2024 (5) TMI 538 - AT - Income Tax

ITAT Confirms Foreign Tax Credit Claim Valid Despite Late Form 67 Submission; DTAA Takes Precedence Over Tax Act.

The DCIT, Circle-4, Income Tax Office, NAGPUR Versus Shri Prabha Nageshwar Rachakondawar

The ITAT upheld the CIT(A)'s decision to allow the appellant's Foreign Tax Credit claim despite the delayed filing of Form 67. The tribunal emphasized ... Foreign Tax Credit u/s. 90/91 - statutory requirement prescribed under Rule 128(9) of I T Rules, 1962 for filing of Form 67 before due date of filing of return for claiming FTC - directory of mandatory obligations - Claim denied as assessee belatedly filed the corresponding Form- 67 under Rule 128 of I.T. Rules, 1963 - HELD THAT:- As in similar factual backdrop that case law in light of Duraiswamy Kumaraswamy [2023 (11) TMI 1000 - MADRAS HIGH COURT] has already held the foregoing Rule 128 of I.T. Rules is directory only than mandatory in nature. This is indeed coupled with the fact that assessee had duly filed her Form-67 on 28.12.2021 well before sec. 154 order in question dated 10.03.2022. Faced with this situation, we hardly see any merit in the Revenue’s instant sole substantive grievance. Issues: Appeal against order u/s. 154 of the Income Tax Act, 1961 involving the filing of Form 67 for claiming Foreign Tax Credit.Issue 1: The Revenue contended that the Ld.CIT(A) erred in allowing the appeal without considering the requirement of filing Form 67 before the due date for claiming Foreign Tax Credit u/s. 90/91 of the Act.Judgment: The CIT(A) directed the AO to allow the claim of the appellant after verifying the genuineness of the credit of taxes claimed u/s. 90/91, despite the delay in filing Form 67. The appellant argued that Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67, and that DTAA overrides the Act. The ITAT, Bangalore benches supported this view, stating that filing Form 67 is a directory requirement. The appeal was allowed based on this reasoning.Issue 2: The Revenue argued that the CIT(A) erred in law and on facts by directing the Assessing Officer to grant foreign tax credit despite the belated filing of Form 67 under Rule 128 of I.T. Rules, 1963.Judgment: The ITAT dismissed the Revenue's appeal, citing the precedent that Rule 128 is directory, not mandatory. The appellant had filed Form 67 before the order in question, and thus, the Revenue's grievance was deemed without merit.In conclusion, the ITAT upheld the CIT(A)'s decision to allow the appellant's claim for Foreign Tax Credit despite the delay in filing Form 67, emphasizing the non-mandatory nature of Rule 128 and the precedence set by previous judgments. The Revenue's appeal was dismissed accordingly.