Case Law Details
Neeta Makkar Vs DCIT (ITAT Kolkata)
Summary: The ITAT Kolkata allowed the assessee’s appeal and held that the denial of foreign tax credit (FTC) of ₹8,81,398 solely because Form No. 67 was filed after the due date was not sustainable. The assessee had filed the return of income declaring total income of ₹83,88,210, and while the assessment accepted the returned income, the Assessing Officer denied the FTC claimed under Section 90 of the Income-tax Act. The Commissioner (Appeals) upheld the denial on the ground that Form No. 67 had been filed after the due date for filing the return. The Tribunal observed that the issue was covered by a series of coordinate bench decisions holding that delayed filing of Form No. 67 is a procedural lapse and not a fundamental defect. Following those decisions and the judicial precedents referred to therein, the Tribunal held that the assessee was entitled to the FTC and directed the Assessing Officer to grant the credit as claimed.
Core Issue: The principal issue before the Tribunal was whether the assessee could be denied Foreign Tax Credit (FTC) under section 90 of the Income-tax Act merely because Form No. 67 was filed after the due date prescribed under Rule 128(9) of the Income-tax Rules, despite the foreign taxes having been duly paid and the credit otherwise being admissible under the applicable Double Taxation Avoidance Agreement (DTAA).
Facts: The assessee, an individual, filed her return of income for AY 2017-18 on 26.07.2017, declaring total income of Rs.83,88,210 and claiming Foreign Tax Credit (FTC) of Rs.8,81,398 under section 90 of the Act. The assessment under section 143(3) accepted the returned income; however, while issuing the computation sheet, the Assessing Officer denied the FTC solely on the ground that Form No. 67, prescribed under Rule 128, had not been filed within the due date for furnishing the return under section 139(1). The due date for filing the return was 05.08.2017, whereas the assessee filed Form No. 67 on 31.03.2018. The Commissioner (Appeals) upheld the denial by treating timely filing of Form No. 67 as a mandatory condition for claiming FTC. The assessee carried the matter before the Tribunal.
Findings of the ITAT: The Tribunal observed that the controversy was no longer res integra and stood covered by a series of decisions of the Kolkata and Bangalore Benches of the Tribunal as well as the judgment of the Madras High Court in Duraiswamy Kumaraswamy v. PCIT. The consistent judicial view was that delay in filing Form No. 67 is merely a procedural lapse and not a substantive defect disentitling an assessee from claiming Foreign Tax Credit.
The Tribunal noted that Rule 128(9) prescribes the procedure for claiming FTC but does not provide that delayed filing of Form No. 67 would automatically result in forfeiture of the substantive benefit. A procedural rule cannot override the statutory entitlement conferred by sections 90 and 91 of the Act or the provisions of the applicable DTAA. Where the assessee has actually paid taxes in the foreign jurisdiction and is otherwise eligible for relief under the DTAA, the benefit cannot be denied merely because of delayed compliance with a procedural requirement.
The Tribunal further relied upon the judgment of the Supreme Court in CIT v. G.M. Knitting Industries (P.) Ltd., wherein it was held that procedural requirements relating to filing prescribed forms should not defeat substantive claims if the prescribed documents are furnished before completion of assessment. Applying the same principle, the Tribunal held that filing of Form No. 67 is directory and not mandatory, and delayed filing does not extinguish the assessee’s entitlement to FTC.
The Tribunal also referred to the decision of the Madras High Court in Duraiswamy Kumaraswamy, which had categorically held that Rule 128 is intended only to facilitate implementation of the Act and cannot curtail the substantive right to claim Foreign Tax Credit. It further relied upon several co-ordinate Bench decisions including Surendra Kumar Goenka, Anindya Sarkar, Mahua Bagchi, Deepak Shimoga Padmaraju, and Brinda Rama Krishna, all of which consistently held that belated filing of Form No. 67 is a curable procedural defect.
