Vikram Dhondu Rao Vs DCIT (ITAT Bangalore)
Delay in filing Form 67 cannot deny Foreign Tax Credit; Filing held to be Procedural, Not Mandatory : ITAT Bangalore
In a significant relief to taxpayers claiming Foreign Tax Credit (FTC), Bangalore ITAT has held that the filing of Form 67 before the due date u/s 139(1), is a procedural requirement & not a mandatory condition for availing FTC benefits. Tribunal directed AO to grant Assessee’s claim of FTC despite the delayed filing of Form 67.
Assessee, a resident individual, earned salary income of Rs76,00,800 from PT Indoliberty Textiles, Indonesia during AY 2018-19 & paid taxes in Indonesia. Offering global income to tax in India, he claimed FTC of Rs 15,20,710 u/s 90. While processing the return u/s 143(1), CPC disallowed FTC on the ground that Form 67 was not filed before the due date u/s 139(1). Assessee subsequently filed Form 67 on 01.08.2020 & sought rectification u/s 154, but AO & CIT(A) rejected the claim citing Rule 128(9) as mandatory. A similar denial occurred for AY 2019-20.
Assessee’s Contentions
- Filing of Form 67 is only procedural; Rule 128(9) does not stipulate denial of FTC for delay.
- The substantive right to FTC flows from Section 90 & the applicable DTAA; procedural lapses cannot override treaty benefits.
- Relied on ITAT Bangalore rulings in Brinda Rama Krishna v. ITO & Shashidhar Seetharam Sharma v. ITO, where delayed filing was condoned.
- Supreme Court in Mangalore Chemicals & Fertilizers Ltd. & Sambhaji v. Gangabai held that procedure is a “hand maid of justice” & not a hindrance.
Revenue’s Arguments
- Rule 128(9) prescribes a due date & non-compliance results in ineligibility.
- The matter is debatable & not fit for rectification u/s 154.
Tribunal’s Findings
- No Penal Consequence in Rule 128(9): The Rule mandates filing before due date but does not state that late filing leads to disallowance.
- Procedural vs Substantive: The filing requirement is procedural; the right to FTC is substantive under DTAA & Section 90, aimed at preventing double taxation.
- Judicial Precedent: Followed Brinda Rama Krishna & Shashidhar Seetharam Sharma, which held Form 67 filing to be directory, not mandatory.
- DTAA Overrides: Treaty benefits prevail over procedural rules unless specifically restricted in the treaty.
- Rectification Possible: Since only one legal view is possible, the issue falls within the scope of section 154 rectification.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
