2023 (6) TMI 1387 - AT - Income Tax

Denial of foreign tax credit - form 67 submitted after the due date of filing of the return of income - procedural / directory OR mandatory requirement - HELD THAT - The undisputed fact is that the assessee holds a foreign tax credit certificate - In our considered opinion filing of form 67 is a procedural / directory requirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantive right of claiming the credit of FTC. We accordingly direct the AO to allow the credit of FTC and hold that rule 128(9) of the Rules does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Appeal filed by the assessee is allowed.

Summary

Issues involved: Denial of foreign tax credit u/s 90 of the Act due to late submission of form 67 after the filing of the return of income.

The appellant, an individual Indian citizen, filed a return of income on his global income for A.Y. 2019-20, including income earned in the USA and claimed foreign tax credit of Rs.18,87,114 u/s. 90 of the Act. The Assessing Officer (AO) denied the foreign tax credit as form 67 was submitted after the due date of filing the return of income. The appellant's rectification application u/s 154 of the Act was rejected by CPC Bangalore, leading to an appeal before the CIT(A) which was unsuccessful.

During the appeal, the appellant's Counsel argued that although form 67 was submitted after the due date due to technical issues, the foreign tax credit should not be denied solely on this ground. The Counsel contended that the filing of form 67 is a procedural requirement and not mandatory. On the other hand, the Departmental Representative (DR) supported the lower authorities' decision to deny the foreign tax credit.

The Appellate Tribunal considered the matter and held that the filing of form 67 is a procedural/directory requirement, not mandatory. The Tribunal emphasized that the violation of procedural norms does not extinguish the substantive right of claiming the foreign tax credit. It was ruled that rule 128(9) of the Rules does not provide for disallowance of foreign tax credit in case of delayed filing of form 67. The Tribunal further stated that the Double Taxation Avoidance Agreement (DTAA) overrides the provisions of the Act, and the Rules cannot be contrary to the Act. Consequently, the Tribunal directed the AO to allow the credit of foreign tax credit, thereby allowing the appeal filed by the assessee.

In conclusion, the Appellate Tribunal ITAT DELHI allowed the appeal of the assessee, emphasizing that the delay in filing form 67, a procedural requirement, should not result in the denial of the foreign tax credit claimed u/s 90 of the Act.