Filing of Form No. 67 for availing FTC is a directory requirement not mandatory
Rule 128(9) of the Income tax Rules does not provide for disallowance of FTC for delay in filing of form 67 as it is a directory requirement not mandatory. Further the DTAA overrides the provisions of the Act and Rule cannot be contrary to the Act.
Section 90 of the Act provides that Government of India can enter into Agreement with other countries for granting relief in respect of income on which taxes are paid in country outside India and such income is also taxable in India. Further, Article 24 of India-Australia DTAA provides for credit for foreign taxes.
Section 90 of the Act read with Article 24(4)(a) provides that Australian tax paid shall be allowed as a credit against the Indian tax but limited to proportion of Indian tax. Neither section 90 nor DTAA provides that FTC shall be disallowed for non- compliance with any procedural requirements. FTC is taxpayer ‘s vested right as per Article 24(4)(a) of the DTAA read with Section 90 and same cannot be disallowed for non-compliance of procedural requirement that is prescribed in the Rules.
Further, Section 295(1) of the Act gives power to the CBDT to prescribe Rules for various purposes. Section 295(2) (ha) gives power to the Board to issue Rules for FTC.
Board has power to prescribe procedure to granting FTC. However, the Board does not have power to prescribe a condition or provide for disallowance of FTC. The procedure prescribed in Rule 128 should therefore be interpreted in this context. Rule 128 is therefore a procedural provision and not a mandatory provision.
With this, the Indore ITAT has recently concluded that rule 128(9) of the Income tax Rules does not provide for disallowance of FTC for delay in filing of Form No. 67.
The copy of the order is as under:
