Delay condoned, Form 67 held directory; FTC claim remanded for fresh verification under Rule 128 compliance review

ITAT Pune condoned the delay in filing the appeal before CIT(A), accepting the assessee's explanation that electronic notices were not noticed until a physical demand notice was received in October 2023. The Tribunal reiterated that filing Form 67 for claiming Foreign Tax Credit (FTC) is directory, not mandatory, and delay in its filing alone cannot justify denial of FTC. The matter was remanded to the Jurisdictional Assessing Officer to verify the assessee's FTC claim based on documents already filed and to decide afresh after granting due opportunity of hearing.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the delay of 48 days in filing the appeal before the Tribunal ought to be condoned in view of the reasons explained by the assessee.

1.2 Whether the delay of about 2 years and 6 months in filing the appeal before the first appellate authority, arising from the intimation under section 143(1), ought to be treated as condonable having regard to the COVID-19 related exclusion of limitation and the assessee's explanation.

1.3 Whether denial of Foreign Tax Credit solely on the ground of delay in furnishing Form No. 67 is legally sustainable, and whether Form No. 67 is to be treated as mandatory or directory for the purpose of granting Foreign Tax Credit.

1.4 Whether, upon condoning delay and holding that delayed filing of Form No. 67 cannot by itself defeat the claim, the matter should be remanded to the Assessing Officer for verification and allowance of Foreign Tax Credit on merits.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of 48-day delay before the Tribunal

Interpretation and reasoning

2.1 The Tribunal examined the affidavit explaining that the original appeal was filed electronically within time, but due to a technical glitch the uploaded enclosures did not reflect, resulting in rejection for non-compliance; the assessee received no email or physical notice of this defect and came to know of it only upon a routine dashboard check, whereafter the appeal was promptly refiled.

2.2 The Tribunal found that these circumstances constituted "reasonable cause" preventing timely filing and applied the liberal approach to condonation laid down by the Supreme Court in Collector, Land Acquisition v. Mst. Katiji, holding that technicalities should not defeat substantial justice.

Conclusions

2.3 The delay of 48 days in filing the appeal before the Tribunal was condoned and the appeal was admitted for adjudication on merits.

Issue 2: Condonation of delay of about 2 years and 6 months before the first appellate authority

Legal framework (as discussed)

2.4 The Tribunal noted that the intimation under section 143(1) was issued on 28.03.2021, that the period was covered by the COVID-19 pandemic, and referred to the decision of the Supreme Court in Cognizance for Extension of Limitation In re, wherein almost two years were excluded from the limitation period for judicial and quasi-judicial proceedings.

Interpretation and reasoning

2.5 The Tribunal recorded that the assessee's appeal before the first appellate authority was filed on 06.12.2023, resulting in a delay of about 2 years and 6 months.

2.6 It further noted that the first appellate authority had not adjudicated the matter on merits, solely on account of this delay, despite the assessee's condonation application explaining that electronically served notices came to his knowledge only after receiving a physical notice of arrears of demand in the last week of October 2023.

2.7 Considering these reasons, the prevailing pandemic situation during the relevant period, and the Supreme Court's exclusion of limitation for nearly two years, the Tribunal held that the delay was satisfactorily explained and ought not to defeat the assessee's statutory right of appeal.

Conclusions

2.8 The delay of about 2 years and 6 months in filing the appeal before the first appellate authority was held to be condonable; the Tribunal treated the delay as condoned for purposes of deciding the assessee's grievance and proceeded to address the Foreign Tax Credit issue.

Issue 3: Nature of requirement to file Form No. 67 and denial of Foreign Tax Credit on account of delay

Legal framework (as discussed)

2.9 The Tribunal proceeded on the basis that Form No. 67 is the prescribed form for reporting details of Foreign Tax Credit and that the assessee's claim of Rs. 8,60,645/- was denied in the intimation under section 143(1) solely for delayed filing of this form.

Interpretation and reasoning

2.10 The Tribunal noted that the assessee relied on a coordinate bench decision holding that the requirement of filing Form No. 67 is directory and that delayed filing, by itself, cannot be a ground to deny Foreign Tax Credit.

2.11 The Tribunal further observed that in a series of its decisions, a consistent view had been taken that filing of Form No. 67 is directory, not mandatory, and that delay in filing this form should not lead to rejection of an otherwise valid Foreign Tax Credit claim.

2.12 In the present case, the Tribunal found that the Foreign Tax Credit had been disallowed solely due to delay in furnishing Form No. 67, without an examination of the substantive correctness of the claim.

Conclusions

2.13 The Tribunal held that delay in filing Form No. 67 could not be treated as a valid ground, by itself, to deny Foreign Tax Credit and that the claim must be examined on merits.

Issue 4: Remand to the Assessing Officer for verification of Foreign Tax Credit claim

Interpretation and reasoning

2.14 Having condoned the relevant delays and having held that delayed filing of Form No. 67 cannot defeat the claim, the Tribunal considered it appropriate to restore the matter for factual verification.

2.15 It noted that the assessee had placed necessary supporting details and documents in the paper book and directed that the assessee produce all requisite material before the jurisdictional Assessing Officer.

Conclusions

2.16 The issue of Foreign Tax Credit was remanded to the jurisdictional Assessing Officer, with a direction to examine the veracity of the assessee's claim based on the evidence to be furnished and to allow Foreign Tax Credit in accordance with law after affording reasonable opportunity of hearing.

2.17 The appeal was treated as allowed for statistical purposes.

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