Tribunal Upholds FTC Claim Despite Form 67 Delay

The Tribunal held that the delay in filing Form 67 should not lead to the denial of Foreign Tax Credit (FTC) under sections 90/90A of the Income Tax Act. The procedural lapse in filing the form was not deemed sufficient to disentitle the assessee from claiming FTC. The Tribunal emphasized that procedural requirements should not override substantive rights granted under the Act. Additionally, the Tribunal noted that recent amendments to Rule 128 extended the deadline for filing Form 67, indicating legislative intent to provide more flexibility. The appeal was allowed for statistical purposes, directing the Assessing Officer to decide the FTC claim on its merits.

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Issues Involved:
1. Denial of Foreign Tax Credit (FTC) due to delay in filing Form 67 under Rule 128.
2. Whether the procedural lapse in filing Form 67 can disentitle the assessee from claiming FTC.
3. The interplay between substantive provisions of the Income Tax Act and procedural requirements under Rule 128.
4. The impact of amendments to Rule 128 on the filing timeline for Form 67.

Issue-wise Detailed Analysis:

1. Denial of Foreign Tax Credit (FTC) due to delay in filing Form 67 under Rule 128:
The primary grievance of the assessee was the denial of FTC under section 90/90A of the Income Tax Act due to the delay in filing Form 67. The assessee, an individual working for a multinational company, filed her return of income on 01/08/2019, including income earned in India and the Netherlands. She claimed FTC of Rs. 3,29,929 for the tax paid in the Netherlands. However, her claim was denied because Form 67 was filed on 09/02/2021, after the due date for filing the return of income under section 139(1).

2. Whether the procedural lapse in filing Form 67 can disentitle the assessee from claiming FTC:
The learned CIT(A) upheld the denial of FTC solely based on the late filing of Form 67, as per Rule 128(9). However, the assessee argued that this procedural lapse should not disentitle her from claiming FTC. The Tribunal noted that Rule 128(9) did not explicitly state that a delay in filing Form 67 would result in the denial of FTC. Citing previous decisions, the Tribunal emphasized that procedural requirements should not override substantive rights granted under the Act.

3. The interplay between substantive provisions of the Income Tax Act and procedural requirements under Rule 128:
The Tribunal examined whether the procedural requirements under Rule 128 could override the substantive provisions of sections 90 and 91 of the Act. The Tribunal referenced several decisions, including Sonakshi Sinha vs CIT and Anuj Bhagwati vs DCIT, which held that the requirements under Rule 128 are directory, not mandatory. It was observed that neither section 90 nor section 91 prescribed a timeline for filing Form 67, and Rule 128 did not provide for the disallowance of FTC due to a delay in filing the form.

4. The impact of amendments to Rule 128 on the filing timeline for Form 67:
The Tribunal noted that Rule 128(9) was amended with effect from 01/04/2022, extending the deadline for filing Form 67 to the end of the assessment year. This amendment indicated a legislative intent to provide more flexibility in the filing timeline. The Tribunal concluded that the delay in filing Form 67 during the year under consideration should not preclude the assessee from claiming FTC.

Conclusion:
The Tribunal held that the mere delay in filing Form 67 should not result in the denial of FTC. The jurisdictional Assessing Officer was directed to decide the claim of FTC on merits after accepting Form 67 and other related documents filed by the assessee. The appeal was allowed for statistical purposes.

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