2024 (2) TMI 860 - AT - Income Tax

Foreign Tax Credit (FTC) u/s 90 denied - mistake in not filing Form 67 along with the return of income rectified filling revised return - procedural lapses - assessee, after filing Form 67 made several attempts to get the rectification done through CPC with no efforts fructified - HELD THAT - As decided in Vinodkumar Lakshmipathi 2022 (10) TMI 87 - ITAT BANGALORE Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Thus we direct the AO to give credit for foreign tax as per Form 67 filed belatedly - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Allowance of Foreign Tax Credit (FTC) despite delay in filing Form 67.

Condonation of Delay:
The Revenue's appeal faced a delay of 36 days. The Tribunal reviewed the reasons provided in the condonation petition and found a reasonable cause for the delay. Consequently, the delay was condoned, and the appeal was admitted for disposal on merits.

Allowance of Foreign Tax Credit (FTC):
The core issue was whether the FTC claim could be allowed despite the delay in filing Form 67. The assessee, an individual working with IBM India Pvt. Ltd., filed the return of income for AY 2019-20 on 23.08.2019, claiming FTC of Rs.62,28,734/- u/s 90 of the Act. The return was processed u/s 143(1) on 23.03.2021, disallowing the FTC claim due to the non-filing of Form 67 within the prescribed time.

Aggrieved, the assessee appealed to the CIT(A) and filed Form 67 on 22.06.2022. The CIT(A) allowed the FTC claim, stating that the filing of Form 67 is directory, not mandatory. The CIT(A) relied on various Tribunal decisions, including the case of Sonakshi Sinha vs CIT, which held that Rule 128(9) does not prescribe disallowance of FTC for delayed filing of Form 67.

The Tribunal upheld the CIT(A)'s decision, emphasizing that procedural requirements should not override substantive rights. It cited precedents where the Tribunal and courts have held that procedural lapses should not result in the denial of substantive tax benefits. Specifically, Rule 128(9) was interpreted as directory, not mandatory, and the DTAA provisions, which override the Act, do not stipulate disallowance for procedural non-compliance.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A)'s order allowing the FTC claim was correct and in accordance with the law. The Tribunal reiterated that procedural requirements should not negate substantive entitlements, especially when the DTAA provisions are more beneficial to the taxpayer.