Foreign Tax Credit Upheld by ITAT Hyderabad: COVID-Era Limitation Extension Applies, Form 67 Filing Held Directory
Overview of the Case
The Income Tax Appellate Tribunal (ITAT), Hyderabad, recently delivered a significant ruling in Ashish Agrawal Vs ITO, addressing two critical questions that frequently arise in cross-border employment situations: whether a substantial delay in filing an appeal can be condoned on account of the COVID-19 pandemic, and whether a Foreign Tax Credit (FTC) claim can be legally denied solely because Form No. 67 was submitted after the prescribed due date.
The assessment year involved was 2019-20, and the appeal arose against an order of the Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre (NFAC), Delhi, dated 28/04/2023. The Tribunal's ruling, pronounced on 26th September, 2023, ultimately decided both questions in favour of the assessee.
Background and Factual Matrix
The Assessee's Employment and Deputation
The assessee in this case is an Indian national who was employed with Emerson Electric Company (India) Private Limited. During the period 30th May, 2017 to 8th June, 2018, he was deputed to the United States of America on an overseas assignment. For the Assessment Year 2019-20, the assessee qualified as a Resident and Ordinarily Resident (ROR) in India, which meant his global income — including salary earned during his stint in the USA — was fully taxable in India under the Income Tax Act, 1961.
Return Filing and FTC Claim
The assessee filed his return of income on 15/11/2019 under Section 139(4) of the Income Tax Act, 1961, declaring a total income of ₹38,32,940/-. Out of this, salary income amounting to ₹11,80,021/-, earned during the period of deputation to the USA, had been subjected to tax both in India and in the United States — a classic case of juridical double taxation.
To mitigate this double tax burden, the assessee claimed a Foreign Tax Credit of ₹1,94,384/- under:
Section 90of the Income Tax Act, 1961- Article 25(2)(a) of the India-USA Double Taxation Avoidance Agreement (DTAA)
- CBDT Circular No. 333, dated 02/04/1982
Denial of FTC at the Processing Stage
When the return was processed under Section 143(1) of the Act, the Assessing Officer denied the FTC claim of ₹1,94,384/-. The grounds for denial were not explicitly detailed in the intimation, but the refusal effectively exposed the assessee to double taxation on the same income.
Proceedings Before the CIT(A)
Appeal Filed With Delay of 710 Days
Dissatisfied with the Section 143(1) intimation, the assessee challenged it before the CIT(A). However, the appeal was filed with a delay of 710 days beyond the prescribed period under Section 249(2) of the Income Tax Act, 1961. The assessee sought condonation of this delay by invoking the Supreme Court's suo motu directions extending limitation periods during the COVID-19 pandemic.
Additionally, the assessee had also filed a rectification application before the Centralised Processing Centre (CPC) after a delay of 604 days, which was separately questioned by the lower authority.
CIT(A)'s Order: Delay Not Condoned, Appeal Dismissed
The CIT(A) declined to condone the 710-day delay and dismissed the appeal without examining the merits of the FTC claim. The relevant finding of the CIT(A) reads as under: