ITAT Allows Foreign Tax Credit Though Form 67 Filed After Due Date

The assessee was an individual and had submitted the return of income for the assessment year in question on September 22, 2018, with a total revenue of Rs. 18,53,90,330. The assessee was selected for limited scrutiny on the ground of double taxation relief under sections 90 and 91. The return of income submitted by the assessee included a foreign tax credit of Rs. 29,21,327 on account of taxes paid in the United Kingdom for income of Rs. 1,46,10,080, which was also taxable in India.

During assessment proceedings, the AO observed that although the foreign tax credit was claimed in the return of income, Form 67 was uploaded on 20.01.2020, i.e., after the due date for filing the return under Section 139(1). Holding that Rule 128(9) mandates filing of Form 67 on or before the due date of return, the Assessing Officer denied the foreign tax credit while completing the assessment under Section 143(3).

Issue Before Tribunal: Whether the foreign tax credit under Section 90 can be denied on the mere shortcoming in not filing Form 67 on or before the due date of filing the return of income in cases where the form is filed before the completion of assessment.

Tribunal Decision: On analysing Section 90 of the Income Tax Act and Rule 128 of the Income Tax Rules, it is found that while Rule 128 governs foreign tax credit claim under Section 90, no provision under either Section 90 or Rule 128 is found that says that foreign tax credit will be denied for late filing of Form 67. As a matter of fact, Rule 128(9) was seen as not saying that non-filing of Form 67 within the time limit would lead to the denial of the foreign tax credit.

The Tribunal further held that the assessee had claimed the foreign tax credit in the return of income itself and had filed Form 67 during the course of assessment proceedings, prior to completion of assessment. Since the requirement under Rule 128 is procedural and no adverse consequence is prescribed for non-compliance within the time limit, the provision was held to be directory in nature. Thus, the Tribunal allowed the claim of foreign tax credit and set aside the disallowance. The appeal was allowed.

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