Foreign tax credit cannot be denied for late filing of Form 67 after return due date

The ITAT Jaipur held that foreign tax credit (FTC) cannot be denied merely for procedural non-compliance, specifically late filing of Form 67 after the return due date. The tribunal ruled that FTC is a vested right under Article 22(2) of the DTAA read with section 90, and procedural requirements in Rules cannot override substantive treaty rights. Since neither section 90 nor the DTAA prescribes disallowance for procedural lapses, and Form 67 was available to the AO when assessment was framed, the assessee was entitled to FTC. Appeal decided in favor of assessee.

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Issues Involved:
1. Disallowance of foreign tax credit (FTC) under section 90/90A of the IT Act, 1961.
2. Requirement of filing Form 67 before the due date for claiming FTC.
3. Procedural versus substantive requirements for claiming FTC.

Summary:

1. Disallowance of FTC under Section 90/90A:
The assessee, a foreign national and non-ordinarily resident, received salary income in Spain and India. The tax paid in Spain was not credited in India due to non-filing of Form 67 before the due date. The assessee appealed against the disallowance of Rs. 37,41,228/- claimed under section 90/90A, arguing that the tax relief was acknowledged in the Annexure-TR but not reflected in the final order.

2. Requirement of Filing Form 67:
The lower authorities held that the claim for FTC cannot be allowed if Form 67 is not filed before the due date specified for furnishing the return. The assessee contended that this requirement is procedural and should not result in the denial of FTC. Various tribunal decisions were cited, emphasizing that neither Section 90 nor DTAA provides for disallowance of FTC for non-compliance with procedural requirements.

3. Procedural versus Substantive Requirements:
The tribunal referenced multiple cases where it was held that filing Form 67 is a directory, not a mandatory requirement. It was argued that procedural norms should not extinguish substantive rights. The tribunal cited decisions from various benches, including the Hon'ble Supreme Court, which support the view that procedural requirements should aid justice and not obstruct it. The tribunal concluded that the assessee is entitled to FTC despite the delay in filing Form 67.

Conclusion:
The tribunal allowed the appeal, directing the AO to grant the FTC of Rs. 37,41,228/- to the assessee, setting aside the order of the CIT (A). The decision was based on the principle that procedural requirements should not override substantive rights, and the assessee's vested right to claim FTC under the tax treaty cannot be denied for mere procedural delays.

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