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of <h1>Form 67 filing delay cannot deny foreign tax credit under Rule 128 directory provision</h1> <h3>Asha Rani Pandya Versus DCIT/ACIT-1 (1) Indore</h3> Asha Rani Pandya Versus DCIT/ACIT-1 (1) Indore - TMI Issues Involved:1. Jurisdiction and legality of the CIT(A)'s order sustaining the CPC's order under section 143(1).2. Denial of Foreign Tax Credit (FTC) due to the late filing of Form 67.Issue-wise Detailed Analysis:1. Jurisdiction and Legality of the CIT(A)'s Order:The assessee contended that the CIT(A)'s order sustaining the CPC's order under section 143(1) was 'bad in law, without jurisdiction,' and based on an 'incorrect interpretation of law.' The assessee argued that the order was passed 'without allowing proper and reasonable opportunity of being heard' and that the facts were 'incorrectly construed.'2. Denial of Foreign Tax Credit (FTC):The primary contention of the assessee was that the CPC disallowed the relief of Rs. 20,18,809 claimed under section 90 on the income earned in the USA, which was included in the total income filed in India. The denial was due to the late filing of Form 67. The assessee argued that 'when overseas Income is included in the total income, the assessee is entitled for relief of overseas taxes paid under section 90 as per applicable double taxation avoidance agreement, if any, or for appropriate tax relief under section 91 of the Act in case there are no such agreements in existence with the respective country.'The assessee, represented by the Ld. AR, submitted that the delay in filing Form 67 should not lead to the disallowance of the FTC claim, asserting that the filing of Form 67 is 'directory and not mandatory.' The assessee relied on several judicial decisions, including:- Deepak Shimoga Padmaraju vs. ADIT- Duraiswamy Kumaraswamy vs. PCIT (Madras High Court)- Ms. Brinda Ramakrishna vs. ITOThe CIT(A) confirmed the disallowance, stating that the assessee failed to file Form 67 within the due date specified under section 139(1) of the Act. The CIT(A) emphasized that 'filing of Form no.67 is mandatory to claim the benefit of Foreign Tax Credit,' citing Rule 128 of the Income Tax Rules, which uses the word 'shall' for filing Form 67 before the time limit for filing the return of income under section 139(1).Tribunal's Analysis and Decision:The Tribunal considered the rival submissions and relevant material on record. It noted that the Hon'ble Madras High Court in Duraiswamy Kumaraswamy vs. PCIT held that 'the filing of form no. 67 for claim of FTC in terms of Rule 128 is only directory in nature.' The Tribunal also referred to the decision of the Bangalore Benches in Deepak Shimoga Padmaraju, which held that 'Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67' and that 'filing of Form No.67 is not mandatory but a directory requirement.'The Tribunal further noted that the DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. Therefore, non-furnishing of Form No.67 before the due date under section 139(1) is not fatal to the claim for FTC. The Tribunal directed the AO to give credit for the foreign tax as per Form 67 filed on 22/10/2022 after due verification.Conclusion:The Tribunal allowed the appeal of the assessee for statistical purposes, directing the AO to allow the claim of foreign tax credit after verification of the quantum. The order was pronounced in the open court on 28.06.2024.
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