Foreign Tax Credit allowed despite late Form 67 filing as Rule 128 deemed directory not mandatory

The ITAT Mumbai ruled in favor of the assessee regarding denial of Foreign Tax Credit under section 90. Though the assessee filed Form 67 through revised return instead of original return and missed the due date, the tribunal held that Rule 128 is directory, not mandatory, as it prescribes no adverse consequences for non-compliance. Following precedent in Sonakshi Sinha case, the tribunal allowed FTC since Form 67 was filed before assessment completion, despite non-adherence to Rule 128(9) timeline requirements.

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Issues Involved:
1. Condonation of Delay
2. Relief u/s 90 of the Income-tax Act, 1961
3. Consequential Levy of Interest u/s 234B and 234C

Summary:

1. Condonation of Delay:
The appeal was filed by the assessee with a delay of 190 days. The assessee submitted an affidavit explaining that the delay was due to the order being received in junk mail and subsequently overlooked. The Tribunal considered the submissions and referenced the case of M/s. Midas Polymer Compounds Pvt. Ltd. v. ACIT, where a delay of 2819 days was condoned by following various judicial precedents and the decision of the Hon'ble Supreme Court in Collector, Land Acquisition v. Mst Katiji and Ors. (167 ITR 471). The Tribunal emphasized that substantial justice should be preferred over technicalities. Consequently, the delay was condoned, and the appeal was admitted for adjudication.

2. Relief u/s 90 of the Income-tax Act, 1961:
The assessee filed a revised return of income claiming relief u/s 90 of the Act by filing Form 67 along with the revised return. The CPC processed the return u/s 143(1) and rejected the claim, which was upheld by the Ld. CIT(A) on the grounds that Form 67 was not filed within the due date specified u/s 139(1). The Tribunal, however, referenced the decision in Sonakshi Sinha v. CIT, where it was held that Form 67 could be filed before the completion of the assessment proceedings. The Tribunal noted that the requirement to file Form 67 by the due date is directory and not mandatory, as Rule 128(9) does not prescribe disallowance of FTC for delay in filing. Therefore, the Tribunal allowed the assessee's claim for relief u/s 90, as Form 67 was filed along with the revised return before the completion of the assessment.

3. Consequential Levy of Interest u/s 234B and 234C:
The Tribunal did not specifically address the issue of consequential levy of interest u/s 234B and 234C in detail, as the primary ground of relief u/s 90 was allowed, which would inherently affect the computation of interest.

Conclusion:
The appeal filed by the assessee was allowed, with the delay in filing condoned and the relief u/s 90 granted, following the principles of substantial justice over technicalities. The order was pronounced in the open court on 05th April, 2023.

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