Foreign Tax Credit: late Form 67 filing does not defeat substantive entitlement where return was timely filed.

Rule 128 of the Income Tax Rules, 1962 is treated as directory for claiming Foreign Tax Credit, so delayed filing of Form 67 does not by itself defeat the substantive credit claim. Where the return was filed within time and Form 67 was submitted later, the assessee's entitlement to credit for tax paid in the United States on dividend income was preserved. The denial of Foreign Tax Credit at the processing stage for non-compliance with the due date was set aside, on the basis that Rule 128 operates as a procedural mechanism to implement Section 90 of the Income-tax Act, 1961 rather than a mandatory condition that extinguishes the credit.

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Issues: Whether the assessee was entitled to Foreign Tax Credit despite filing Form 67 after the due date, and whether Rule 128 of the Income Tax Rules, 1962 is mandatory or directory for claiming such credit.

Analysis: The claim for Foreign Tax Credit arose from tax paid in the United States on dividend income and was denied at the processing stage for non-filing of Form 67 within the due date. The Tribunal followed the view that Rule 128 is intended to facilitate implementation of Section 90 of the Income-tax Act, 1961 and that belated filing of Form 67 does not defeat the substantive entitlement to credit where the return was otherwise filed within time and the form was later submitted.

Conclusion: Filing of Form 67 under Rule 128 of the Income Tax Rules, 1962 is directory and not mandatory. The assessee was entitled to Foreign Tax Credit, and the denial of the credit was set aside.

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