Form 67 Filing Deadline: Directory, Not Mandatory; DTAA Over Income Tax Act

The Tribunal held that the requirement to file Form 67 before the due date is directory, not mandatory, and that DTAA provisions override the Income Tax Act, directing the AO to consider the appellant's claim based on supporting documents filed. The Tribunal allowed the appeal for statistical purposes, remitting the matter back to the AO for further assessment, emphasizing the importance of considering claims based on legal principles and supporting documents.

---

---

Issues Involved:
1. Disallowance of tax credit due to procedural lapse in filing Form 67 within the due date.
2. Eligibility for Foreign Tax Credit as per Indo-American DTAA.
3. Whether the provisions of DTAA override the provisions of the Income Tax Act, 1961.

Issue 1: Disallowance of tax credit due to procedural lapse in filing Form 67 within the due date:
The case involved an appeal against the order of the CIT(A), National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2017-18. The appellant contended that the tax credit should not be denied due to a procedural lapse of not filing Form 67 within the due date as specified in Rule 128(9) of the Income Tax Rules, 1962. The appellant argued that the provisions of DTAA should override the provisions of the Income Tax Act, 1961, citing relevant constitutional provisions. The NFAC upheld the disallowance of tax credit as the appellant submitted Form 67 after the due date prescribed for filing the return of income. However, the Tribunal, based on precedent, held that the requirement to submit Form 67 before filing returns is directory, not mandatory. The Tribunal emphasized that DTAA overrides the Act and Rules, directing the AO to consider the claim of the assessee based on supporting documents filed.

Issue 2: Eligibility for Foreign Tax Credit as per Indo-American DTAA:
The appellant, an employee deputed to the USA, earned salary in foreign currency during the previous year. The CPC made an addition of Rs.3,29,045 after adjusting the tax credit under section 90 of the Income Tax Act during processing. The appellant filed rectification requests, but the claim for tax paid on income earned outside India was not allowed due to the late submission of Form 67. The NFAC upheld the addition made by the AO. However, the Tribunal, citing precedent, emphasized that the appellant is entitled to claim Foreign Tax Credit (FTC). The Tribunal held that the claim cannot be denied, directing the AO to consider the claim based on supporting documents filed by the assessee.

Issue 3: Whether the provisions of DTAA override the provisions of the Income Tax Act, 1961:
The appellant argued that the provisions of DTAA should override the Income Tax Act, 1961, citing constitutional provisions and relevant case law. The Tribunal, in line with established legal principles, held that DTAA indeed overrides the provisions of the Act and Rules. The Tribunal directed the AO to consider the claim of the assessee in accordance with law and supporting documents. The appeal of the assessee was allowed for statistical purposes, remitting the issue back to the AO for further consideration.

In conclusion, the Tribunal's judgment addressed the issues of disallowance of tax credit, eligibility for Foreign Tax Credit as per DTAA, and the overriding effect of DTAA on the Income Tax Act, 1961. The Tribunal emphasized the importance of considering claims based on legal principles and supporting documents, ultimately allowing the appeal for statistical purposes and remitting the matter back to the AO for further assessment.

---