2024 (3) TMI 468 - AT - Income Tax

Denial of Foreign Tax Credit (FTC) claimed u/s. 90 - there was delay in furnishing Form 67 - HELD THAT - The requirement of filing Form 67 within the due date prescribed u/s. 139(1) of the Act cannot be treated as mandatory. Further, it was held that it is to be treated as directory in nature. This is because Rule 128(9) of the Income-tax Rules, 1962 does not provide for disallowance of FTC in case of delay in filing Form 67. On identical facts, the Ahmedabad Bench of the Tribunal in the case of Keval Niraj Hutheesing 2023 (3) TMI 1467 - ITAT AHMEDABAD after considering the judicial pronouncements, had directed the AO to give credit for FTC after due verification of Form 67 filed. In the afore-mentioned case also, Form 67 was not filed before the processing the return u/s. 143(1) of the Act, but was filed subsequently. Thus we direct the A.O. to give credit for FTC after due verification of Form 67. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
The solitary issue raised is whether the CIT(A) is justified in confirming the denial of Foreign Tax Credit (FTC) claimed u/s. 90 of the Act, amounting to Rs. 43,015.

Comprehensive Details:

Facts of the Case:
The individual assessee filed the return of income for the assessment year 2020-2021 within the due date but filed the requisite Form 67 for claiming FTC after the prescribed time limit. The CPC did not grant the credit for FTC due to the delay in filing Form 67. The assessee filed a rectification application which was also rejected, leading to an appeal before the CIT(A).

CIT(A) Decision:
The CIT(A) dismissed the appeal, stating that Form 67 must be filed within the due date as per the Act and found no mistake in the CPC's order justifying interference.

Tribunal's Findings:
The Tribunal considered various judicial pronouncements and held that the filing of Form 67 within the due date is not mandatory but directory. Referring to a similar case, the Tribunal directed the AO to grant credit for FTC after verification of Form 67, emphasizing that procedural laws should not control the claim of FTC.

Legal Arguments:
The Assessee argued that the DTAA provisions override the Act, ensuring the right to claim FTC under the tax treaty. They cited cases supporting the view that procedural requirements like filing Form 67 should not be considered mandatory.

Tribunal's Decision:
Agreeing with the Assessee's contentions, the Tribunal held that the rule regarding Form 67 is not mandatory, and DTAA prevails over procedural provisions. The Tribunal directed the AO to grant credit for FTC after verifying Form 67, allowing the appeal for statistical purposes.

Conclusion:
The Tribunal's decision emphasized the non-mandatory nature of filing Form 67 for claiming FTC and upheld the Assessee's right under the DTAA. The AO was directed to grant the credit after verification, in line with judicial precedents supporting a taxpayer-friendly approach.