Following the settled legal position, the Tribunal concluded that the lower authorities were not justified in denying FTC solely on account of delayed filing of Form No. 67. Since the assessee had otherwise satisfied the conditions for claiming relief under section 90 and the applicable DTAA, the credit could not be denied on technical grounds.
Decision: The Tribunal allowed the appeal and directed the Assessing Officer to grant Foreign Tax Credit of Rs.8,81,398 as claimed by the assessee in the return of income. It held that belated filing of Form No. 67 is only a procedural irregularity and does not defeat the substantive right to claim Foreign Tax Credit under section 90 read with the applicable DTAA.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), Addl/JCIT (A), Kochi (hereinafter referred to as the “Ld. CIT(A)”] dated 04.11.2025 for the AY 2017-18.
2. The issue raised in Ground No.1 of the appeal is whether the lower authorities were justified in denying the foreign tax credit of ₹8,81,398/- claimed by the assessee u/s 90 of the Act on the ground that Form No. 67 was filed belatedly by the assessee.
3. Brief facts of the case are that, the assessee is individual, who had filed her return of income on 26.07.2017 for A.Y. 2017-18 declaring income of ₹83,88,210/-. The case of the assessee was selected for regular scrutiny by issue of notice u/s 143(2) of the Income-tax Act, 1961 (the Act). The assessment was completed u/s 143(3) of the Act at total income of ₹83,88,210/- as declared by the assessee in her return of income. However, in the ITNS Computation Sheet annexed to the assessment order, the ld. AO had denied foreign tax credit of ₹8,81,398/- claimed by the assessee u/s 90 of the Act.
4. In the appellate proceedings, the Ld. JCIT(A) observed that, in order to claim the foreign tax credit, the assessee was required to file Form 67 on or before the due date of filing of return of income. The ld. CIT (A) noted that the due date of furnishing of return of income was 05.08.2017 whereas the assessee had filed Form 67 only on 31.03.2018, noting that the Form 67 was filed belatedly. Thus , the ld. CIT (A) upheld the order of the ld. AO.
5. We have heard both the parties and perused the material on available on record. We find that the impugned issue is no longer res interga and the coordinate Bench at Kolkata in a series of decisions has held that belated filing of Form 67 is a procedural error and not a fundamental infirmity and has therefore allowed the FTC credit claimed by the assessee. The relevant findings rendered in the decision of Surendra Kumar Goenka (ITA No.1831/Kol/2024), which is applicable to the present case, is reproduced hereunder:-
“8. We find that the assessee has filed its original income tax return on 31.07.2017 u/s 139(1) of the act and Form no. 67 has been filed on 12.07.2018. The Ld. CIT(A) has dismissed the case of the assessee only on this ground that there was a delay in filing of form no. 67. We have perused the decision of Co-ordinate bench of Kolkata in the case of Anindya Sarka vs. ACIT, CPC in ITA No. 1345/Kol/2024 for AY 2020-21 dated 26.07.2024. The operative part is reproduced as under:
“7. The Ld. DR supported the order of the Ld. CIT(A). We have gone through the rival contention and also examined the facts. It was submitted before the Ld. CIT(A) by the assessee that the rerun of income was filed on 25.12.2020 and on 26.12.2020 he had submitted the Form No. 67 after receiving the communication from the e-filing team, Income Tax Department on 25.12.2020 that the return of income was not accompanied by Form No. 67 as mandated by I.T.A. No. 1831/Kol/2024 Assessment Year: 2020-21 Surendra Kumar Goenka law. Subsequently, since the credit was not allowed, he filed rectification application and Form No. 67 on 03.07.2022 and prior to that rectification requests on 21.05.2022 and on 07.06.2022 were also filed. The credit was not allowed since From No. 67 was filed beyond the date for filing the return of income under Section 139(1) of the Act. In the case of Mahua Bagchi Vs. ACIT (supra) relied upon by the assessee, it is held as under:
…….
8. Further, in the case of Deepak ShimogaPadmaraju Vs. Assistant Director of Income Tax (supra), relying upon the case of Brinda Rama Krishna in ITA No. 454/Bang/2021 for AY 2018- 19, order dated 17.11.2021 it has been held that Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67. The relevant extract of the aforesaid order read as under:
“(ii) filing of Form No.67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act.
