Shashank Shekhar Vs ITO (ITAT Bangalore)
Bangalore ITAT: Foreign Tax Credit Cannot Be Denied Merely for Delay in Filing Form 67; Requirement Is Directory
The assessee, an Indian resident, earned income of ₹8.98 lakh in the USA, paid US tax of ₹1.80 lakh and offered the corresponding income to tax in India. He claimed Foreign Tax Credit of ₹1,64,427 under Section 90 read with the India-USA DTAA.
CPC denied the FTC because Form 67 was not filed with the original return. The assessee subsequently filed Form 67 on 18 March 2019 and a revised return on 22 March 2019, but the credit was again denied while processing the revised return. The first appellate authority dismissed the appeal on technical grounds without deciding the claim on merits.
The Bangalore ITAT held that the time limit prescribed in Rule 128(9) for filing Form 67 is directory and not mandatory. Neither Sections 90 and 91 nor Rule 128 prescribe denial of FTC as a consequence of delayed filing. A substantive DTAA benefit cannot therefore be defeated merely because of a procedural lapse, particularly when Form 67 and proof of foreign taxes were available before the authorities.
Following Sonakshi Sinha v. CIT, Brinda Rama Krishna v. ITO and the Madras High Court ruling in Venkatanarayanan Somayaji Lakshminarasimha v. PCIT, the Tribunal directed the jurisdictional AO to accept Form 67 and supporting documents and adjudicate the FTC claim on merits, after granting the assessee an adequate opportunity of hearing.
