Foreign tax credit claims challenged over late Form 67 filing; Rule 128 treated as directory, credit restored.

The dominant issue was whether foreign tax credit could be denied solely because Form 67 was filed belatedly. Applying HC authority, the Tribunal held that Rule 128's requirement to furnish Form 67 is directory and intended to facilitate implementation of the Act rather than create a mandatory condition precedent. Drawing an analogy from SC jurisprudence treating belated filing of a prescribed form during assessment as sufficient compliance, it found that delayed submission did not defeat the substantive entitlement to FTC. Consequently, the denial of FTC was set aside and the AO was directed to grant the credit; the appeal was allowed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether Foreign Tax Credit (FTC) claimed under section(s) 90/90A could be denied solely because Form-67 was filed after the time indicated in Rule 128(9), even though the foreign income was offered to tax in India and FTC was claimed in the return.

(ii) What relief and direction should follow where FTC was denied at processing stage under section 143(1) only on the ground of delayed filing of Form-67.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Denial of FTC solely due to delayed filing of Form-67

Legal framework (as discussed by the Court): The Court noted the requirement under Rule 128(9) that Form-67 is to be furnished on or before the end of the relevant assessment year (subject to the return being furnished within the time specified under section 139(1) or 139(4)). The Court also dealt with FTC claims made under section(s) 90/90A in respect of foreign income offered to tax in India.

Interpretation and reasoning: The Court accepted that, as per Rule 128(9), Form-67 was required to be filed within the stipulated time and that the assessee filed it beyond that time. However, the Court held that filing of Form-67 is merely a procedural requirement and therefore FTC cannot be "summarily declined" for delayed filing, provided the substantive requirements for FTC are otherwise satisfied. The Court expressly relied on the view that Form-67 filing is directory in nature, and that delayed filing cannot, by itself, extinguish the FTC entitlement.

Conclusions: The Court conclusively decided that FTC could not be denied merely because Form-67 was filed late. The disallowance of FTC on this sole ground was held to be unjustified, and the revenue was directed to allow FTC, subject to satisfaction of substantive requirements.

Issue (ii): Relief where FTC was denied at section 143(1) processing stage for late Form-67

Interpretation and reasoning: The Court found that the denial of FTC in processing under section 143(1) was made only because Form-67 was not filed within time, and that this approach was incorrect because the delay was procedural and could not, on that basis alone, defeat the FTC claim. Given that the same issue governed both years, the Court applied the same conclusion to the later year on a mutatis mutandis basis.

Conclusions: The Court directed the Assessing Officer to allow FTC for both years: (a) FTC of Rs. 58,79,711/- for the earlier year; and (b) FTC of Rs. 51,28,213/- for the later year. Both appeals were allowed to that extent.

---