2025 (1) TMI 1065 - AT - Income Tax

Denial of claim of credit for Foreign Tax paid - Form No.67 was not filed before the time limit specified u/s.139(1) and filing of Form No.67 is mandatory to claim the benefit of Foreign Tax Credit - HELD THAT - Admittedly in the present case Form No.67 was not filed within the due date for filing of the return of income under the provisions of section 139(1) but Form No.67 was filed on 23.03.2020. CPC Bangalore had processed the return of income as on 18.02.2021 which means that Form No.67 was very much available with the CPC Bangalore. CPC Bangalore cannot deny the claim for credit for foreign tax paid merely because Form No.67 was not filed within the due date specified for filing the return of income under the provisions of section 139(1) of the Act as it is merely directory in nature. Our view is fortified by the judgment of Hon ble Madras High Court in the case of Duraiswamy Kumaraswamy 2023 (11) TMI 1000 - MADRAS HIGH COURT wherein it has been held that filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature. We further find support from the decision of this Tribunal in the case of Samiran Arunkumar Dutta 2024 (9) TMI 1267 - ITAT PUNE where also assessee was employed with same employer but Foreign Tax Credit was allowed even when Form No.67 was filed belatedly. We direct the JAO to allow the alleged Tax Credit by taking into consideration the Form No.67 filed by the appellant but after due verification. Accordingly the grounds of appeal raised by the assessee stands allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the filing of Form No.67 within the due date specified under section 139(1) of the Income Tax Act, 1961, is mandatory for claiming Foreign Tax Credit (FTC).
Whether the Centralized Processing Centre (CPC), Bangalore, was justified in denying the FTC claim due to the late filing of Form No.67.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Mandatory Nature of Filing Form No.67

Relevant Legal Framework and Precedents: The relevant legal framework involves section 139(1) of the Income Tax Act, 1961, which specifies the due date for filing income tax returns. Rule 128 of the Income Tax Rules outlines the requirement for filing Form No.67 to claim FTC. The judgment refers to the precedent set by the Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy, which held that the filing of Form No.67 is directory and not mandatory.
Court's Interpretation and Reasoning: The Tribunal interpreted that the requirement to file Form No.67 is directory in nature. It reasoned that the rule serves to implement the provisions of the Act and does not impose a strict deadline that would invalidate an FTC claim if filed late.
Key Evidence and Findings: The appellant filed Form No.67 on 23.03.2020, which was after the due date for filing the return under section 139(1). The CPC processed the return on 18.02.2021, indicating that the form was available for consideration.
Application of Law to Facts: The Tribunal applied the law by considering the availability of Form No.67 at the time of processing and concluded that the late filing should not bar the FTC claim.
Treatment of Competing Arguments: The Tribunal acknowledged the Departmental Representative's argument that the amended provisions required timely filing but ultimately sided with the appellant's interpretation supported by prior Tribunal decisions.
Conclusions: The Tribunal concluded that the filing of Form No.67 is directory, and therefore, the FTC claim should not be denied solely based on the timing of the form's submission.

Issue 2: Justification of CPC's Denial of FTC

Relevant Legal Framework and Precedents: The Tribunal referred to its own prior decisions and the Madras High Court's ruling to assess the CPC's action.
Court's Interpretation and Reasoning: The Tribunal reasoned that since Form No.67 was available at the time of processing, the CPC's denial based solely on the timing was unjustified.
Key Evidence and Findings: The Tribunal noted that the CPC had access to Form No.67 before processing the return, indicating no procedural hindrance in considering the FTC claim.
Application of Law to Facts: The Tribunal applied the principle that procedural requirements should not override substantive rights, allowing the FTC claim despite the late filing.
Treatment of Competing Arguments: The Tribunal dismissed the argument that strict adherence to filing deadlines was necessary, emphasizing the directory nature of the rule.
Conclusions: The Tribunal directed the Jurisdictional Assessing Officer to allow the FTC claim after verifying the form, thus overturning the CPC's denial.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The CPC, Bangalore cannot deny the claim for credit for foreign tax paid merely because Form No.67 was not filed within the due date specified for filing the return of income under the provisions of section 139(1) of the Act, as it is merely directory in nature."
Core Principles Established: The judgment establishes that the requirement to file Form No.67 is directory and not mandatory, and procedural lapses should not invalidate substantive claims if the purpose of the rule is met.
Final Determinations on Each Issue: The Tribunal allowed the appeal, directing the Jurisdictional Assessing Officer to grant the FTC claim after due verification, thereby affirming that late filing of Form No.67 does not preclude the claim.

The judgment underscores the importance of interpreting procedural requirements in a manner that does not unjustly impede substantive rights, aligning with broader principles of equity and justice in tax law administration.

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