2024 (11) TMI 23 - AT - Income Tax

Foreign tax credit cannot be denied for delayed Form 67 filing as Rule 128(9) lacks disallowance provision

Vamshi Krishna Ayyalasomayajula Versus The Income Tax Officer, Ward 5 (3) (4), Bangalore.

Vamshi Krishna Ayyalasomayajula Versus The Income Tax Officer, Ward 5 (3) (4), Bangalore. - TMI Issues:Disallowance of foreign tax credit under section 143(1) of the Income Tax Act 1961 for non-filing of Form 67 within the due date.Analysis:The appeal was filed against the order of the CIT(Appeals) upholding the disallowance of foreign tax credit (FTC) by the Centralized Processing Centre (CPC) under section 143(1) of the Income Tax Act 1961. The appellant claimed FTC of INR 7,05,587 against the federal taxes paid in the USA on doubly taxed USA sourced income of INR 40,86,983 under section 90(2) of the Act, read with Article 25 of the India-USA Double Taxation Avoidance Agreement (DTAA).The appellant, a resident as per the Act and DTAA provisions, filed the return of income late and submitted Form 67 after the due date. The FAA dismissed the appeal noting the delay in filing Form 67. The appellant argued that the filing of Form 67 is a procedural requirement and relied on previous Tribunal decisions to support their case.The Tribunal considered the arguments and cited previous decisions where it was held that the requirement of filing Form 67 within the due date is directory, not mandatory. The Tribunal emphasized that procedural laws should not control the claim of FTC and that the DTAA provisions override the Act to benefit the taxpayer. The Tribunal directed the AO to grant FTC after verifying Form 67, allowing the appeal for statistical purposes.In conclusion, the Tribunal ruled in favor of the appellant, directing the AO to grant the foreign tax credit after verifying Form 67, based on the principles that procedural laws are subservient to justice and DTAA provisions take precedence over domestic laws for the benefit of the taxpayer.