Foreign Tax Credit Cannot Be Denied For Delay In Filing Form 67: Bangalore ITAT

[29 March 2022] The Bangalore Bench of ITAT has ruled that Foreign Tax Credit cannot be denied to the assessee for delay in filing Form 67. The Bench ruled that Rule 128 of the Income Tax Rules which requires the assessee to submit Form 67 before filing the income tax return for claiming Foreign Tax Credit (FTC) is directory in nature and not mandatory, thus FTC cannot be denied for delay in filing Form 67.
The Assessee filed its income tax return and claimed FTC under Section 90 of Income Tax Act with respect to tax withheld by Japan. The Assessing Officer noted that the Assessee had not filed Form 67 before filing its income tax return which was mandatory for claiming FTC. Subsequently, during assessment proceedings the Assessee filed Form 67 which was not accepted by the AO. The AO disallowed the claim of FTC on the ground that the Assessee had failed to furnish Form 67 on or before the due date of furnishing the income tax return under the Act which was mandatory as per Rule 128 (9) of the Income Tax Rules, 1962. The Assessee filed an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)) against the order of the AO.
The CIT(A) confirmed the order of the AO and held that the provisions of Rule 128 (8) and 128 (9) are mandatory in nature and rejected the contention of the Assessee that filing of Form 67 was a procedural requirement the non-compliance of which did not disentitle the Assessee of FTC. The Assessee filed an appeal before the ITAT against the order of the CIT (A).
The ITAT noted that Rule 128 requires the Assessee to submit Form 67 before filing the income tax return for claiming FTC. The ITAT held that the requirement of Rule 128 is directory in nature and not mandatory since it does not provide for disallowance of FTC in case of delay in filing Form 67.