Foreign tax credit allowed where Form 67 filed before assessment completion; Rule 128 treated as directory, not mandatory

ITAT allowed the appeal and directed the CIT(A) to grant the claimed foreign tax credit after verifying Form No.67. The tribunal held that the requirement to file Form 67 with the return under Rule 128 is directory, not mandatory, and filing it before completion of assessment satisfies the condition for FTC. The tribunal applied the principle that Rule 128 implements the Act and is directory in nature, therefore denial of FTC for late filing of Form 67 was set aside.

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Issues: Whether the assessee, having filed Form 67 belatedly before completion of assessment proceedings, is entitled to claim Foreign Tax Credit for foreign tax withheld where Form 67 was not filed on or before the due date of filing the return under section 139(1).

Analysis: The Tribunal examined whether the requirement to file Form 67 under Rule 128(9) is mandatory or directory. The assessee declared foreign dividend and claimed FTC under section 90, but omitted to file Form 67 with the return and later filed Form 67 on 18.06.2020 during assessment proceedings before the assessment order dated 10.01.2021. The Tribunal applied settled precedent holding that Rule 128's requirement to file Form 67 with the return is directory in nature and that where the form is furnished before completion of assessment, the FTC claim should not be denied on the sole ground of belated filing. The Tribunal directed verification of the belatedly filed Form 67 and, following the Madras High Court decision cited, held that the form requirement serves implementation of statutory provisions and does not bar entitlement to FTC when filed before assessment.

Conclusion: The assessee's claim for Foreign Tax Credit is allowed; the Ld. CIT(A) and AO are directed to grant the FTC after verifying Form 67.

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