Form 67 is directory and not mandatory to claim foreign tax credit

[Vivek Jalan]

It is high time that necessary amendments should be made in the Income Tax Act/ Rules to incorporate the process of claiming the tax credit, where the foreign tax credit certificates are received by an assesses even after the end of the assessment year. This would avoid hardship for the assesses and will also serve the ends of natural justice. The background of the issue is that as per the provisions of section 90 read with Rule 128 and Form 67, an assesses is entitled to relief of the tax paid in foreign country on the income, which is also taxed in India, as per the prescribed guidelines. As per Rule 128, for claiming the tax credit under section 90, the assesses needs to file Form 67 along with the proof of payment of tax on or before the end of the assessment year relevant to the previous year in which FTC is claimed by an assesses [as per the recent CBDT Notification No. 100 of 2022]. In cases where the details of such foreign tax payment are available to the assesses company only after the end of the relevant assessment year, the above timeline prescribed for filing Form 67, continue to act as deterrent to claim the tax credit u/s 90 of the Act. Till now, when such FTC relief was being claimed during assessment, the assessing officers are raising objections citing non filing of such additional claim before the due date of filing the return of income & now may say it should have been claimed before end of the AY. As a result, the assesses are/will be denied tax credit for no fault of theirs, since it is impossible to make such claims in the absence of requisite details, for which Indian assesses are helpless and are dependent on the tax authorities of respective foreign jurisdiction.

However, even barring the amendment, the issue is whether Form 67 is mandatory or directory for claiming foreign tax credit. In a decision in ANUJ BHAGWATI VERSUS DEPUTY COMMISSIONER OF INCOME TAX-CIRCLE – 1 (1) (1) , MUMBAI - 2022 (9) TMI 1397 - ITAT MUMBAI, the coordinate bench of the Tribunal vide order dated 20/09/2022, while deciding the issue held that section 90/ 91 of the Act has not been amended insofar as grant of foreign tax credit is concerned and Rules cannot override the Act and therefore filing of Form No. 67 is not mandatory, but it is directory. Following the decision, it was held in the case of NIRMALA MURLI RELWANI VERSUS ASSTT. DIRECTOR OF INCOME TAX CENTRAL PROCESSING CENTER, BENGALURU - 2022 (12) TMI 395 - ITAT MUMBAI that mere delay in filing Form No. 67 as per the provisions of Rule 128(9), will not preclude the assesses from claiming the benefit of foreign tax credit in respect of tax paid outside India.

Again, what happens in case Form 67 is not filed erroneously. In the case of DCIT, CIRCLE – 2 (2) (1) , BENGALURU VERSUS SHRI. DEVESH M NAYEL - 2024 (2) TMI 860 - ITAT BANGALORE  it was held that where on realizing the mistake that Form 67 was not filed along with return of income and same was filed subsequently, the delay should not be considered as fatal to claim FTC.

Hence until a consequential amendment is made, foreign tax credit can be claimed accordingly based on the decisions.