ITAT Delhi Upholds Deletion of Addition on Foreign Investment Made in Minors’ Names

The assessee filed his return for AY 2017-18, declaring total income of Rs. 26.80 crore, including clubbed income of his minor daughters under Section 64(1A). The case was selected for limited scrutiny on account of the claim of double taxation relief under Sections 90/91 and holding of foreign assets.

During the assessment, the Assessing Officer noticed investments of Rs. 3.31 crore in shares of a foreign company made in the names of the assessee’s minor daughters. Treating the investments as unexplained, the AO made an addition under Section 69, invoked Section 115BBE, and also denied the foreign tax credit of Rs. 23.02 lakh for taxes paid in Singapore, citing non-compliance with Form 67.

The CIT(A) deleted the addition and allowed the foreign tax credit. The Revenue appealed before the Tribunal.

Main Issue: Whether the deletion of the addition under Section 69 and grant of foreign tax credit under Sections 90/91 were justified.

ITAT Ruled: The ITAT dismissed the Revenue’s appeal, holding that the assessee, having disclosed total income, had sufficiently explained sources to make the investments. The foreign investments were duly disclosed in Schedule FA, and the funds were routed through disclosed Indian bank accounts, leaving no basis for adverse inference under Section 69.

The Tribunal also noted that the assessee had furnished full particulars in Schedules FSI and TR and had filed Form 67 within the time permitted under Section 139(4). Thus, denial of FTC was held to be unjustified, and relief under Sections 90/91 was directed.

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