Foreign tax credit allowed despite delayed Form-67 filing under Rule 128 being directory not mandatory

The Madras HC allowed a petitioner's claim for foreign tax credit despite delayed filing of Form-67. The petitioner, working in UK, filed returns for AY 2019-20 to 2021-22 showing foreign income but failed to upload Form-67 due to COVID-19 outbreak. The court held that filing Form-67 under Rule 128 is directory, not mandatory, citing precedent in Duraiswamy Kumaraswamy case. The court condoned the delay considering genuine reasons and set aside the impugned orders, emphasizing that Sections 90, 90A, and 91 aim to prevent double taxation burden.

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Issues:
1. Delay in filing Form-67 for claiming Foreign Tax Credit.
2. Rejection of Foreign Tax Credit claimed by the petitioner.
3. Maintainability of revision petitions under Section 264 of the Income Tax Act.
4. Whether the filing of Form-67 is mandatory or directory.
5. Applicability of previous judgments in similar cases.

Analysis:

1. Delay in filing Form-67 for claiming Foreign Tax Credit:
The petitioner, working in the UK, filed returns of income for the Assessment Years 2019-20, 2020-21, and 2021-22 in India but failed to upload Form-67 along with the returns due to the Covid outbreak. Later, the Form-67 was uploaded. The court considered the reasons for the delay reasonable, especially in light of a similar case where the petitioner was allowed to file Form 67 after the assessment year had commenced.

2. Rejection of Foreign Tax Credit claimed by the petitioner:
The respondent disallowed the Foreign Tax Credit claimed by the petitioner due to the delayed filing of Form-67. However, the court held that the rejection was not in accordance with law. The court set aside the impugned order and directed the reassessment, considering the foreign tax credit filed by the petitioner.

3. Maintainability of revision petitions under Section 264 of the Income Tax Act:
The petitioner had filed revision petitions under Section 264 of the Income Tax Act to revise the assessment orders, but they were rejected as not maintainable due to being beyond the period of limitation. Subsequently, the petitioner filed writ petitions challenging the rejection of the revision petitions.

4. Whether the filing of Form-67 is mandatory or directory:
The court held that the filing of Form-67 for claiming Foreign Tax Credit under Section 90 of the Income Tax Act is directory and not mandatory. Citing a Supreme Court judgment, the court emphasized that the rule regarding Form-67 is for the implementation of provisions and can be filed even after the assessment order is passed.

5. Applicability of previous judgments in similar cases:
The court relied on a previous judgment in a similar case to support its decision to set aside the impugned orders and allow the petitioner to claim the Foreign Tax Credit. The court emphasized the importance of considering the circumstances leading to the delay in filing Form-67 and the genuine nature of the petitioner's claim.

In conclusion, the court allowed the writ petitions, set aside the impugned orders, and directed the reassessment by considering the Foreign Tax Credit filed by the petitioner. The court emphasized the importance of granting due credit to the petitioner and following the principles laid down in previous judgments regarding the filing of Form-67 for claiming Foreign Tax Credit.

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