Foreign Tax Credit cannot be denied merely because there is a delay in filing Form-67 which is directory and not mandatory.
In a recent judgment, the ITAT Hyderabad has held that Foreign Tax Credit cannot be denied merely because there is a delay in filing Form-67 as consistently held that DTAA provisions override the Income Tax Rules
ABCAUS Case Law Citation:
4468 (2025) (03) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the order passed by the Assessing Officer (AO) CPC u/s 143(1) denying the benefit of Foreign Tax Credit u/s 91 of the Income Tax Act, 1961 (the Act) solely on the reason that the assessee had filed Form-67 beyond the due date of filing the return of income u/s 139(1) of the Act.
The assessee contended that there are various judgements on this point that filing of Form 67 within the due date prescribed in filing the return of income u/s 139(1) of the Act is only directory and not mandatory and therefore, the claim of Foreign Tax Credit cannot be denied merely on the ground of delay in filing Form-67.
In support of his contention, the assessee relied upon the decision of the ITAT Bangalore, ITAT Amritsar and decision of the Delhi Bench of the Tribunal and submitted that the Tribunals have taken a consistent view and held that the provisions of DTAA would prevail over the provisions of the Act and therefore, filing of Form 67 is only a directory requirement and delay in filing the Form 67 cannot be a ground for disallowance of Foreign Tax Credit. Similar view has been taken by the Jabalpur Bench of the Tribunal.
The Tribunal observed that there was no dispute that in the case of the assessee there was a TDS deducted by the Foreign Government which was claimed as Foreign Tax Credit in accordance with section 91 of the Act. The CPC while processing the return u/s 143(1) disallowed the claim of Foreign Tax Credit on the ground that the assessee has not filed Form 67 within the prescribed time limit in case of the assessee.
The Tribunal noted that there are series of decisions on this point as relied upon by the assessee. In one case the Bangalore Bench of the Tribunal had held that DTAA overrides the provisions of the Act and the Rules, as held by various High Courts, which has also been approved by Hon’ble Supreme Court. Similar view was been taken by the Delhi Bench of the Tribunal. The Jabalpur Bench of ITAT had also reiterated the above view.
The Tribunal further noted that Coordinate Bench (Hyderabad) of the Tribunal held that DTAA provision override the provisions of the Act. Rules cannot be read in isolation. Rules must be read in the context of the Act and the DTAA impacting the rights, liabilities and disabilities of the parties.
Further, the Tribunal noted that the Hon’ble Madras High Court had held that the filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature. This is what the Hon’ble Supreme Court had held when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of assessment order.
In view of the series of decisions of this Tribunal and to maintain the rule of consistency with the decisions of the Coordinate Benches and the decision of the Hon’ble Supreme Court the Tribunal held that the Foreign Tax Credit cannot be denied merely because there is a delay in filing Form-67.
Accordingly, Assessing Officer was directed to allow the Foreign Tax Credit to the assessee.
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