Delay in filing Form 67 is a procedural lapse that does not affect the substantive right to claim FTC: ITAT
In a case before Income Tax Tribunal on Foreign Tax Credit, the following issues were involved
1. Denial of Foreign Tax Credit (FTC) due to procedural non-compliance (late filing of Form 67).
2. Whether FTC can be disallowed purely based on delay in filing Form 67.
3. Application of Double Taxation Avoidance Agreement (DTAA) between India and Thailand.
Let us have a Short Overview of the Case:
• The appellant earned income in both India and Thailand in AY 2019-20.
• He filed his return of income on August 27, 2019, claiming Foreign Tax Credit.
• FTC was denied because Form 67 was filed on April 8, 2021, after the due date for filing the return.
• Appeals to the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] were dismissed on procedural grounds.
𝗔𝗽𝗽𝗲𝗹𝗹𝗮𝗻𝘁’𝘀 𝗔𝗿𝗴𝘂𝗺𝗲𝗻𝘁𝘀:
1. DTAA provisions override the Income Tax Act and Rules when more beneficial to the Assessee.
2. Filing Form 67 is procedural, not substantive, and cannot bar the claim of Foreign Tax Credit.
3. The appellant cited judicial precedents emphasizing that procedural lapses should not extinguish substantive rights.
4. Natural justice principles and avoidance of double taxation should apply.
𝗧𝗿𝗶𝗯𝘂𝗻𝗮𝗹’𝘀 𝗙𝗶𝗻𝗱𝗶𝗻𝗴𝘀:
1. DTAA Supremacy: The provisions of DTAA override Income Tax Act rules, including Rule 128, if more beneficial to the taxpayer.
2. Procedural Nature of Form 67: Filing Form 67 is a directory, not mandatory, requirement. Non-compliance with procedural norms does not nullify the substantive right to claim FTC.
3. No Double Taxation: Denial of FTC would result in double taxation, contrary to the principles of DTAA and CBDT Circular No. 14 (1955).
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𝗧𝗿𝗶𝗯𝘂𝗻𝗮𝗹’𝘀 𝗗𝗲𝗰𝗶𝘀𝗶𝗼𝗻:
• The Tribunal allowed the appeal and directed the Assessing Officer to grant FTC as per the DTAA between India and Thailand.
• The delay in filing Form 67 was deemed a procedural lapse that does not affect the substantive right to claim FTC.
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𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻:
The Income Tax Appellate Tribunal ruled in favor of the taxpayer, emphasizing the primacy of DTAA provisions and the directory nature of procedural requirements like Form 67 filing. This decision reinforces the principle that substantive rights cannot be denied due to procedural lapses.
The copy of the order is as under:
