Foreign tax credit compliance: late Form 67 filing treated as directory, preserving substantive credit claim.

Form 67 under Rule 128 for foreign tax credit was treated as a procedural requirement linked to the implementation of a substantive tax benefit under Sections 90 and 91 of the Income-tax Act read with Article 24 of the India-Kenya DTAA. Where the assessee uploaded the form before completion of processing under Section 143(1), the principle of substantial compliance applied and the delayed filing did not defeat the underlying credit claim. On that reasoning, rejection of foreign tax credit solely for late filing of Form 67 was unsustainable, the disallowance was set aside, and the matter was remitted for reconsideration.

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Issues: Whether the requirement of filing Form 67 under Rule 128 of the Income-tax Rules, 1962 for claiming foreign tax credit was mandatory or directory, and whether the assessee was entitled to have the foreign tax credit claim considered when the form was filed before completion of assessment.

Analysis: The claim for foreign tax credit arose under Sections 90 and 91 of the Income-tax Act, 1961 read with Article 24 of the India-Kenya Double Taxation Avoidance Agreement. The assessee filed the return without Form 67, but the form was subsequently uploaded before the processing under Section 143(1) was completed. The reasoning applied the principle that procedural requirements intended to implement a substantive benefit should be treated as directory where the substantive claim is otherwise admissible. Reliance was placed on the settled principle of substantial compliance, under which a procedural form filed before the final assessment action should not defeat the underlying tax credit claim.

Conclusion: Rule 128 was treated as directory in the facts of the case, and the rejection of foreign tax credit solely for delayed filing of Form 67 was held unsustainable. The disallowance was set aside and the matter was remitted for reconsideration of the foreign tax credit claim.

Ratio Decidendi: A procedural form required for claiming a statutory tax benefit does not, by itself, extinguish the substantive entitlement where it is furnished before final assessment and the claim is otherwise admissible; such procedural compliance is directory when the rule serves only as a mode of implementation.

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