Foreign Tax Credit cannot be denied for mere delay in filing of Form no 67

The brief facts of the case is that the Assessee is an individual taxpayer. During the year under consideration, the Assessee was employed with Shell India Markets Private Limited fromApril 2017 to 30 November 2017. Thereafter, he was sent on a long-term assignment to Iraq where he was employed with Shell Gas Iraq B.V (‘Shell Iraq’) from December 2017 to 31 March 2018 during the year under consideration. As per the applicable tax laws in Iraq, taxes on salary income earned in Iraq were deposited with the Iraq tax authorities for the above mentioned period. For the assessment year 2018-19, the Assessee was a Resident and Ordinarily Resident (‘ROR’) in India. Accordingly, global income of the Assessee inclusive of salary income from Iraq was taxable in India. The Assessee had filed his original return of income under section 139(1) of the Income Tax Act, 1961 (the Act) on 6 August 2018 in India declaring total income of Rs.77,09,060/-. Thereafter, the Assessee filed his revised return of income on 20th March, 2019 declaring total income of Rs.83,69,190/- and claiming the Foreign Tax Credit (‘FTC’) of Rs.3,93,063/- with respect to taxes paid in Iraq. The Assessee had e-filed the Form 67 – ‘Statement of Income from a country or specified territory outside India, and Foreign Tax Credit on 16 March 2019 for the purposes of claiming Foreign Tax Credit (FTC). The Assessee received an intimation u/s 143(1) of the Income Tax Act dated 17 June 2020 wherein CPC did not grant credit of Rs.3,93,063/- i.e. the FTC claimed by the Assessee.

Aggrieved by the denial of FTC by the CPC, the assessee preferred an appeal before the NFAC /CIT(A). The NFAC upheld the denial of FTC credit on the ground that Assessee has not filed Form 67 within the due date of filing original return of income u/s 139(1) of the Act.

Aggrieved by the order of NFAC (Appeals), the Assessee filed anappeal before the Tribunal. ITAT in its order dated 18.05.2022 relied on the judgement given by the Co-ordinate Bench of ITAT, Bangalore in the case of Brinda Rama Krishna (in ITA No. 454/Bang/2021 for AY.2018-19), order dated 17.11.2021 and held that Assessee has vested right to claim the FTC under the tax treaty, the same cannot be disallowed for mere delay in compliance of a procedural provision, that is ‘delay in filing Form No.67’. The Co-ordinate Bench of ITAT, Bangalore in the case of Ms. Brinda Rama Krishna (supra) in its order stated as follows:

I have given a careful consideration to the rival submissions. I agree with the contentions put forth by the learned counsel for the Assessee and hold that (i) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67; (ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. I am of the view that the issue was not debatable and there was only one view possible on the issue which is the view set out above. I am also of the view that the issue in the proceedings u/s.154 of the Act, even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee’s application u/s.154 of the Act was not on the ground that the issue was debatable but on merits. I therefore do not agree with the submission of the learned DR in this regard.

In the result, the appeal is allowed.”

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