Foreign Tax Credit Allowed Despite Late Form 67 Filing Under Section 139(1) and Rule 128(9)

The ITAT Chennai allowed the assessee's appeal, holding that foreign tax credit cannot be denied solely due to late submission of Form 67 under section 139(1). Relying on the Madras HC decision in Duraiswamy Kumaraswamy, the tribunal found that filing Form 67 before completion of assessment, even if not within the prescribed deadline under rule 128(9), entitles the assessee to claim foreign tax credit.

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1. ISSUES:

1. Whether failure to file Form 67 on or before the due date prescribed under section 139(1) and rule 128(9) precludes claim for foreign tax credit under section 90/91.

2. Whether filing Form 67 during the course of assessment proceedings but before completion of assessment suffices for claiming "foreign tax credit".

3. Whether the requirement in Rule 128(9) is "mandatory" or "directory and not mandatory" for denial of foreign tax credit.

2. RULINGS / HOLDINGS:

1. The Court holds that non-filing of "Form 67" by the due date prescribed under section 139(1) and rule 128(9) does not automatically preclude the claim of "foreign tax credit" under section 90/91; the requirement in Rule 128(9) is to be treated as "directory and not mandatory".

2. The Court holds that filing Form 67 during the assessment proceedings, i.e., before completion of the assessment, is sufficient to claim foreign tax credit and directs lower authorities to allow the credit as claimed where Form 67 was submitted before completion of assessment.

3. The Court sets aside the impugned order denying credit for delay in filing Form 67 and directs the grant of foreign tax credit, following consistent decisions of coordinate benches that treat Rule 128(9) as directory.

3. RATIONALE:

1. Applied statutory and regulatory framework: section 90/91 (entitlement to relief/credit), section 139(1) (due date for filing return), Rule 128 (clauses (4) and (9)) of the Income-tax Rules, 1962; noting that Rule 128(4) specifies conditions where credit would not be allowed while Rule 128(9) prescribes timing for furnishing Form 67.

2. Interpreted procedural rule as directory because Rule 128(9) does not prescribe any adverse consequence or express denial of credit for non-compliance; where a procedural provision prescribes no negative consequence, non-adherence is not treated as mandatory.

3. Relied on consistent tribunal precedents holding that Form 67 submitted before completion of assessment suffices to claim foreign tax credit; distinguished situations involving violation of statutory provisions that carry express consequences from non-compliance with a rule that does not prescribe denial.

4. Noted legislative amendment extending the filing timeline for Form 67 "on or before the end of the assessment year", which reinforces the non-mandatory character of earlier timing requirements in Rule 128(9).

5. Concluded that, in the absence of any provision in the Act or Rule prescribing denial of credit for delayed filing of Form 67, the appropriate remedy is to allow the foreign tax credit where Form 67 was filed during assessment proceedings prior to completion of assessment.

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