Foreign Tax Credit cannot be denied for delayed Form 67 where treaty entitlement overrides a directory procedural rule.

Delay of 710 days in filing the appeal before the CIT(A) was condoned because the assessee showed sufficient cause arising from the pandemic period and the prior pursuit of rectification under section 154; the appeal had been rejected only on limitation, so the merits were not examined. Foreign Tax Credit claimed under section 90 read with Article 25(2)(a) of the India-USA DTAA could not be denied for delayed filing of Form 67, because Rule 128(9) was held to be directory and subordinate to the Act and treaty. The assessee was therefore granted the claimed Foreign Tax Credit.

---

---

Issues: (i) Whether the delay of 710 days in filing the appeal before the CIT(A) deserved condonation. (ii) Whether Foreign Tax Credit could be denied for delay in filing Form 67.

Issue (i): Whether the delay of 710 days in filing the appeal before the CIT(A) deserved condonation.

Analysis: The delay was attributed to the pandemic period and to the assessee first pursuing rectification proceedings under section 154 of the Income-tax Act, 1961. The limitation instructions issued by the Supreme Court during the pandemic were applicable, and the facts showed sufficient cause for the delayed filing. The CIT(A) had dismissed the appeal only on limitation and had not examined the merits.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether Foreign Tax Credit could be denied for delay in filing Form 67.

Analysis: The credit was claimed under section 90 of the Income-tax Act, 1961 read with Article 25(2)(a) of the India-USA Double Taxation Avoidance Agreement. Rule 128(9) of the Income-tax Rules, 1962 was held to be directory and not capable of defeating the treaty-based entitlement to foreign tax relief. The rule was required to be read in conformity with the Act and the treaty, and could not override them.

Conclusion: Denial of Foreign Tax Credit for delayed Form 67 filing was not sustained and the claim was allowed in favour of the assessee.

Final Conclusion: The appeal succeeded on both limitation and substantive tax relief, and the assessee obtained the claimed Foreign Tax Credit.

Ratio Decidendi: A treaty-based foreign tax credit cannot be denied by a procedural rule where the rule is only directory and must yield to the overriding provisions of the Double Taxation Avoidance Agreement.

---