Chennai ITAT Grants Full Foreign Tax Credit Despite Lower FTC Claim in Form 67 – Procedural Lapse Cannot Defeat Substantive Relief

Shrinivasan Ranganathan Vs ACIT (ITAT Chennai)

The Chennai ITAT held that a lower Foreign Tax Credit (FTC) claim made in Form 67 cannot permanently disentitle an assessee from claiming the correct FTC amount when the relevant foreign tax payment details are already on record. The Tribunal observed that delay in filing or mistakes in Form 67 are merely procedural lapses and cannot override substantive relief available under sections 90/91 of the Act.

In this case, the assessee originally claimed FTC of ₹8.70 crore in Form 67 filed along with the belated return. During scrutiny, additional LTCG income of ₹3.83 crore was offered, resulting in eligibility for enhanced FTC of ₹9.78 crore. However, the AO restricted the FTC to the original amount mentioned in Form 67 on the ground that no revised Form 67 had been filed.

The Tribunal noted that the AO himself subsequently rectified the mistake u/s 154 and granted the full FTC of ₹9.78 crore by relying on the Madras High Court ruling in Venkatanarayanan Somayaji Lakshminarasimha v. PCIT, which held that Rule 128 and Form 67 requirements are directory in nature.

The ITAT emphasised that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice must prevail. Since the AO had already granted the correct FTC through rectification and the taxes paid in the foreign country were duly reflected in Form 67 itself, the CIT(A)’s order denying enhanced FTC was quashed.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 25.11.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2023-24.

2. The grounds raised read as under:-

1 For that the order of the Ld. Commissioner of Income-Tax (Appeal), NFAC [CIT(A)], under section 250 of the Income-Tax Act, 1961 (Act) dated 25.11.2025 is erroneous, bad in law, and was passed ignoring the facts and merits of the case.

2.1 For that the Ld. CIT(A) erred in confirming the restriction of Foreign Tax Credit (FTC) to Rs.8,70,22,525/- as against the eligible amount of Rs.9,78,31,360/-which was stated to be the US Tax paid in Form No.67 filed by the appellant within time.

2.2 For that the Ld. CIT(A) failed to appreciate that delay in filing Form No.67 or claim of lesser amount, therein, is only a procedural lapse and that, per se, could not defeat the substantive claim of FTC.

2.3 For that the Ld. CIT(A) ought to have noted that lesser amount of FTC claimed by the appellant in Form No.67 will not perpetually disentitle him from the eligible FTC of Rs.9,78,31,360/-.

2.4 For that the Ld. CIT(A) failed to note that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice should prevail.

3.1. For that the Ld. CIT(A) failed to consider the rectification order of the AO which was on the same issue raised in the impugned appeal.

4. For these and other additional grounds that may be adduced before or at the time of hearing, the appellant prays that the appeal be allowed.

3. Brief facts of the case are that the assessee is a resident individual deriving income from India as well as the United States, filed his return of income on 30.12.2023 u/s.139(4) of the Act declaring total income of Rs.33,25,85,490/-. The assessee had along with the return of income filed Form No.67 claiming Foreign Tax Credit (FTC) u/s.90/91 of the Act for a sum of Rs.8,70,22,525/-. The assessment was selected for complete scrutiny and notice u/s.143(2) of the Act was issued on 19.06.2024. During the course of assessment proceedings, it was noticed that capital gains of Rs.3,83,92,903/- pertaining to the assessee was wrongly reported as the income of the assessee’s wife which was subsequently revised in the computation of income filed in response to notice issued u/s.142(1) of the Act and shown as income of the assessee which resulted in enhanced income of Rs.3,83,92,903/-.

4. The assessment was completed u/s.143(3) r.w.s.144B of the Act vide order dated 11.03.2025 on the enhanced amount offered by the assessee during the course of assessment proceedings (i.e., enhanced Long Term Capital Gain of Rs.3,83,92,903/-). However, the FTC claimed u/s.90/91 of the Act was restricted to Rs.8,70,22,525/- as shown in Form No.67 filed along with the return of income on 30.12.2023. The assessee during the course of assessment proceedings after offering enhanced LTCG of Rs.3,83,92,903/- had stated that assessee is entitled to FTC of Rs.9,78,31,360/- instead of Rs.8,70,22,525/- claimed in Form No.67 which was filed along with return of income. However, the AO stated that since the revised form No.67 was not filed, assessee is not entitled to enhanced FTC.

