Foreign Tax Credit Cannot Be Denied for Delay in Filing Form 67, PCIT Has Power to Condone Default u/s 264: Delhi HC [Read Order]

In a recent ruling, the Delhi High Court held that foreign tax credit (FTC) cannot be denied only because Form 67 was filed late and the Principal Commissioner of Income Tax (PCIT) has enough power under Section 264 to condone such default instead of rejecting the claim on technical ground.

Real Time Data Services Pvt. Ltd. filed writ petitions challenging the PCIT’s order by which its revision application under Section 264 was rejected. The lead case was for AY 2020-21.

The petitioner did not upload Form 67 within the due date as required under Rule 128. It realised this only after getting intimation under Section 143(1)(a), where foreign tax credit of Rs. 1,01,34,300 (TDS on foreign receipts) was not allowed. The petitioner filed a rectification application under Section 154, but said it was not decided.

The petitioner argued that Rule 128 is not mandatory in a strict way and the Commissioner could condone the delay, even by using powers under Section 119. The department argued that Form 67 was not filed in time and there is no relaxation in Rule 128, so revision was rightly rejected.

Justice Dinesh Mehta and Justice Vinod Kumar observed that this was only a technical or venial breach and such lapse cannot take away assessee’s substantial right of foreign tax credit. The Court observed that denying FTC would mean withholding money without authority of law and would cause unjust enrichment.

The court relied on Vijay Gupta case and observed that PCIT had power under Section 264 to consider and condone such default. Since Form 67 was later filed on 14.09.2022, the court directed the AO to allow FTC after verifying facts. If AO still wants to deny it, he must pass a speaking order. The exercise must be done within two months. All writ petitions were allowed.

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