Foreign tax credit cannot be denied solely for late Form 67 filing where treaty relief is otherwise available.

Delay in filing the first appeal was condonable where the assessee showed a bona fide explanation based on reliance on a tax consultant and lack of timely awareness of the adverse order. Foreign tax credit under section 90 and Article 24 of the India-Sri Lanka DTAA could not be denied merely because Form No. 67 was filed late, as Rule 128(9) was treated as directory and the treaty-based substantive entitlement prevailed subject to verification. The claim for carry forward of house property loss was not examined earlier and was remitted for verification and decision in accordance with law.

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Issues: (i) Whether the delay in filing the appeal before the first appellate authority was liable to be condoned. (ii) Whether foreign tax credit could be denied only because Form No. 67 was filed belatedly. (iii) Whether the claim for carry forward of house property loss required consideration.

Issue (i): Whether the delay in filing the appeal before the first appellate authority was liable to be condoned.

Analysis: The assessee showed a bona fide explanation for the delay, namely reliance on a tax consultant and lack of timely awareness of the adverse order and demand. The record did not justify refusing to entertain the appeal on limitation alone, and the assessee was also not effectively represented before the first appellate authority.

Conclusion: The delay was liable to be condoned and the objection to maintainability could not stand.

Issue (ii): Whether foreign tax credit could be denied only because Form No. 67 was filed belatedly.

Analysis: Relief under section 90 of the Income-tax Act, 1961 and Article 24 of the India-Sri Lanka DTAA protects the credit for foreign taxes paid where the same income is taxed in India and abroad. Rule 128(9) of the Income-tax Rules, 1962 was treated as directory in nature, and the substantive entitlement to foreign tax credit could not be defeated merely for delayed filing of Form No. 67. The credit was treated as a vested right, and the treaty benefit prevailed where more beneficial to the assessee.

Conclusion: Foreign tax credit could not be denied solely on the ground of belated filing of Form No. 67, and the assessee was entitled to the credit subject to verification in accordance with law.

Issue (iii): Whether the claim for carry forward of house property loss required consideration.

Analysis: The loss claim had not been examined by the first appellate authority. The appropriate course was to permit the assessee to substantiate the claim before the Assessing Officer and have it verified according to law.

Conclusion: The issue was restored for verification and allowance in accordance with law.

Final Conclusion: The appeal succeeded on the principal dispute regarding foreign tax credit and on the delay issue, while the loss claim was remitted for verification; the assessee obtained substantive relief with ancillary statistical relief on the remaining claim.

Ratio Decidendi: A procedural requirement for claiming foreign tax credit cannot defeat the substantive treaty-based entitlement where the treaty is more beneficial, and delay in filing the prescribed form by itself does not justify denial of the credit.

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