Foreign tax credit filing delay condonable where Rule 128 is directory and substantive relief remains available.

Delay in filing Form 67 for foreign tax credit was treated as capable of condonation where the explanation for non-compliance was bona fide, including difficulty in obtaining foreign documents during the Covid period. Rule 128 governing Form 67 was regarded as directory, not mandatory, because it implements the substantive relief available under Sections 90, 90A and 91. On that basis, rejection of the foreign tax credit claim solely for delayed filing was held unsustainable, and the claim was required to be reconsidered on merits. The impugned order was set aside and the matter remitted for reassessment after considering the credit claim.

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Issues: (i) Whether delay in filing Form 67 for claiming foreign tax credit under the income-tax regime could be condoned. (ii) Whether Rule 128 governing filing of Form 67 is mandatory or directory, and whether the foreign tax credit claim could be considered on merits despite delayed filing.

Issue (i): Whether delay in filing Form 67 for claiming foreign tax credit under the income-tax regime could be condoned.

Analysis: The claim related to foreign tax credit for income earned abroad and the return was filed without Form 67. The delay was explained with reference to the difficulty in obtaining foreign documents during the Covid period. The Court treated the explanation as reasonable and accepted that the belated filing did not, by itself, justify rejection of the credit claim.

Conclusion: The delay in filing Form 67 was condoned in favour of the assessee.

Issue (ii): Whether Rule 128 governing filing of Form 67 is mandatory or directory, and whether the foreign tax credit claim could be considered on merits despite delayed filing.

Analysis: The Court followed the view that Rule 128 is intended to implement the substantive relief under Sections 90, 90A and 91 and is therefore directory in nature. Since the foreign tax credit particulars were furnished before the relevant processing had attained finality, the rejection of the claim merely for delayed filing was held to be unsustainable. The matter was therefore required to be reconsidered with due credit for the foreign tax credit claim.

Conclusion: Rule 128 was held to be directory, and the foreign tax credit claim was required to be reconsidered on merits.

Final Conclusion: The impugned order was set aside and the matter was remitted for reassessment after considering the foreign tax credit claim, resulting in relief to the assessee on the core issue.

Ratio Decidendi: A procedural requirement for filing Form 67 to claim foreign tax credit is directory, not mandatory, and delay in compliance can be condoned where the substantive claim is otherwise supported and the explanation for delay is bona fide.

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