2025 (3) TMI 983 - AT - Income Tax

Delayed Form 67 filing after return submission under section 139(1) cannot deny Foreign Tax Credit under Rule 128(9)

Suchi Agarwal Versus ITO, Ward-5 (2) (4), Noida, Uttar Pradesh.

ITAT Delhi held that delayed filing of Form 67 after submitting return under section 139(1) does not warrant denial of Foreign Tax Credit. The tribunal ... Denial of Foreign Tax Credit claimed - assessee has filed Form 67 after filing return of income u/s 139(1) - HELD THAT:- Identical issue came up in the case of Neha Kapoor [2023 (9) TMI 31 - ITAT DELHI] wherein held Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act - Thus, we direct the AO to accept Form 67 filed by the assessee and allow Foreign Tax Credit in accordance with law. Also see Ajay Kumar Mishra [2023 (6) TMI 363 - ITAT DELHI] - Decided in favour of assessee. ISSUES PRESENTED and CONSIDEREDThe primary legal issue considered in this judgment is whether the denial of Foreign Tax Credit (FTC) to the assessee due to the late filing of Form 67 is justified. The core questions revolve around the interpretation of procedural requirements versus substantive rights under the Income Tax Act and the Double Taxation Avoidance Agreement (DTAA), and whether the filing of Form 67 is mandatory or directory.ISSUE-WISE DETAILED ANALYSIS1. Relevant Legal Framework and PrecedentsThe legal framework involves Section 139(1) of the Income Tax Act, which specifies the filing requirements for returns, and Rule 128(9) of the Income Tax Rules, which pertains to the procedural aspect of claiming FTC through Form 67. The DTAA provisions, which override domestic laws where they are more beneficial to the taxpayer, are also crucial. Precedents from various ITAT decisions, such as Neha Kapoor vs. ITO, Ms. Brinda Rama Krishna, and others, provide a basis for understanding the procedural versus substantive nature of Form 67.2. Court's Interpretation and ReasoningThe Tribunal emphasized that the filing of Form 67 is a procedural requirement and not a mandatory one. This interpretation aligns with the view that procedural norms should not extinguish substantive rights. The Tribunal noted that the DTAA provisions, which are more beneficial to the taxpayer, should prevail over the procedural requirements of the Income Tax Act and Rules.3. Key Evidence and FindingsThe Tribunal considered the fact that the assessee filed Form 67 after the due date for filing the return under Section 139(1) but before the end of the relevant assessment year. The Tribunal found that various coordinate benches had consistently held that such procedural delays should not lead to the denial of FTC.4. Application of Law to FactsThe Tribunal applied the principle that procedural requirements should not override substantive rights. It concluded that the late filing of Form 67 does not justify the denial of FTC, especially when the DTAA provisions, which are more beneficial, do not impose such a condition.5. Treatment of Competing ArgumentsThe Tribunal considered the arguments of the Revenue, which relied on the procedural non-compliance to deny FTC. However, it found these arguments unpersuasive in light of the overriding nature of DTAA provisions and the consistent judicial interpretation that procedural delays should not affect substantive rights.6. ConclusionsThe Tribunal concluded that the denial of FTC based on the late filing of Form 67 was unjustified. It directed the Assessing Officer to accept Form 67 and allow the FTC in accordance with the law.SIGNIFICANT HOLDINGSThe Tribunal held that the filing of Form 67 is a directory requirement, not a mandatory one, and that procedural delays should not extinguish the substantive right to claim FTC. It emphasized that DTAA provisions override domestic law where they are more beneficial to the taxpayer.Core Principles EstablishedThe judgment reinforces the principle that procedural requirements should not override substantive rights, particularly when DTAA provisions apply. It also establishes that late filing of Form 67 should not lead to the denial of FTC.Final Determinations on Each IssueThe Tribunal directed the Assessing Officer to accept Form 67 and verify the assessee's claim for FTC, thereby allowing the appeal of the assessee. This determination aligns with the broader judicial consensus that procedural non-compliance should not negate substantive tax benefits.