WHETHER FILING OF FORM 67 IN TIME U/S 139(1) IS DIRECTORY OR MANDATORY?

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Short note of today's case law for quick reference:

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[2024] 110 ITR (Trib) (S.N.) 5 (Pune)

[BEFORE THE INCOME-TAX APPELLATE TRIBUNAL — PUNE "SMC" BENCH]

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AKSHAY RANGROJI UMALE

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DEPUTY COMMISSIONER OF INCOME-TAX

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1. Assessee filed return u/s 139(4) and claimed Foreign-tax-credit.

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2. CPC denied the claim on Foreign tax credit on the ground that the form 67 and the accompanying certificate and statements were notified within time framed prescribed u/s 139(1) of the Act.

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3. CIT(A) confirmed denial.

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4. ITAT held that: It is a well settled law that the rules are sub-ordinate piece of legislation, enacted to facilitate the carrying out of the objective of main legislation i.e. provisions of the Act.

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5. The very purpose and objective of insertion of rule 128 was to allow foreign tax credit and it was so prescribed by subrule 1.

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6. The insertion of rule 128 was under the provisions of section 295(2)(ha) of the Act which empowered the Board to prescribe procedure for granting of relief or deduction of any tax paid in any foreign country outside India u/s 90 or 90A or 91, against income-tax payable under the Act. This ipso facto clarified that the compliance envisaged under sub-rule (9) was procedural in nature. PR. CIT V. WIPRO Ltd. [2022] 446 ITR 1 (SC) distinguished.

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7. That filing of form 67 with certificate and statements was mandatory as it relates to the essence of foreign tax credit claim to be allowed as a matter of substance, but directory with respect to the time-limit within which it was to be made merely a matter of convenience rather than substance.

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8. That filing of form 67, the credit and statements as envisaged under sub-rule 8 at any time before it was actually processed or before the final assessment was actually made was sufficient compliance with sub-rule (9) of rule 128 and the assessee entitled to foreign tax credit.

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9. A careful reading and conjunct consideration of provisions of section 90 & 90A and provisions of DTAA in general do not prevail over the provisions of the Act and the rules made there under.

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10. Section 90 and 90A of the Act do not also provide so.

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11. However, where the DTAA provides for the taxation of a particular category of income at certain rates, then charging of that income at different rates as per the Act may come in conflict with DTAA and hence taxes on that category of income will be levied at the rates provided in the agreement.

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12. But where no such rates on an income or a category of income on the status of an assessee has been prescribed in the DTAA, there cannot be any conflict in the Act.

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13. When there is no specific provision, in the agreement, it is a basic law i.e. income tax Act and the rules that will govern the taxation of income.