Foreign tax credit survives delayed Form No. 67 filing where treaty entitlement is substantive and the reporting requirement is procedural

Foreign tax credit under Section 90 should not be denied solely because Form No. 67 was filed after the time prescribed by Rule 128(9). The analysis treats the relevant DTAA provisions, where more beneficial, as prevailing over the Act and subordinate rules. Rule 128(9) prescribes the timing and manner of filing but does not expressly provide that delayed filing extinguishes the substantive credit entitlement. The filing requirement is therefore characterised as procedural and directory, while credit for foreign taxes paid abroad is treated as a vested right. On this reasoning, delayed filing of Form No. 67 does not by itself justify denial of foreign tax credit.

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Issues: Whether foreign tax credit could be denied under Section 90 on the sole ground that Form No. 67 was not filed within the time prescribed under Section 139(1) read with Rule 128(9).

Analysis: The claim arose from denial of foreign tax credit in rectification proceedings despite disclosure of foreign income in the revised return and subsequent filing of Form No. 67. The applicable framework considered was Section 90 of the Income-tax Act, 1961, Rule 128(9) of the Income-tax Rules, 1962, and the relevant DTAA. The reasoning proceeded on the basis that the treaty provisions granting credit for foreign taxes, being more beneficial, prevail over the Act and subordinate rules. Rule 128(9) prescribes the time for furnishing Form No. 67, but does not stipulate disallowance of foreign tax credit for delayed filing. The requirement was therefore treated as procedural and directory, not one that extinguishes the substantive entitlement to credit. The credit for foreign taxes paid abroad was treated as a vested right, and denial merely for delayed filing of Form No. 67 was found unjustified. Earlier coordinate bench decisions and the High Court decision relied upon were applied as covering the controversy.

Conclusion: Foreign tax credit could not be denied merely because Form No. 67 was filed belatedly; the assessee was entitled to the credit of foreign tax in accordance with law and the applicable DTAA. The issue was decided in favour of the assessee.

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