2022 (3) TMI 834 - AT - Income Tax

Foreign Tax Credit (FTC) for default in filling Form 67 under Rule 128 - delay in compliance of a procedural provision - denial of claim as Assessee failed to furnish Form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act which is mandatory according to Rule 128(9) - As submitted that when there is no condition prescribed in DTAA that the FTC can be disallowed for non-compliance of any procedural provision - HELD THAT - There is no dispute that the Assessee is entitled to claim FTC. On perusal of provisions of Rule 128 (8) (9) it is clear that one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view this requirement cannot be treated as mandatory rather it is directory in nature. This is because Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda Kumar Krishna 2022 (2) TMI 752 - ITAT BANGALORE It s a trite law that DTAA overrides the provisions of the Act and the Rules as held by various High Courts which has also been approved by Hon ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. 2021 (3) TMI 138 - SUPREME COURT . We accordingly hold that FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/evidences in support of its claim. We thus remand this issue back to the Ld.AO to consider the claim of assessee in accordance with law based on the verification carried out in respect of the supporting documents filed by assessee. Appeal of assessee stands allowed for statistical purposes.

Summary

Issues:
1. Disallowance of Foreign Tax Credit (FTC) for not filing Form 67 before the due date.
2. Interpretation of Rule 128 and its mandatory nature in claiming FTC.
3. Applicability of DTAA provisions over domestic laws in claiming FTC.

Analysis:
1. The appeal was filed against the order disallowing the FTC claim due to the non-filing of Form 67 before the due date. The Assessing Officer (AO) and CIT(A) held that the failure to submit Form 67 on time rendered the claim non-est in law. The contention that this was a procedural requirement and noncompliance should not disentitle the assessee was rejected.

2. The CIT(A) affirmed the AO's decision, emphasizing the mandatory nature of Rule 128(8) & (9) in requiring timely submission of Form 67. However, the Tribunal found that the requirement was directory, not mandatory, as Rule 128(9) did not specify disallowance for delayed filing. Citing a previous tribunal decision, it held that the FTC could not be denied solely for this reason.

3. The assessee argued that DTAA provisions should prevail over domestic procedural rules, asserting a vested right to claim FTC under the tax treaty. The Tribunal concurred, stating that DTAA supersedes domestic laws, as established by previous court rulings. Consequently, the FTC claim was upheld, and the matter was remanded to the AO for further consideration based on supporting documents.

In conclusion, the Tribunal allowed the appeal, directing the assessee to provide necessary details for the FTC claim. The judgment clarified the directory nature of Rule 128(9) regarding Form 67 filing and upheld the primacy of DTAA provisions in claiming FTC, emphasizing compliance with the law for verification.