ITAT Upholds Deletion of Addition on Foreign Investments; Allows Foreign Tax Credit

The assessee filed his return of income for A.Y. 2017–18 declaring a total taxable income of Rs. 26.80 crore, which included income clubbed from his three minor daughters under section 64(1A) of the Income-tax Act. The case was selected for limited scrutiny on the grounds that the assessee had foreign assets and had claimed double taxation relief under sections 90/91.

The Assessing Officer treated investments made to foreign company as unexplained under section 69, denied foreign tax credit of Rs. 23.02 lakh for taxes paid in Singapore, invoked section 115BBE, and completed the assessment accordingly. The CIT(A) deleted the addition relating to foreign investments and allowed the foreign tax credit. Aggrieved, the Revenue appealed before the Tribunal.

Main Issues: Whether the CIT(A) was justified in deleting the addition of Rs. 3.31 crore made under section 69 towards alleged unexplained foreign investments and whether the CIT(A) was justified in allowing foreign tax credit of Rs. 23.02 lakh under sections 90/91, despite the Revenue’s objection regarding Form No. 67.

ITAT Held: The Tribunal held that the assessee had sufficient disclosed income to explain the foreign investments made in the names of his minor daughters. The investments were duly declared in Schedule FA of the return of income, and corresponding bank accounts were also disclosed. In view of the returned income of Rs. 26.80 crore, the Tribunal found no merit in the Revenue’s allegation of unexplained investment.

The Tribunal noted that Form No. 67 had been filed on 22.12.2017, well within the permissible time, and complete details of foreign income and taxes paid in Singapore were furnished in the return and during assessment proceedings. The Tribunal upheld the CIT(A)’s direction to allow relief under sections 90/91. Thus, the appeal filed by the Revenue was dismissed.

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