Foreign tax credit cannot be denied for delayed Form 67 filing when substantive entitlement is established

Foreign tax credit under the Double Taxation Avoidance Agreement and section 90 is treated as a substantive relief against double taxation. Rule 128(9) is described as a procedural requirement for claiming the credit, not a condition that extinguishes entitlement. Where foreign tax has been paid and Form 67 is filed during rectification proceedings, the delayed filing does not defeat the underlying claim. The operative point is that procedural lapse should not override a vested tax benefit when the substantive eligibility for credit is otherwise established.

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Issues: Whether denial of foreign tax credit merely because Form 67 was not filed along with the return of income was justified, where the assessee had otherwise paid foreign tax and submitted the form during rectification proceedings.

Analysis: Relief from double taxation under the Double Taxation Avoidance Agreement and section 90 of the Income-tax Act, 1961 was treated as the governing substantive entitlement. Rule 128(9) of the Income-tax Rules, 1962 was regarded as a procedural requirement meant to regulate the claim, not as a condition that extinguishes the credit itself. The filing of Form 67 during rectification, together with the existence of the underlying foreign tax payment, was held to satisfy the procedural aspect without defeating the substantive claim. The reasoning followed the liberal view that procedural delay should not defeat a vested tax benefit when the core entitlement is otherwise established.

Conclusion: The assessee was entitled to foreign tax credit, and the denial of credit on the ground of delayed filing of Form 67 was held unsustainable.

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