Therefore, non-furnishing of Form No.67 before the due date u/s 139(1) of the Act is not fatal to the claim for FTC. The findings of this Tribunal are reproduced below: ….
16. We have also gone through the decision of the Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy us. PCIT (supra) and found that the facts are identical to the facts of the case of the assessee and the decision is squarely applicable to the facts of the case of the assessee. In that case, the petitioner was resident of India and had filed Indian ITR and claimed benefit of FTC u/s 90/91 of the Act row. Article 24 of the India-Kenya DTAA. During the year, he had income of both Kenya and India but while filing the Indian ITR for the impugned assessment year 2019-20, the Form No. 67 prescribed in rule 128 of the rules for claiming FTC was inadvertently not uploaded along with the ITK which was uploaded on 02.02.2021 The return was processed on 26.03.2021, however, the credit of FTC was not given effect to and the request made to the CPC to give effect to the FTC was not accepted and intimation along with notices of demand was received. The assessee also could not succeed with the rectification application filed and approached the CIT u/s 264 of the Act and at the same time filed a writ petition before the Hon’ble Madras High Court. It was stated by the respondent- department that rule 128 is mandatory and cannot be considered as directory in nature. The petitioner referred to the judgment of the Hon’ble Supreme Court in the case of CIT vs. G.M. Knitting Industries (P) Ltd. Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015 The Hon’ble High Court allowed the Writ Petition in favour of the assessee by holding as under.
“11. The law laid down by the Hon’ble Apex Court in Commissioner of Income Tax, Maharashtra v. G.M.Knitting Industries (P) Limited in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015, which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature This is what the Hon’ble Supreme Court had held in the above cases when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of assessment order. W P. No 5834 of 2022.
12. Further, in the present case, the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the PTC was rejected by the respondent, which is not proper and the same is not in accordance with law. Therefore, the impugned order is liable to be set aside.
13. Accordingly, the impugned order dated 25.01.2022 is set aside. While setting aside the impugned order, this Court remits the matter back to the respondent to make reassessment by taking into consideration of the FTC filed by the petitioner on 02.02.2021. The respondent is directed to give due credit to the Kenya income of the petitioner and pass the final assessment order. Further, it is made clear that the impugned order is set wade only to the extent of disallowing of FTC clam made by the petitioner und hence, the first respondent is directed to consider only on the aspect of rejection of FTC clam within a period of 8 weeks from the date of receipt of copy of this order”
17. Respectfully following the order of the Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy vs. PCIT (supra) and concurring with the views held by the coordinate Benches of the Tribunal (supra), we hold that merely because the assessee could not file Form No. 67 within the prescribed time limit as per the provisions of rule 128(9) of the Income-tax rules, 1962, as it stood during the year under consideration, will not preclude the assessee from claiming the benefit of the foreign tax credit in respect of taxes paid outside India. Therefore, the claim of the assessee is allowed and the Assessing Officer is directed to give benefit of foreign tax credit in respect of tax paid outside India by the assessee in accordance with law and the DTAA between India and the USA. Accordingly, grounds no. 2,3,4 of the appeal are allowed.
10. Keeping in view, the provision of DTAA as well as the judicial precedent in this regard, we find no justification for not allowing the credit for FTC. The order of the Ld. CIT(A) as well as the AO for disallowing the foreign tax credit claimed in revised Indian tax return amounting to Rs. 20,64,365/- is hereby set aside. The assessee is entitled for advance of FTC of Rs. 20,64,365/-. So far the other submission of the record for levying interest is concerned in view of the decision as stated above, the levying additional interest is also hereby set aside.”
6. Respectfully following the above, we hold that the denial of FTC by the lower authorities was not sustainable. The AO is accordingly directed to grant the FTC to the assessee, as claimed by her in the return of income.
7. In the result, the appeal of the assessee is allowed.
the order is pronounced in the open Court on 25/06/2026.
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