Foreign tax credit entitlement under the India-USA DTAA cannot be denied solely for delayed Form No. 67 filing.

Foreign tax credit under the India-USA DTAA was treated as a substantive entitlement under Article 25(2)(a), and Rule 128(9) of the Income-tax Rules was read in conformity with the treaty rather than as an independent bar. The time limit for filing Form No. 67 was held directory, so delayed filing alone could not justify denial of the credit. Reliance on rectification under section 154 and the return-filing timeline under section 139(1) did not support refusal of the foreign tax credit, which remained available subject to verification of the foreign tax paid details.

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Issues: Whether Foreign Tax Credit could be denied solely because Form No. 67 was filed after the due date prescribed under Rule 128(9) of the Income-tax Rules, 1962, notwithstanding the entitlement flowing from the India-USA Double Taxation Avoidance Agreement.

Analysis: The claim for credit was rejected only on the ground of delayed filing of Form No. 67. The ruling treats Article 25(2)(a) of the India-USA Double Taxation Avoidance Agreement as conferring the substantive entitlement to credit for foreign tax paid. Rule 128(9) of the Income-tax Rules, 1962 was read in conformity with the treaty and not in isolation, and the time limit for filing Form No. 67 was held to be directory rather than mandatory for denial of the substantive credit. The rectification under section 154 of the Income-tax Act, 1961 and the linkage with the return-filing timeline under section 139(1) of the Income-tax Act, 1961 did not justify refusal of the foreign tax credit.

Conclusion: The denial of Foreign Tax Credit for delay in filing Form No. 67 was not sustained, and the assessee was entitled to credit subject to verification of the foreign tax paid details.

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