2025 (2) TMI 33 - AT - Income Tax

Foreign Tax Credit allowed under section 90/90A despite late filing of Form 67 with ITR

Vaibhav Singh Versus The ITO, Ward-1 (2), Jaipur.

Vaibhav Singh Versus The ITO, Ward-1 (2), Jaipur. - TMI ISSUES PRESENTED and CONSIDEREDThe core issue in this appeal was whether the assessee was entitled to claim Foreign Tax Credit (FTC) under Section 90/90A of the Income Tax Act, 1961, despite the late filing of Form No. 67, which is required to be submitted before the due date for filing the return of income under Section 139(1) of the Act. The Tribunal also considered whether procedural non-compliance, specifically the late filing of Form 67, could result in the disallowance of FTC.ISSUE-WISE DETAILED ANALYSIS1. Relevant Legal Framework and PrecedentsThe legal framework involves Section 90/90A of the Income Tax Act, which allows relief from double taxation under the Double Taxation Avoidance Agreement (DTAA) between India and the USA. Rule 128 of the Income Tax Rules prescribes the procedure for claiming FTC, including the submission of Form 67. The Tribunal referenced several precedents, including decisions from ITAT Bangalore, ITAT Delhi, and other jurisdictions, which have held that the procedural requirement of filing Form 67 is not mandatory but directory.2. Court's Interpretation and ReasoningThe Tribunal acknowledged the procedural requirement under Rule 128(9) for filing Form 67 before the due date for filing the return. However, it emphasized that neither Section 90 nor the DTAA explicitly mandates disallowance of FTC for procedural non-compliance. The Tribunal referred to the principle that procedural requirements should not override substantive rights, as established in various Supreme Court judgments.3. Key Evidence and FindingsThe assessee had filed Form 67 after the due date for filing the return, which was a significant factor in the CPC's initial disallowance of the FTC. However, the Tribunal noted that the assessee had paid taxes in the USA and was eligible for relief under the DTAA, which should not be denied merely due to procedural lapses.4. Application of Law to FactsThe Tribunal applied the principle that procedural non-compliance should not negate substantive rights. It found that the assessee's entitlement to FTC was a substantive right under the DTAA and Section 90, which could not be denied due to the late filing of Form 67.5. Treatment of Competing ArgumentsThe Revenue argued that the late filing of Form 67 justified the disallowance of FTC. However, the Tribunal disagreed, citing precedents where procedural lapses did not result in the denial of substantive rights. The Tribunal emphasized that the DTAA and Section 90 did not stipulate disallowance for procedural non-compliance.6. ConclusionsThe Tribunal concluded that the assessee was entitled to FTC despite the late filing of Form 67, as the substantive right to relief under the DTAA and Section 90/90A was not contingent on procedural compliance.SIGNIFICANT HOLDINGS1. Preserve Verbatim Quotes of Crucial Legal ReasoningThe Tribunal cited the Supreme Court's principle that 'if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner,' but clarified that procedural requirements should not override substantive rights.2. Core Principles EstablishedThe Tribunal established the principle that procedural requirements, such as the timely filing of Form 67, are directory and not mandatory. Substantive rights under the DTAA and Section 90/90A should not be denied due to procedural non-compliance.3. Final Determinations on Each IssueThe Tribunal directed the Assessing Officer to allow the relief of FTC to the assessee, setting aside the order of the CIT(A). The Tribunal's decision was based on the substantive right to FTC under the DTAA, which should not be denied due to procedural lapses.In conclusion, the Tribunal allowed the appeal, affirming the assessee's entitlement to FTC despite the procedural delay in filing Form 67, and directed the Assessing Officer to grant the relief accordingly.