Foreign tax credit claim survives belated Form 67 filing where the procedural deadline is treated as directory.

Delay in filing Form 67 under Rule 128 does not, by itself, extinguish a treaty-based foreign tax credit claim under section 90 where the substantive entitlement is otherwise established. The Tribunal treated the filing deadline as directory, not mandatory, and held that a procedural lapse could not defeat the assessee's underlying right to credit for foreign tax paid. It further held that the denial could not be sustained as a rectification issue under section 154 because the claim required verification on merits after acceptance of Form 67. The matter was restored for fresh examination in accordance with law.

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Issues: Whether delay in filing Form 67 under Rule 128 of the Income-tax Rules, 1962 disentitles the assessee from claiming foreign tax credit under section 90 of the Income-tax Act, 1961, and whether the denial of such credit could be rectified under section 154 of the Income-tax Act, 1961.

Analysis: The assessee had disclosed the foreign salary income and claimed credit for tax paid in the USA, but the credit was denied in processing under section 143(1) only because Form 67 was filed after the due date prescribed for filing the return. The Tribunal noted that the credit claim was founded on section 90 and the relevant tax treaty, and that the procedural lapse in filing Form 67 did not affect the underlying entitlement to foreign tax credit. Following coordinate bench decisions, the Tribunal held that the time limit for filing Form 67 is directory and not mandatory, and that non-compliance with the procedural timeline cannot extinguish a substantive treaty-based claim. The Tribunal also held that the claim required verification on merits after accepting Form 67, and therefore the matter could not be denied merely as a non-apparent mistake.

Conclusion: The assessee remained entitled to claim foreign tax credit despite belated filing of Form 67, and the matter was restored to the Assessing Officer for verification and fresh decision in accordance with law.

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