Shashank Shekhar Vs ITO (ITAT Bangalore)
Bangalore ITAT: Foreign Tax Credit Cannot Be Denied Merely for Delay in Filing Form 67; Requirement Is Directory
The assessee, an Indian resident, earned income of ₹8.98 lakh in the USA, paid US tax of ₹1.80 lakh and offered the corresponding income to tax in India. He claimed Foreign Tax Credit of ₹1,64,427 under Section 90 read with the India-USA DTAA.
CPC denied the FTC because Form 67 was not filed with the original return. The assessee subsequently filed Form 67 on 18 March 2019 and a revised return on 22 March 2019, but the credit was again denied while processing the revised return. The first appellate authority dismissed the appeal on technical grounds without deciding the claim on merits.
The Bangalore ITAT held that the time limit prescribed in Rule 128(9) for filing Form 67 is directory and not mandatory. Neither Sections 90 and 91 nor Rule 128 prescribe denial of FTC as a consequence of delayed filing. A substantive DTAA benefit cannot therefore be defeated merely because of a procedural lapse, particularly when Form 67 and proof of foreign taxes were available before the authorities.
Following Sonakshi Sinha v. CIT, Brinda Rama Krishna v. ITO and the Madras High Court ruling in Venkatanarayanan Somayaji Lakshminarasimha v. PCIT, the Tribunal directed the jurisdictional AO to accept Form 67 and supporting documents and adjudicate the FTC claim on merits, after granting the assessee an adequate opportunity of hearing.
List of Cases Discussed / Relied Upon
- Sonakshi Sinha Vs CIT(A) [2022] 142 taxmann.com 414 (Mum-Trib.)
- 42 Hertz Software India Pvt. Ltd. Vs ACIT [2022] 139 taxmann.com 448 (Bangalore-Trib.)
- Ms. Brinda Rama Krishna v. ITO [2022] 135 taxmann.com 358 (Bang Trib)
- Vinodkumar Lakshmipathi V CIT(A) NFAC ITA No.680/Bang./2022, 06.09.2022
- Venkatanarayanan Somayaji Lakshminarasimha vs. PCIT [2025] 174 taxmann.com 754 (Madras)
- Wipro Ltd. v. DCIT [2023] 152 Taxmann.com 102 (Karnataka HC)
- Commissioner of Income-Tax, Maharashtra v. G.M.Knitting Industries (P) Limited, Civil Appeal Nos.10782 of 2013 and 4048 of 2014 dated 24.06.2015
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. The assessee has filed the present appeal against the impugned order dated 21.10.2025, passed under section 250 of the Income Tax Act (“ the Act”) by the learned Additional/Joint Commissioner of Income Tax Appeals – 1, Chennai [“learned Addl./Joint CIT(A)”], for the assessment year 2017- 18.
2. When the present appeal was called for hearing, neither anyone appeared on behalf of the assessee nor was any application seeking adjournment was filed. Therefore, we proceed to decide the present appeal after hearing the learned Departmental Representative (“learned DR”) and perusal of the material placed on record.
3. In this appeal, the assessee has raised the following grounds: –
1. The learned CIT(A) erred in denying Foreign Tax Credit (FTC) of ₹1,64,427, despite the credit being allowable u/s 90 of the Income-tax Act read with Article 25 of the India-USA DTAA
2. The CIT(A) failed to appreciate that FTC was disclosed in the original return and consistently reflected in revised returns, showing full compliance and bona fide conduct.
3. The learned CIT(A) failed to consider that Form 67 was filed on 18.03.2019, i.e., before the processing of the revised return (12.04.2019), thus meeting the requirement in substance.
4. The appellant is entitled to claim Foreign Tax Credit (FTC) under Section 90 of the Income tax Act, 1961, read with Article 25 of the India-USA DTAA, in respect of taxes paid in the USA.
5. The appellant had disclosed the FTC claim in the original return and consistently reflected the same in subsequent revised returns. Form 67 was filed on 18/03/2019, prior to processing of revised intimation, showing bona fide intent to claim FTC
6. The denial of FTC by CPC and subsequent dismissal by CIT(A) on procedural grounds is unjustified, as the appellant’s claim is substantive in nature and supported by law and facts.
7. Judicial precedents supporting the claim:
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- Brinda Rama Krishna vs. DCIT – Recognition of substantive right to FTC under DTAA.
- Wipro Ltd. v. DCIT [2023] 152 Taxmann.com 102 (Karnataka HC) – Procedural delay should not defeat substantive right.
4. The solitary grievance of the assessee is against the denial of Foreign Tax Credit (“FTC”) under section 90 of the Act due to delay in filing Form No. 67.