5. Aggrieved, assessee filed appeal before the FAA. The FAA dismissed the appeal of the assessee. The FAA held that the assessee himself had claimed the FTC of Rs.8,70,22,525/- only. It was further held the fact that Form No.67 disclosed higher amount of US tax paid does not automatically entitle the assessee to higher FTC, because FTC can be granted only to the extent claimed and substantiated in the return and Form 67. It was further noted by the FAA that assessee did not file revised return nor Form No.67 within the statutory time limit. Hence, it was concluded by the FAA that the AO was correct in restricting the benefit of amount to the actual claim of the assessee in the return of income filed.

6. Aggrieved, assessee has filed the present appeal before the Tribunal. The assessee has filed a paper-book enclosing therein the return of income filed for the relevant assessment year namely AY 2023-24, Form No.67 for claiming the FTC, letter submitted by the assessee enclosing the revised computation of income, return of income filed in USA and acknowledgement for the same, the rectification order u/s.154 of the Act dated 17.11.2025 and the case laws relied on. The Ld.AR by referring to the rectification order dated 17.11.2025 submitted that the AO based on rectification application filed by the assessee had granted the benefit of FTC to the full extent of Rs.9,78,31,360/-. The Ld.AR submitted that in light of the rectified order of the AO dated 17.11.2025, assessee does not have any grievance. However, before the appeal before the FAA could be withdrawn, the FAA has passed the impugned order. The Ld.AR relied on the judgment of the Hon’ble Madras High Court in the case of Venkatanarayanan Somayaji Lakshminarasimha v. PCIT in W.P.No.28199 of 2024 dated 04.04.2025, in support of his contention that assessee was under bonafide impression that FTC could be allowed automatically in the return form itself and there was no necessity to amend/modify Form No.67 based on the revised computation offering enhanced income.

7. The Ld.DR supported the orders of the AO and the FAA.

8. We have heard rival submissions and perused the material on record. The assessee had filed the rectification application claiming relief u/s.90/91 of the Act of Rs.9,78,31,360/-. The AO passed the rectification order on 17.11.2025. A copy of the same is placed on record at page 51 of the paper-book submitted by the assessee. In the said rectification order, the AO by relying on the judgment of the Hon’ble Madras High Court in the case of Venkatanarayanan Somayaji Lakshminarasimha, supra, had held that filing of FTC in terms of Rule 128 is only directory in nature and accordingly, corrected the mistake apparent by giving relief u/s.90/91 of the Act (FTC claim) of sum of Rs.9,78,31,360/-. The rectification order of the AO dated 17.11.2025 reads as follows:-

“The assessee filed his return of income for AY 2023-24 on 30.12.2023 admitting a total income of Rs.33,25,85,490/-. The case was selected for Scrutiny under CASS and completed u/s 143(3) r.w.s 144B of the Income Tax Act, 1961 after making an addition of Rs. 3,83,92,903/- and restricting the claim of relief u/s 91 to Rs. 8,70,22,525/- instead of the assessee’s claim of Rs. 9,78,31,360/-, In the assessment order the AO had denied the full relief u/s 91 stating that the Form 67 was not filed before 31 December 2023.

The assessee had filed the rectification petition stating that the Form 67 was filed on 30.12.2023 before the due date of filing and had also relied upon the Madras High Cont decision in Venkatanarayanan Somayaji Lakshminarasimha V PCIT(W.P.No. 28199 of 2024 dated 04.04.2025) stating the Foreign Tax Credit has to be given credit irrespective of the filing date and as Filing of FTC in terms of the Rule 128 is only a directory in nature. Also the assessee mentioned that the addition of Rs. 3,83,92,903/-was added twice in the computation of income

The claim of the assessee was considered. Since the mistake is apparent from record, the order u/s 154 is passed as under:

The tax computation is as under:

9. In light of the rectification order of the AO, the claim of the assessee for granting FTC for a sum of Rs.9,78,31,360/- has been granted. Therefore, in essence, this appeal filed by the assessee has become infructuous. However, before the assessee could withdraw the appeal, the FAA has passed the impugned order confirming the assessment order dated 11.03.2025. The delay in filing Form No.67 or claim of less amount therein is only a procedural lapse. The claim of lesser amount cannot defeat the substantive claim of FTC. The claim of lesser amount of FTC in Form No.67 will not perpetually disentitle the assessee from the eligible claim of FTC of Rs.9,78,31,360/- when the relevant details of taxes paid in the foreign country are already available in Form No.67. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice should prevail. Therefore, in light of the rectification order of the AO dated 17.11.2025 granting full benefit of FTC of Rs.9,78,31,360/-, the FAA’s order is quashed. It is ordered accordingly.

10. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 14^th May,2026 at Chennai.