Foreign tax credit under a DTAA cannot be denied solely for late Form 67 filing when treaty relief is otherwise established.

Foreign tax credit under the India-Nepal DTAA cannot be denied merely because Form No. 67 was filed late, where the assessee had paid tax in Nepal and the treaty relief was otherwise established. The ITAT Kolkata held that the DTAA, being more beneficial, prevails over procedural requirements in the Income-tax Rules, and that delayed filing of Form No. 67 does not by itself extinguish the substantive entitlement to credit for foreign tax paid. On that basis, the treaty-based foreign tax credit was allowed.

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Issues: Whether foreign tax credit could be denied merely because Form No. 67 was filed belatedly, notwithstanding the assessee's entitlement under the India-Nepal Double Taxation Avoidance Agreement.

Analysis: The assessee had earned income in Nepal on which tax had been paid there, and the dispute turned on whether late filing of Form No. 67 under the Income-tax Rules could defeat the substantive claim for foreign tax credit. The Tribunal treated the relevant DTAA provision as having overriding force where it was more beneficial to the assessee and accepted that the credit for foreign tax paid is a substantive entitlement. It followed the reasoning that procedural delay in filing Form No. 67 does not, by itself, extinguish the underlying treaty-based relief when the foreign tax payment is otherwise established.

Conclusion: The foreign tax credit could not be denied solely on the ground of belated filing of Form No. 67, and the credit under the DTAA was allowed in favour of the assessee.

Ratio Decidendi: Where a tax treaty grants relief from double taxation and is more beneficial to the assessee, the treaty prevails over procedural requirements in the rules, and a belated Form No. 67 does not by itself nullify the substantive entitlement to foreign tax credit.

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