5. The brief facts of this case pertaining to this issue, as emanating from the record, are: The assessee is an individual and resident of India. For the year under consideration, the assessee earned income both in India and the USA. The assessee duly paid taxes amounting to Rs. 1,79,971/- in the USA on the income of Rs. 8,98,392/-, which was earned in the USA and offered the same to tax in India. Accordingly, the assessee claimed FTC of Rs. 1,64,427/-. The return filed by the assessee was processed vide intimation dated 06.03.2019 issued under section 143(1) of the Act denying the FTC claimed by the assessee. Subsequently, on 18.03.2019, the assessee filed Form No. 67 and revised return of income on 22.03.2019. The revised return of income was also processed vide intimation dated 12.04.2019 issued under section 143(1) of the Act denying the FTC claimed by the assessee. Being aggrieved, the assessee filed an appeal before the learned Addl./Joint CIT(A). Vide impugned order, the said appeal was dismissed upon the ground of delay, without adjudicating the grounds raised by the assessee on merits. Being aggrieved, the assessee is in appeal before us.
6. We have considered the submission s and perused the materials available on record. In the present case, there is no dispute regarding the fact that the assessee paid the taxes outside India on the income which it earned outside India. Since the said income was offered to tax in India by the assessee, being a resident in India, the taxes paid outside India were claimed under section 90 of the Act. Since the assessee did not file Form No. 67 along with his return, the claim of FTC was denied while processing his return of income under section 143(1) of the Act. However, subsequently, the assessee filed Form No. 67 on 18.03.2019 and also filed a revised return of income. However, even thereafter, the assessee’s claim of FTC was not accepted under section 90 of the Act. The learned Addl./Joint CIT(A) dismissed the appeal filed by the assessee on technical grounds without going into the merits of the case.
7. In the appeal before us, the assessee has placed on record Form No. 67, which forms part of the paper book on pages 85 – 86. Further, the assessee has also placed on record Form W – 2 in respect of taxes paid in the USA, which forms part of the paper book from pages 85 – 89. Thus, it is evident that Form No. 67 was available for consideration before the AO – CPC.
8. We find that under Rule 128(9), as it stood during the year under consideration, provided that the statement in Form No.67, referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. Thus, during the year under consideration, the assessee was required to furnish Form No. 67 on or before the due date of filing the return of income under section 139(1) of the Act, as per the provisions of Rule 128(9). We further find that Rule 128(9) has been substituted by the Income -tax (Twenty- seventh Amendment) Rules, 2022, w.r.e.f. 01/04/2022, and the same reads as under:
“(9) The statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the end of the assessment year relevant to the previous year in which the income referred to in sub-rule (1) has been offered to tax or assessed to tax in India and the return for such assessment year has been furnished within the time specified under sub-section (1) or sub-section (4) of section 139:”
9. Thus, with effect from 01/04/2022, the time period for furnishing a statement in Form No. 67 has been extended till the end of the assessment year in which the corresponding income has been offered/assessed to tax and the return of such assessment year has been furnished within the time specified under 139(1) or 139(4) of the Act.
10. We find that the Coordinate Bench of the Tribunal in Sonakshi Sinha vs CIT, reported in [2022] 142 taxmann.com 414 (Mum -Trib.), while dealing with a similar issue wherein the taxpayer filed Form No.67, after the due date for filing the return of income under section 139(1), observed as follows: –
“012. We have carefully considered the rival contention and perused the orders of the lower authorities. Short question In this appeal is whether assessee is entitled to foreign tax credit even when form number 67 required to be filed according to the provisions of rule 128 (9) of the Income Tax Rules on or before the due date of filing of the return of income, not complied by the assessee, but same was filed before the completion of the assessment proceedings. Precisely, the fact shows that assessee filed return of income u/s 139 (1) of the income tax act. In such a return of income, she claimed the foreign tax credit. However, form number 67 was filed during the course of assessment proceedings and not before the due date of filing return. Rule 128 (9) of the Income Tax Rules 1962 provides that the statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. We find that coordinate bench in 42 Hertz Software India (P.) Ltd v. ACIT [2022] 139 taxmann.com 448 (Bangalore – Trib.) wherein following its earlier order in the case of Ms. Brinda Rama Krishna v.ITO [2022] 135 taxmann.com 358 (Bang Trib) it was held that “one of the requirements of Rule128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns and that this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No. 67. Same view is also taken by a coordinate division bench in Vinodkumar Lakshmipathi V CIT(A) NFAC ITA No.680/Bang./2022 06.09.2022. It is well settled that while laying down a particular procedure, if no negative or adverse consequences are contemplated for non-adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Admittedly, Rule 128 does not prescribe denial of credit of FTC. Further the Act i.e. section 90 or 91 also do not prescribe timeline for filing of such declaration on or before due date of filing of ROI. Further rule 128 (4) clearly provides the condition where the foreign tax credit would not be allowed. Rule 128 (9) does not say that if prescribed form would not be filed on or before the due date of filing of the return no such credit would be allowed. Further by the amendment to the rule with effect from 1 April 2022, the assessee can file such form number 67 on or before the end of the assessment year. Therefore, legislature in its own wisdom has extended such date which is beyond the due date of filing of the return of income. Further, the fact in the present case is quite distinct then the issue involved in the decision of the honourable Supreme Court in case of Wipro Ltd (supra). Here it is not the case of violation of any of the provisions of the act but of the rule, which does not provide for any consequence, if not complied with. Therefore, respectfully following the dec isions of the coordinate bench on this issue, we hold the assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income Tax Rules, which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground number 2 of the appeal of the assessee is allowed.”
