Foreign tax credit allowed despite delayed Form 67 filing under India-USA tax treaty provisions

ITAT Ahmedabad allowed assessee's appeal for foreign tax credit under DTAA between India and USA. Revenue authorities denied FTC relief due to delayed filing of Form 67. ITAT held that Form 67 filing is directory, not mandatory requirement. Since assessee filed Form 67 before return processing and paid taxes in USA, double taxation cannot be imposed. Following precedents from ITAT Ahmedabad, Jaipur, and Bangalore, tribunal ruled that delayed Form 67 filing cannot deny FTC entitlement when treaty provisions apply.

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Issues Involved:
1. Denial of Foreign Tax Credit (FTC) due to late filing of Form No. 67.
2. Procedural requirements versus substantive rights in claiming FTC.
3. Relevance of judicial precedents in similar cases.

Issue-Wise Detailed Analysis:

1. Denial of Foreign Tax Credit (FTC) due to late filing of Form No. 67:
The primary issue revolves around the denial of FTC for taxes paid in the USA on the grounds that Form No. 67 was not filed within the time limit specified under Section 139(1) of the Income Tax Act. The Assessee had earned income from the USA and paid taxes there, which was declared in the return of income. However, the Centralized Processing Center (CPC) denied the FTC claim due to the delayed submission of Form No. 67, which was filed on 10.03.2021, after the due date but before the return was processed on 24.12.2021.

2. Procedural requirements versus substantive rights in claiming FTC:
The Assessee argued that the filing of Form No. 67 is a procedural requirement and should not negate the substantive right to claim FTC. The Ld. CIT(A) held that filing Form No. 67 before the due date is mandatory as per Rule 128 of the Income Tax Rules, 1962, which uses the word "Shall," implying a mandatory requirement. The Assessee contended that the procedural delay should not override the substantive right to avoid double taxation.

3. Relevance of judicial precedents in similar cases:
The Assessee cited several judicial precedents where the late filing of Form No. 67 did not bar the claim for FTC. Notably, the ITAT in the case of Manoj Kaushikprasad Jingar vs. The Assessing Officer, CPC, Bangalore, and Sanjeev Agarwal 152 taxmann.com 67 (Jaipur - Trib.) held that the late filing of Form No. 67 is a procedural lapse and should not deny the substantive right to claim FTC. The ITAT in these cases emphasized that procedural requirements should not override substantive rights, especially when the details provided are not disputed.

Conclusion:
The Tribunal, after considering the rival contentions and judicial precedents, concluded that the Assessee's delay in filing Form No. 67 should not result in the denial of FTC. The Tribunal observed that the Department did not dispute the veracity of the details provided in Form No. 67 and that the Assessee had duly declared the overseas income and taxes paid. Citing various judicial precedents, the Tribunal held that procedural delays should not negate substantive rights. Therefore, the appeal filed by the Assessee was allowed, and the FTC claim was granted.

Pronouncement:
The order was pronounced in Open Court on 10/09/2024.

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