2025 (4) TMI 390 - AT - Income Tax

Foreign Tax Credit cannot be denied solely for delayed filing of Form-67 under Section 91

Shri Suresh Kumar Vobbilisetty Versus Income Tax Officer (International Taxation) -2 Hyderabad

Shri Suresh Kumar Vobbilisetty Versus Income Tax Officer (International Taxation) -2 Hyderabad - TMI ISSUES PRESENTED and CONSIDEREDThe core legal issue in this case is whether the first appellate authority was justified in confirming the denial of Foreign Tax Credit (FTC) claimed by the assessee under Section 91 of the Income Tax Act, 1961, due to the late filing of Form 67 beyond the due date specified for filing the return of income under Section 139(1) of the Act.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe case revolves around the interpretation of Rule 128(9) of the Income Tax Rules, 1962, which requires the filing of Form 67 for claiming FTC before the due date of filing the return of income under Section 139(1). The assessee argued that this requirement is directory rather than mandatory, citing various tribunal decisions, including those from the Bangalore Bench in 42 Hertz Software India (P) Ltd vs. ACIT and the Amritsar Bench in Harbans Singh v. AO, CPC. These precedents suggest that the provisions of the Double Taxation Avoidance Agreement (DTAA) override the Income Tax Act, and thus, the procedural requirement of filing Form 67 should not lead to the denial of FTC.Court's Interpretation and ReasoningThe Tribunal considered the consistent view taken by various benches that the DTAA provisions prevail over the Income Tax Act, and procedural requirements like filing Form 67 are directory. The Tribunal noted that Rule 128(9) does not explicitly provide for the disallowance of FTC due to delayed filing of Form 67. The Tribunal referenced the Supreme Court's decision in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT, which supports the precedence of DTAA over domestic tax laws.Key Evidence and FindingsThe Tribunal acknowledged the existence of a TDS deduction by a foreign government amounting to Rs. 95,539, which the assessee claimed as FTC. The CPC disallowed this claim due to the late filing of Form 67, which was submitted after the prescribed deadline. However, the Tribunal found that various precedents support the view that such procedural delays should not lead to the denial of FTC.Application of Law to FactsThe Tribunal applied the principle that DTAA provisions override domestic tax rules, emphasizing that procedural requirements should not negate substantive rights. The Tribunal directed the Assessing Officer to consider the FTC claim based on the evidence provided by the assessee, without disallowing it solely due to the late filing of Form 67.Treatment of Competing ArgumentsThe Tribunal considered the arguments from both the assessee and the revenue. While the revenue relied on the decision of the Visakhapatnam Bench in Muralikrishna Vaddi vs. ACIT/Dy. CIT, the Tribunal found the weight of judicial precedents favored the assessee's position. The Tribunal emphasized maintaining consistency with prior decisions that support the directory nature of the filing requirement.ConclusionsThe Tribunal concluded that the FTC should not be denied merely due to the late filing of Form 67. It directed the Assessing Officer to allow the FTC claim after verifying the relevant details and evidence provided by the assessee.SIGNIFICANT HOLDINGSThe Tribunal held that the provisions of the DTAA override the provisions of the Income Tax Act and Rules, as supported by the Supreme Court's decision in Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT. The Tribunal stated, 'FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/evidences in support of its claim.' This holding aligns with the principle that procedural requirements should not impede substantive tax reliefs provided under international agreements.The Tribunal's decision reinforced the principle that procedural delays in filing Form 67 should not result in the denial of FTC, thereby supporting the assessee's right to claim FTC despite the delay. The Tribunal directed the Assessing Officer to verify the foreign tax paid and allow the FTC claim in accordance with the law.In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the Assessing Officer to grant the FTC claim after due verification, thereby setting a precedent for similar cases where procedural delays in filing Form 67 are involved.