11. We further find that the Hon’ble Madras High Court in Venkatanarayanan Somayaji Lakshminarasimha vs. PCIT, reported in [2025] 174 taxmann.com 754 (Madras), held that delay in filing Form No. 67 is only a procedural lapse which can be condoned and thus, FTC cannot be denied for delay in filing Form No. 67. The relevant observations of the Hon’ble Madras High Court, in the aforesaid decision, are reproduced as follows: –
“6. There is no dispute with regard to filing of income tax return in time i.e., 30.06.2018. While filing the income tax return, the petitioner disclosed Foreign Income at 65,61,171/ – and claimed a sum of Rs.18,85,919/ – towards foreign tax credit which was withheld by employer. The 2nd respondent vide order dated 14.05.2020 rejected the foreign tax credit on the ground that Form 67 was not submitted along with Income Tax Return. The Form 67 was introduced for the 1st time from the Assessment Year 2018-19 vide Rule 128(9) Income Tax Act and the same was filed by the petitioner on 20.05.2020. Thereafter, the petitioner filed the rectification petition on 20.05.2020 and the same was rejected by the 3rd respondent on the ground that Form 67 was not filed in time.
7. As rightly contended by the learned counsel for the petitioner the delay in filing the Form 67 is only the procedural lapse. That apart, this Court in the decision cited by the learned counsel for the petitioner has observed that Rule 128 is not mandatory but to be considered as directory in nature. The relevant portion of the said decision is extracted hereunder:
“9. In the present case, the petitioner initially worked at Kenya and subsequently, he became the resident of Indian from the assessment year 2018-2019 and 20192020. The petitioner admitted the fact that he has filed his return in India on 10.08.2019. The intimation under Section 143(1) was issued on 26.03.2020. However, he has filed the return without Form -67 which is required to be filed under Rule 128 to claim the benefit of FTC and the same came to be filed on 02.02.2021 which was well before the complet ion of the assessment year. The intimation under Section 143(1) was issued from the CPC only on 26.03.2021.
10. According to the learned counsel appearing for the respondent, the procedure under Rule 128 is mandatory and and cannot be considered as directory in nature. The petitioner has filed his return including his Kenya income along with his Indian Income tax and claimed the benefits of FTC. However, the petitioner would submit that it is not mandatory. The Rule cannot make anything mandatory and it can be directory in nature, that too before the Assessment, the claim to avail the benefits of FTC is filed. Therefore, it would be the amounts to due compliance under the Act. The petitioner referred to the Judgment of the Hon’ble Supreme Court in the case of 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, wherein it was held that Form 3AA is required to be filed along with the return of income to avail the benefit and even if it is not filed, but the same is filed during assessment proceedings but before the final order of assessment is made that would amount to sufficient compliance.
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.
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 FTC 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 aside only to the extent of disallowing of FTC claim made by the petitioner and hence, the first respondent is directed to consider only on the aspect of rejection of FTC claim within a period of 8 weeks from the date of receipt of copy of this order.”
12. Thus, respectfully following the decisions cited supra, we are of the considered opinion that mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as they stood during the year under consideration, will not preclude the assessee from claiming the benefit of FTC in respect of tax paid outside India. Since in the present case, the claim of the assessee was denied on this technical aspect without going into the merits, we deem it appropriate to direct the jurisdictional AO to decide the claim of the FTC on merits, after accepting the Form No.67 and other related documents filed by the assessee. We order accordingly. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. As a result, grounds raised by the assessee are allowed for statistical purposes.
13. In the result, the appeal by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 17-Aug-2026.
