Foreign tax credit filing delay is directory; summary denial without notice under return processing is unsustainable

Rule 128(9) prescribes the filing timeline for Form No. 67, but the delay is not, by itself, a statutory bar to foreign tax credit where the Act does not attach denial as a consequence. The filing requirement is treated as directory, so foreign tax credit cannot be refused solely because Form No. 67 was filed late. A summary adjustment under section 143(1) also cannot sustain denial of foreign tax credit without notice and an opportunity to respond under the proviso to section 143(1)(a). The matter therefore requires fresh consideration on merits after due opportunity.

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Issues: (i) Whether delay in filing Form No. 67 was fatal to the claim for foreign tax credit; (ii) whether the adjustment under section 143(1) could be sustained without notice to the assessee.

Issue (i): Whether delay in filing Form No. 67 was fatal to the claim for foreign tax credit.

Analysis: The claim for foreign tax credit arose in respect of tax paid outside India on income offered to tax in India. The governing view applied by the Tribunal was that Rule 128(9) prescribes the time for filing Form No. 67, but the rule does not stipulate denial of credit as the consequence of delay. The requirement was treated as directory and not mandatory, and the provisions governing foreign tax credit could not be curtailed by the rule where the Act itself did not impose such a disallowance.

Conclusion: Delay in filing Form No. 67 was not fatal, and the claim for foreign tax credit could not be rejected on that ground.

Issue (ii): Whether the adjustment under section 143(1) could be sustained without notice to the assessee.

Analysis: The foreign tax credit was denied while processing the return without putting the assessee to notice of the proposed variation. The Tribunal found that the adjustment was made under the summary processing mechanism and that the assessee had not been given the opportunity contemplated by the proviso to section 143(1)(a). The matter therefore required fresh consideration on merits after acceptance of Form No. 67 and the related documents.

Conclusion: The adjustment could not be sustained in the manner adopted, and the matter had to be examined afresh after giving the assessee due opportunity.

Final Conclusion: The assessee obtained relief on the core controversy, and the claim for foreign tax credit was restored for decision on merits.

Ratio Decidendi: In the absence of a statutory consequence in the Act, the filing timeline prescribed for Form No. 67 is directory, and a summary adjustment denying foreign tax credit cannot be sustained without affording the assessee the notice contemplated by section 143(1)(a).

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