2024 (11) TMI 24 - AT - Income Tax

Foreign tax credit allowed despite late Form 67 filing under section 90 and Rule 128(9)

Ram Avadhanulu Jonnavithula Versus The Deputy Commissioner of Income Tax, Circle 3 (3) (1), Bangalore

Ram Avadhanulu Jonnavithula Versus The Deputy Commissioner of Income Tax, Circle 3 (3) (1), Bangalore - TMI Issues Involved:1. Condonation of delay in filing the appeal.2. Claim of Foreign Tax Credit (FTC) and the requirement of filing Form 67.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The primary issue was whether the delay of 1809 days in filing the appeal by the assessee should be condoned. The assessee argued that the delay was due to a bona fide belief that the foreign tax credit disallowance could be rectified under section 154 of the IT Act, 1961. The assessee made attempts at rectification which were rejected without clear communication, and the period was further extended due to COVID-19 disruptions, as acknowledged by the Supreme Court of India. The assessee requested that the delay be considered from the last rectification rejection date, reducing it to 212 days. The First Appellate Authority (FAA) did not condone the delay, citing a lack of reasonable cause. However, the Tribunal found the assessee's reasons sufficient and, following the judgment of the Hon'ble Apex Court in Collector, Land Acquisition Vs. MST. Katiji and Others, condoned the delay, allowing the appeal to be heard on merits.2. Claim of Foreign Tax Credit (FTC) and the Requirement of Filing Form 67:The second issue revolved around the denial of the FTC claim due to the late filing of Form 67. The FAA dismissed the appeal because the assessee did not file Form 67 within the due date prescribed under section 139(1), which is mandatory as per Rule 128(9). The assessee contended that the delay was due to procedural issues and argued that the requirement to file Form 67 within the due date should be considered directory, not mandatory. The Tribunal noted that similar issues had been addressed in previous cases, where it was held that the requirement of filing Form 67 is procedural and should not lead to disallowance of FTC if filed late. The Tribunal directed the Assessing Officer (AO) to verify Form 67 and allow the FTC, aligning with the judicial pronouncements that procedural requirements should not obstruct substantive rights like claiming FTC. The decision was based on the understanding that DTAA provisions override procedural rules when beneficial to the taxpayer.Conclusion:The Tribunal allowed the appeal for statistical purposes, directing the AO to verify Form 67 and grant the FTC, emphasizing that procedural lapses should not impede substantive claims, especially when the taxpayer has shown bona fide intentions and reasonable causes for delays. The judgment underscores the principle that procedural rules are meant to aid justice, not obstruct it.