Aparna Girish Hebbani Vs ITO (ITAT Mumbai)
Foreign Tax Credit Cannot Be Denied for Delay in Filing Form 67 – Procedural Lapse Cannot Defeat Substantive DTAA Rights
The Mumbai ITAT held that Foreign Tax Credit (FTC) cannot be denied merely due to delay in filing or verification of Form 67, when the assessee has substantively paid foreign taxes and offered the same income to tax in India. In this case, the assessee, an NRI employed in Australia, claimed FTC under Section 90 read with the India–Australia DTAA for taxes paid on salary income in Australia. Although the return was filed within time, Form 67 could not be verified within the due date due to technical OTP issues, compounded by COVID-19 travel restrictions.
The Tribunal held that Rule 128(9) is directory and not mandatory, as it is a procedural provision intended to facilitate processing and cannot override the substantive right to FTC granted under Section 90 and the DTAA. A mandatory interpretation would result in double taxation, defeating the very object of DTAA and India’s international obligations. The Tribunal relied on settled principles that procedure is a handmaid of justice, not its master, and noted that Rule 128 does not prescribe denial of FTC as a consequence of delay.
The ITAT rejected the CIT(A)’s reliance on Bharat Hari Singhania (SC) as misplaced and followed consistent coordinate bench decisions, including Sonakshi Sinha, 42 Hertz Software India Pvt. Ltd., Brinda Ramakrishna, and Binod Kumar Lakshmipati, all of which held that delayed filing of Form 67 cannot disentitle FTC. It was also noted that the subsequent amendment to Rule 128 (effective 01.04.2022) extending the timeline reinforces the non-mandatory nature of the earlier requirement.
Accordingly, the Tribunal directed the Assessing Officer to grant FTC for foreign taxes paid, holding that procedural delay or technical glitches cannot defeat a genuine and verifiable claim, and allowed the appeal in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
