rules on provisions of double taxation between India and Japan

ITAT rules on provisions of double taxation between India and Japan

It advises the assessing officer to consider the claim under the agreement between the two countries

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that the Foreign Tax Credit (FTC) cannot be denied to the assessee under the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Japan.

The assessee is a private limited company engaged in the business of software publishing consultancy. Its area of business includes supplying operating systems software, business and other applications software and computer games.

The assessee filed the Income Tax Return (ITR) in November 2017. It declared a total income of Rs.1,36,89,850. During the proceedings, the assessing officer (AO) noted that the assessee had claimed the FTC of Rs.43,46,900 under Sections 90 and 91 in respect of the tax withheld by Japan.

The two-member bench comprising Judicial Member Beena Pillai and Accountant Member Chandra Poojari observed that the assessee was entitled to claim FTC, as there was no dispute.

Citing an earlier decision of the tribunal, ITAT ruled, "One of the requirements for claiming FTC is that Form 67 is to be submitted by the assessee before the filing of the ITR. Therefore, it cannot be treated as mandatory. It is, rather directory in nature. This is because Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67."

The bench further said, "We accordingly, hold that FTC cannot be denied to the assessee, who is directed to file relevant details/evidence in support of its claim. We remand the issue back to the AO to consider the claim of the assessee in accordance with the law."