Case Law Details
Varun Vijaykumar Chhabria Vs ITO (ITAT Bangalore)
Foreign Tax Credit Cannot Be Denied for Late Form 67 – Bang ITAT Allows Substantive Relief
The Bangalore ITAT held that Foreign Tax Credit (FTC) cannot be denied merely due to delay in filing Form 67, and allowed credit of ₹2.91 lakh under Section 90 read with India–USA DTAA.
The assessee, an individual deputed to the USA, had:
- Earned salary abroad,
- Paid taxes in the USA, and
- Subsequently disclosed the same in India through a revised return along with Form 67.
The CPC and CIT(A) denied FTC on the ground that:
- Form 67 was not filed within the due date u/s 139(1),
- Hence, Rule 128(9) conditions were not satisfied.
However, the Tribunal held:
- The assessee had furnished complete evidence of foreign tax payment, including US tax returns.
- Double taxation relief under DTAA is a substantive right, which cannot be denied on procedural lapses.
- Filing of Form 67 is directory and procedural, not mandatory.
The ITAT emphasized:
- Law aims to avoid double taxation, and denying FTC would defeat this objective.
- Procedural requirements cannot override substantive entitlement.
- Reliance was placed on coordinate bench rulings (e.g., Brinda Ramkrishna).
Accordingly, the Tribunal directed the AO to grant FTC of ₹2.91 lakh in full.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The present appeal filed, at the instance of the assessee, is directed against the order passed under section 250 of the Income Tax 1961 dated 22-12-205 pertaining to A.Y. 2019-20 at National Faceless Appeal Centre-NFAC, Delhi.
2. The effective issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of Foreign Tax Credit of Rs. 2,91,145/- otherwise allowable under India-USA DTAA read with section 90 of the Act.
3. The necessary facts are that the assessee is an individual. During the assessment year 2019-20, the assessee was employed with Alstom Transport India Ltd and was deputed in USA for short period starting from 1st December 2018 to 30th November 2019. For deputation in USA, the assessee drawn salary from Alstom Transportation Inc and tax on the same was paid in USA. The amount of tax paid in the USA on the salary drawn for the period 1st December 2018 to 31st March 2019 was valued in Indian currency for 2,91,145/- only.
3.1 In the original return filed for the year under dispute, the assessee declared salary income earned from India only. However, in the revised return the assessee declared salary drawn in India as well as from USA and accordingly claimed relief under section 90 of the Act for foreign tax credit of Rs. 2,91,145/- only. The assessee also filed form 67 as required under the Act for claiming foreign tax credit along with revised return.
3.2 The CPC, while processing the return under section 143(1) of the Act, disallowed the claim of the assessee under section 90 of the Act and accordingly raised demand of taxes and levy of interest.
4. The aggrieved assessee filed rectification application under section 154 of the Act but did not get the relief. Finally, the assessee filed appeal before the learned NFAC/ CIT(A).
5. The learned CIT(A) observed that as per rule 128(9) of the Income Tax Rule 1962 read with section 90 the Act, the assessee is allowed credit of taxes paid in country/specified territory outside India and for which the assessee is required to file Form-67 on or before the due date of filing return under section 139(1) of the Act. The assessee in original return under section 139(1) of the Act has neither offered foreign income nor claimed benefit of FTC nor furnished Form 67 for claiming such benefit. The assessee offered overseas income in the revised return and filed Form-67 along with revised hence the same was beyond the due date specified. Therefore, considering the explicit provisions of Rule 128(9) of the Income Tax Rule, the assessee is not eligible for credit of FTC. Hence, the Id. CIT-A dismissed the appeal of the assessee.
6. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before the Tribunal.
7. The learned AR before us submitted paper book running from pages 1 to 175 and contended that the lower authorities have erred both in law and on facts in denying the claim of the assessee. It was argued that the adjustment made in the intimation under section 143(1) of the Act, which was confirmed by the learned CIT(A), is bad in law and liable to be quashed. The Id. AR pointed out that the assessee had duly furnished all relevant details and supporting documents for claiming foreign tax credit as per section 90 of the Act read with article 25 of India-USA DTAA but despite this, the claim was rejected mechanically by the authorities below.
8. The Id. AR further submitted that the appellant had complied with the prescribed requirements and furnished proof of taxes paid abroad. On proper appreciation of facts and law, the assessee is entitled to such credit as claimed in the return of income. The authorities failed to appreciate that the assessee had fulfilled all the conditions laid down for availing the foreign tax credit and hence the credit ought to have been allowed.
9. On the other hand, the learned DR vehemently supported the finding of lower authorities.
10. We have heard the rival contentions of both the parties and perused the materials placed on record, including the paper book filed by the assessee. The undisputed facts are that the assessee, an individual, had revised his return of income declaring foreign income and claimed credit of foreign taxes paid amounting to T2,91,145/- only. The assessee had also filed Form 67 along with the filing of the revised return. The lower authorities have rejected the claim mainly on the ground that the Form-67 was not filed within due date prescribed.
10.1 On perusal of the record, we find that the assessee has produced necessary evidence such payment of taxed and copy of US Tax Return. These documents substantiate that the assessee had indeed paid tax in the USA on the foreign income offered to tax in India. Thus, the requirement of Rule 128(8)(ii) of the Income-tax Rules, 1962, stands duly complied with.
10.2 It is a settled principle that denial of substantive benefit like Foreign Tax Credit, which is guaranteed under section 90/91 of the Act read with applicable DTAA, cannot be made merely on technical or procedural lapses, particularly when the assessee has subsequently furnished all the relevant details and evidence. Several Hontle High Courts as well as the Tribunal in various decisions have held that the filing of Form 67 within prescribed time limit i.e. on or before due date specified u/s 139(1) of the Act (prior to amendment applicable from A.Y. 2022-23) is directory in nature and the assessee cannot be deprived of legitimate FTC merely on account of procedural delay.
10.3 In view of the above discussion and after considering the evidence of foreign tax payment, we are of the opinion that the assessee is entitled to claim the Foreign Tax Credit as per law. The learned CIT(A) erred in disallowances the legitimate claim of the assessee merely on account of procedural requirement of filing form-67 on or before due date prescribed under section 139(1) of the Act.
10.4 The purpose of Form-67 is procedural and intended to help to verify the claim. It is not meant to deny a legitimate relief merely because of a procedural requirement. This view finds support from the decisions of coordinate benches of this Tribunal, including Ms. Brinda Ramkrishna v. ITO (135 taxmann.com 358), where it was held that filing of Form-67 is directory and not mandatory.
10.5 The law aims at ensuring that income is not doubly taxed. The assessee has paid tax in the USA and also offered the same income to tax in India. Denial of FTC in such circumstances would amount to double taxation, which the DTAA specifically seeks to avoid. Therefore, we hold that the authorities below erred in denying the FTC claim merely because of filing of Form-67 along with revised return was not filed with original return of income. Accordingly, we set aside the finding of the learned CIT(A) and direct the AO to grant the foreign tax credit of T2,91,145/ as claimed by the assessee. Hence, the ground of appeal raised by the assessee is allowed.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in court on 15th day of April, 2026
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