Filing Form 67 for Foreign Tax Credit is procedural not mandatory, late filing doesn't bar substantive right to claim FTC

The ITAT Delhi held that filing Form 67 for claiming Foreign Tax Credit is procedural rather than mandatory in nature. The assessee filed their return on 13.10.2021, Form 67 on 25.01.2022, and rectified return on 04.09.2022 for AY 2021-22. The tribunal ruled that violation of procedural norms does not adversely affect the substantive right to claim FTC, allowing the assessee's grounds and granting the credit despite late filing.

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Issues Involved:
1. Rejection of application u/s 154 by CIT(A).
2. Denial of Foreign Tax Credit (FTC) due to late filing of Form 67.

Summary:

Issue 1: Rejection of application u/s 154 by CIT(A)
The assessee filed an application for rectification u/s 154 of the Income Tax Act, 1961, which was rejected by the CIT(A). The CIT(A) held that the appellant was required to file Form 67 before the due date specified for furnishing the return of income u/s 139(1). Since Form 67 was filed after the due date, the appellant was deemed ineligible for relief u/s 90 of the Act. The CIT(A) confirmed the order of the AO and dismissed the appeal, stating that the appellant could not provide any contrary evidence against the order u/s 154.

Issue 2: Denial of Foreign Tax Credit (FTC) due to late filing of Form 67
The assessee argued that the CIT(A) erred in rejecting the application u/s 154 without basis and in violation of principles of natural justice. The assessee contended that the relief of Rs. 4,27,677/- claimed u/s 90/91 should have been allowed, and the demand of Rs. 4,74,780/- should have been deleted. The assessee cited various judicial precedents to support the argument that filing Form 67 is procedural and directory, not mandatory. The cited cases, including Duraiswamy Kumaraswamy vs. PCIT, Gaurave Singh vs. ITO, and others, emphasized that the requirement to file Form 67 is directory and not filing it within the due date does not extinguish the substantive right to claim FTC.

The Tribunal, after considering the submissions and judicial precedents, concluded that filing Form 67 is procedural and directory, not mandatory. The Tribunal held that violation of procedural norms does not adversely affect the substantive right to claim FTC. Consequently, the grounds raised by the assessee were allowed, and the appeal was decided in favor of the assessee.

Order:
The appeal was allowed, and the order was pronounced in the Open Court on 31.05.2024.

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