The New Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) allowed foreign tax credit despite the delay in filing Form No. 67 and ruled that Rule 128(9) under Income Tax Rule, 1962 is a directory and cannot be considered mandatory.
Avik Anup Prabhu, the assessee filed his income tax for the assessment year 2020-21 under section 139(1) of the Income Tax Act, 1961. Then, the assessee claimed a Foreign Tax Credit (FTC) of Rs. 49, 54, 248, supported by Form No. 67 in the revised return. Unfortunately, the Centralized Processing Centre (CPC) disallowed the FTC claim due to Form No. 67 was not filed before the due date for filing the return the return of income as per section 139(1) of the Income Tax Act.
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The aggrieved assessee appealed before the first appellate authority against the disallowance. The first appellate authority upheld the disallowance relying on Income tax Rule 128(9), which stipulates that Form No. 67 must be filed before the due date of filing the return.
The first appellate authority ruled since the assessee failed to file Form No. 67 within the due date, the claim of FTC cannot be allowed. The assessee appealed the first appellate authority order before the ITAT, New Delhi where the assessee’s counsel prayed to allow the Foreign Tax Credit.
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The two-member bench comprising Saktijit Dey (Vice President) and S Rifaur Rahman (Accountant Member) considered rival submissions and perused materials on records. The tribunal noted that the assessee had included the foreign income earned of Rs. 1,68,48,868 but could not furnish Form No. 67 in his support of the FTC claim amounting to Rs. 49,54,248 in the provision of section 90 of the Income Tax Act.
The tribunal further noted that the assessee filed a revised return of income along with Form No. 67, which was disallowed. The Tribunal found the issue was no more res integra. Referring to various precedents set by various Coordinate Benches, which have consistently ruled that Rule 128(9) is a directory and cannot override the provision under section 90 of the Income Tax Act.
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The income tax appellate tribunal observed that the amendment effective from 1 April 2022, which allows filing Form No. 67 by the end of the assessment year, further supports the non-mandatory nature of the earlier rule. Thus, the tribunal directed the assessing officer to grant the Foreign Tax Credit after verifying the facts. The assessee’s appeal was allowed.
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