2025 (3) TMI 918 - AT - Income Tax

Form No. 67 filing for foreign tax credit under sections 90/90A is directory, not mandatory requirement

Monika Rathore, Suman Kunj Versus Income-tax Officer, Ward-1, Morena, Madhya Pradesh

ITAT AGRA held that filing Form No. 67 for foreign tax credit under sections 90/90A is directory, not mandatory. Delayed filing does not affect ... Denial of Foreign Tax Credit u/s 90/90A - delayed filling of Form No. 67 - HELD THAT:- We hold that the filing of form no. 67 is directory and not mandatory ad violation of procedural norms does not adversely affect the substantive rights or claims. Thus, the assessee is eligible for FTC and the matter is restored back to the file of ld. AO with the direction to verify assessee’s claim in respect of Foreign Tax Credit as per law after admitting/accepting Form No. 67 and to decide the issue as per law. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether the denial of Foreign Tax Credit (FTC) claimed by the assessee under Section 90/90A of the Income Tax Act, 1961, due to the late filing of Form 67, was justified. The Tribunal examined whether the procedural requirement of filing Form 67 before the due date for filing the return of income is mandatory or merely directory, and whether such procedural non-compliance can lead to the denial of substantive tax relief.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe relevant legal framework involves Section 90/90A of the Income Tax Act, 1961, which allows for relief from double taxation under a Double Taxation Avoidance Agreement (DTAA). Rule 128 of the Income Tax Rules, 1962, specifically Rule 128(8) and 128(9), mandates the filing of Form 67 for claiming FTC. The Tribunal also considered precedents from various ITAT benches, which have held that the filing of Form 67 is directory and not mandatory.Court's Interpretation and ReasoningThe Tribunal interpreted that the requirement to file Form 67 is procedural and directory rather than mandatory. The Tribunal reasoned that procedural lapses should not override substantive rights, especially when the provisions of a DTAA are involved, which are intended to provide relief from double taxation. The Tribunal emphasized that the provisions of a DTAA should prevail over procedural requirements under domestic law when they are more beneficial to the taxpayer.Key Evidence and FindingsThe key evidence included the assessee's submission of Form 67 after the processing of the return of income and the reliance on various ITAT decisions that supported the view that procedural requirements should not negate substantive claims. The Tribunal found that the assessee had indeed declared global income and claimed FTC in accordance with the DTAA provisions, albeit with a procedural delay in filing Form 67.Application of Law to FactsThe Tribunal applied the law by considering the DTAA provisions and the procedural requirements under the Income Tax Rules. It concluded that the denial of FTC due to the late filing of Form 67 was not justified, as the procedural requirement should not defeat the substantive right to claim FTC under the DTAA.Treatment of Competing ArgumentsThe Tribunal considered the Revenue's argument that the word 'shall' in Rule 128 indicates a mandatory requirement. However, it countered this by referring to precedents where the procedural requirement was deemed directory. The Tribunal also noted that the provisions of a DTAA should take precedence over procedural rules when they are more beneficial to the taxpayer.ConclusionsThe Tribunal concluded that the filing of Form 67 is a directory requirement, and the late filing should not result in the denial of FTC. The matter was remanded to the Assessing Officer to verify the claim of FTC in accordance with the law, after accepting Form 67.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning'Filing of Form 67 is directory and not mandatory and violation of procedural norms does not adversely affect the substantive rights or claims.'Core Principles EstablishedThe core principle established is that procedural requirements, such as the filing of Form 67, should not override substantive rights under a DTAA, which are designed to provide relief from double taxation. The Tribunal reinforced that the provisions of a DTAA should prevail over procedural rules when they are more beneficial to the taxpayer.Final Determinations on Each IssueThe Tribunal determined that the denial of FTC due to the late filing of Form 67 was unjustified. It directed the Assessing Officer to verify the claim of FTC after accepting Form 67 and to decide the issue in accordance with the law, thereby allowing the appeal for statistical purposes.