Foreign tax credit cannot be denied solely for delayed Form 67 filing when treaty entitlement is otherwise established.

Foreign tax credit under Section 90 of the Income-tax Act, 1961 and Article 24 of the India-Italy DTAA is a substantive treaty-based entitlement, and the more beneficial treaty relief prevails where applicable. Rule 128 and Form 67 operate as a procedural mechanism for claiming that credit, not as a condition that extinguishes the underlying right. Delayed filing of Form 67 was treated as a curable procedural lapse, so foreign tax credit could not be denied solely on that ground where entitlement was otherwise established.

---

---

Issues: Whether foreign tax credit could be denied merely because Form 67 was filed belatedly under Rule 128 of the Income-tax Rules, 1962, despite the assessee otherwise being entitled to relief under Section 90 of the Income-tax Act, 1961 and Article 24 of the India-Italy DTAA.

Analysis: The relief for taxes paid abroad flows from Section 90 of the Income-tax Act, 1961 and the applicable treaty provision, which provide credit for foreign taxes and operate on the principle that the treaty benefit prevails where it is more beneficial. Rule 128 prescribes the procedural mode for claiming the credit by filing Form 67, but the provision was treated as machinery in nature and not as a condition extinguishing the substantive right to claim foreign tax credit. The delayed filing of Form 67 was considered a curable procedural lapse, and the claim was found not to be defeated solely on that ground.

Conclusion: The delayed filing of Form 67 did not justify denial of foreign tax credit, and the assessee remained entitled to the credit in accordance with law.

Ratio Decidendi: A substantive treaty-based entitlement to foreign tax credit cannot be denied solely for belated compliance with a procedural filing requirement where the rule is directory and the underlying entitlement is otherwise established.

---