ITAT Ahmedabad Rules Procedural Delay in Filing Form 67 Cannot Defeat Substantive Right to Foreign Tax Credit

In a highly significant judicial pronouncement for entities engaged in cross-border transactions, the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has reaffirmed a fundamental principle of tax jurisprudence: substantive rights cannot be extinguished by mere procedural delays. In the case of Endel Retail And Customer Care Pvt. Ltd. Vs DCIT, the Tribunal ruled that the delayed filing of Form 67 does not invalidate an assessee's legitimate claim for Foreign Tax Credit (FTC) under Section 90 and Section 90A of the Income Tax Act 1961, provided the foreign income has been duly offered to tax in India and the corresponding taxes have been paid abroad.

This ruling serves as a critical safeguard against double taxation, ensuring that the legislative intent behind Double Taxation Avoidance Agreements (DTAAs) is not defeated by rigid administrative interpretations of procedural rules, specifically Rule 128 of the Income Tax Rules 1962.

The Statutory Framework: Foreign Tax Credit and Form 67

To fully appreciate the gravity of this judicial decision, it is essential to understand the statutory mechanics governing the claim of Foreign Tax Credit in India.

The Substantive Right: Section 90 and Section 90A

The Income Tax Act 1961 incorporates provisions to prevent the same income from being taxed in two different jurisdictions. Section 90 empowers the Central Government to enter into agreements with foreign countries for the avoidance of double taxation. Similarly, Section 90A deals with agreements between specified associations. When an assessee earns income from a foreign jurisdiction and pays taxes on that income abroad, these sections allow the assessee to claim a credit for the foreign taxes paid against their Indian tax liability on the same income. This is a substantive right designed to ensure equity and prevent the undue financial burden of double taxation.

The Procedural Mechanism: Rule 128

To operationalize the claim of FTC, the Central Board of Direct Taxes (CBDT) introduced Rule 128 of the Income Tax Rules 1962. This rule outlines the procedural requirements for claiming the credit. Specifically, Rule 128(9) mandates that an assessee must furnish a statement in Form 67, along with a certificate or statement specifying the nature of income and the amount of tax deducted or paid. The rule stipulates that this form should be filed on or before the due date for furnishing the return of income under Section 139(1).

The core legal friction in recent years has revolved around whether the timeline prescribed in Rule 128(9) is mandatory (where failure to comply strictly results in the loss of the right) or directory (where substantial compliance is sufficient, and delays can be condoned).

Factual Matrix of the Dispute

The present appeal, bearing I.T.A. No.1204/Ahd/2026, pertains to the Assessment Year 2023-24. The assessee, Endel Retail And Customer Care Pvt. Ltd., is a corporate entity primarily engaged in the business of providing management consultancy services.