Foreign tax credit cannot be denied merely for delayed Form 67 filing where the claim is otherwise supported by treaty.

Delayed filing of Form 67 under rule 128 does not, by itself, justify denial of foreign tax credit where the underlying tax has been paid abroad and the income has also been taxed in India. The procedural filing requirement was treated as directory rather than mandatory, so the credit could still be allowed subject to verification. The refusal to grant credit was also held to be capable of correction in rectification proceedings under section 154 because it was not a debatable issue on the settled legal position. The Assessing Officer was directed to allow the foreign tax credit claimed.

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Issues: Whether the assessee was entitled to foreign tax credit despite delayed filing of Form 67 and whether the denial of credit could be sustained in rectification proceedings under section 154.

Analysis: The assessee had paid tax in the United Kingdom on salary income that was also offered to tax in India, and the claim for foreign tax credit was supported by the treaty position and the form filed before the appellate proceedings. The denial was based on non-filing of Form 67 within the prescribed time under rule 128, but the Tribunal followed the view that the requirement is procedural and directory, not mandatory, and that delay in filing the form does not by itself justify denial of the credit. It also accepted that the issue was not debatable for the purposes of section 154, as the mistake in refusing credit was capable of rectification on the settled legal position.

Conclusion: The assessee was entitled to foreign tax credit subject to verification, and the Assessing Officer was directed to grant the credit for the amount claimed.

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