Foreign Tax Credit cannot be denied for late Form 67 filing when DTAA relief is otherwise allowable.

Foreign Tax Credit under a DTAA cannot be denied merely because Form No. 67 was filed late under Rule 128(9) of the Income-tax Rules, 1962. Where the credit is otherwise allowable on the merits, the filing requirement is treated as directory rather than mandatory, and a procedural lapse by itself cannot defeat substantive treaty relief. The Tribunal noted that the taxpayer's entitlement to credit for Malaysian tax on salary income taxed in India was not disputed in principle, and that the DTAA prevails over the Act and Rules to the extent it is more beneficial. The matter was remanded for verification of supporting documents and reconsideration according to law.

---

---

Issues: Whether Foreign Tax Credit could be denied for delay in filing Form No. 67 under Rule 128(9) of the Income-tax Rules, 1962, and whether the relevant DTAA entitled the assessee to credit of tax paid in Malaysia notwithstanding such procedural default.

Analysis: The claim for Foreign Tax Credit was supported by tax deducted in Malaysia on the same salary income that was offered to tax in India. The Tribunal noted that the DTAA entitlement to relief was not disputed on merits and that Rule 128(9) did not provide for disallowance of Foreign Tax Credit merely because Form No. 67 was filed belatedly. It further relied on the settled principle that a Double Taxation Avoidance Agreement prevails over the Act and the Rules to the extent it is more beneficial to the assessee. The contrary view taken by the lower authority was held to be unsustainable, and the earlier reasoning treating the filing requirement as mandatory was not accepted.

Conclusion: Foreign Tax Credit could not be denied solely on account of delayed filing of Form No. 67, and the issue was remanded to the Assessing Officer for verification of the supporting documents and reconsideration in accordance with law.

Ratio Decidendi: Where treaty-based Foreign Tax Credit is otherwise allowable, delay in filing Form No. 67 under Rule 128(9) of the Income-tax Rules, 1962 is a directory procedural lapse and cannot, by itself, defeat the substantive DTAA relief.

---