Income Tax | Delay in Filing Form 67 Not Ground to Deny Foreign Tax Credit: Delhi High Court

The Delhi High Court has held that a mere delay in filing Form 67, the prescribed declaration required to claim credit in India for taxes already paid abroad as required under Rule 128 of the Income Tax Rules, 1962 cannot be used to deny an assessee the substantive benefit of Foreign Tax Credit (FTC).

A Division Bench of Justices Dinesh Mehta and Vinod Kumar made the observation while allowing a petition filed by Real Time Data Services Private Limited against the Principal Commissioner of Income Tax, Delhi.

Foreign Tax Credit allows a taxpayer to reduce its Indian tax liability by the amount of tax already paid or deducted in a foreign country on the same income, thereby preventing double taxation.

“may be the petitioner omitted or failed to upload Form No. 67 by the due date of return but simply because of this technical or venial breach, its substantial right of getting Foreign Tax Credit of Rs.1,01,34,300/-, deducted from its receipt cannot be denied. If that be so, it would amount to withholding of a substantial amount of an assessee without there being any authority of law which would amount to unjust enrichment in turn.”

The company's claim for foreign tax credit of Rs.1.01 crore, being tax deducted on its foreign receipts, had been denied during processing of its return under Section 143(1)(a) of the Income Tax Act on the ground that Form 67 was not uploaded within the due date prescribed under Rule 128 of the Income Tax Rules, 1962.

After receiving the intimation, the assessee moved an application for rectification and subsequently filed a revision petition under Section 264 of the Income Tax Act before the Principal Commissioner. Section 264 empowers the Commissioner to revise orders passed by subordinate tax authorities in appropriate cases to grant relief to an assessee.

The Principal Commissioner rejected the revision petition, observing that there was no power to condone delay in uploading Form 67 within the prescribed time.

The High Court held that the delay constituted only a technical breach and could have, and should have, been condoned while exercising powers under Section 264.

It observed that the Form was subsequently furnished by the Petitioner and the default should have been condoned by the Commissioner, while exercising powers under Section 264.

Section 264 empowers the Principal Commissioner or Commissioner to revise, either suo motu or upon application by the assessee, any order (not covered under Section 263) passed by a subordinate authority.

As such, the Court directed the Assessing Officer to allow Foreign Tax Credit after verifying the Form and allowed the petition.

For Petitioner: Advocates Satyalipsu Ray and Prasana Kumar Dash

For Respondent: Advocates Puneet Rai, SSC with Ashvini Kr and Rishab Nagia, JSC