Delay in Filing Form 67 Shouldn't Deny Foreign Tax Credit, Rules ITAT Delhi; Upholds Substantive Right Under DTAA.

The ITAT DELHI allowed the appeal, ruling that the delay in filing Form 67, a procedural requirement, should not result in the denial of the foreign tax credit claimed under Section 90 of the Act. The Tribunal held that procedural norms do not nullify the substantive right to claim foreign tax credit, and the DTAA overrides conflicting provisions of the Act. Consequently, the AO was directed to grant the foreign tax credit, thereby favoring the appellant.

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Issues involved: Denial of foreign tax credit u/s 90 of the Act due to late submission of form 67 after the filing of the return of income.

The appellant, an individual Indian citizen, filed a return of income on his global income for A.Y. 2019-20, including income earned in the USA and claimed foreign tax credit of Rs.18,87,114 u/s. 90 of the Act. The Assessing Officer (AO) denied the foreign tax credit as form 67 was submitted after the due date of filing the return of income. The appellant's rectification application u/s 154 of the Act was rejected by CPC Bangalore, leading to an appeal before the CIT(A) which was unsuccessful.

During the appeal, the appellant's Counsel argued that although form 67 was submitted after the due date due to technical issues, the foreign tax credit should not be denied solely on this ground. The Counsel contended that the filing of form 67 is a procedural requirement and not mandatory. On the other hand, the Departmental Representative (DR) supported the lower authorities' decision to deny the foreign tax credit.

The Appellate Tribunal considered the matter and held that the filing of form 67 is a procedural/directory requirement, not mandatory. The Tribunal emphasized that the violation of procedural norms does not extinguish the substantive right of claiming the foreign tax credit. It was ruled that rule 128(9) of the Rules does not provide for disallowance of foreign tax credit in case of delayed filing of form 67. The Tribunal further stated that the Double Taxation Avoidance Agreement (DTAA) overrides the provisions of the Act, and the Rules cannot be contrary to the Act. Consequently, the Tribunal directed the AO to allow the credit of foreign tax credit, thereby allowing the appeal filed by the assessee.

In conclusion, the Appellate Tribunal ITAT DELHI allowed the appeal of the assessee, emphasizing that the delay in filing form 67, a procedural requirement, should not result in the denial of the foreign tax credit claimed u/s 90 of the Act.

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