Tribunal Grants Foreign Tax Credit Despite Late Form Submission, Prioritizes DTAA Over Procedural Rules.

The Tribunal ruled in favor of the assessee, granting the foreign tax credit of Rs. 6,99,334 despite the delayed filing of Form No.67. It determined that Rule 128(9) was procedural and that the Double Taxation Avoidance Agreement (DTAA) takes precedence over the Act. All grounds raised by the assessee were allowed.

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Issues:
Challenge to order of Commissioner of Income Tax (Appeals) regarding foreign tax credit denial under section 143(1) for assessment year 2020-21.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2020-21. The assessee raised grounds challenging the denial of foreign tax credit amounting to Rs. 6,99,334 related to foreign sourced salary income of Rs. 48,55,367, which was taxed in both the USA and India. The assessee contended that the Form No.67 filing was not mandatory but a directory requirement, and Rule 128(9) of the IT Rules did not provide for disallowance of foreign tax credit due to a delay in filing the form. The appellant sought to modify the grounds of appeal as well. The assessee's total income was disclosed as Rs. 75,76,900, with a significant portion earned in the USA. The assessee, being a resident of India, offered the income from the USA for taxation in India and filed Form No.67 to claim foreign tax credit under section 90 of the Act. However, a demand was raised by the Central Processing Centre, Bengaluru, due to issues with TDS credit and the filing of Form No.67.

The issue revolved around the timely filing of Form No.67 and the denial of foreign tax credit by the authorities. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeal, citing Rule 128 of the Income Tax Rules, 1962, which mandates filing Form No.67 before the due date of furnishing the return of income under section 139(1) of the Act. The assessee then appealed to the Tribunal. The Tribunal considered the arguments presented by the authorized representative for the assessee, emphasizing that Rule 128(9) was procedural and that DTAA overrides the Act, rendering the rules subservient to it. The Tribunal referenced various judicial pronouncements to support its decision.

After reviewing the submissions and material on record, the Tribunal found that previous decisions had granted relief to the assessee in similar cases. The Departmental Representative failed to provide a compelling argument or distinguish the cited judgments. Consequently, the Tribunal held that the assessee was entitled to the foreign tax credit of Rs. 6,99,334, regardless of the delayed filing of Form No.67. As a result, all grounds raised by the assessee were allowed, and the appeal was granted in favor of the assessee.

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