Case Law Details
Harshit Satish Gupta Vs DCIT (ITAT Mumbai)
Case Summary:
The case arose from the denial of Foreign Tax Credit (FTC) amounting to Rs. 2,76,317 claimed by the assessee for taxes paid in Germany for AY 2019-20. The assessee, an individual employed with Tata Consultancy Services Ltd., was deputed to TCS Germany Ltd., where he earned salary income that was subjected to tax in Germany. The foreign salary was duly offered to tax in India as part of his global income, and the assessee claimed FTC under Section 90 of the Income Tax Act, 1961 read with Article 23 of the India-Germany Double Taxation Avoidance Agreement (DTAA).
However, while processing the return under Section 143(1), the Central Processing Centre (CPC) denied the FTC solely because Form No. 67 had been filed after the issuance of the intimation under Section 143(1). The subsequent rectification application under Section 154 was also rejected, and the Commissioner of Income Tax (Appeals) upheld the denial by holding that the delayed filing of Form No. 67 disentitled the assessee from claiming FTC.
Aggrieved by the appellate order, the assessee preferred an appeal before the Income Tax Appellate Tribunal, Mumbai Bench. Advocate Sachin P. Kumar, appearing on behalf of the assessee, argued that there was no dispute regarding the foreign income, payment of taxes in Germany, or inclusion of such income in the Indian return. It was contended that Rule 128 prescribing Form No. 67 is merely procedural in nature and cannot override the substantive right to claim FTC under Section 90 of the Act and the India-Germany DTAA. It was further submitted that a procedural lapse cannot result in denial of treaty benefits when the substantive conditions for claiming FTC stand fulfilled.
After examining the facts and legal position, the Tribunal observed that the Revenue had not disputed the genuineness of the foreign income, payment of taxes in Germany, or the quantum of FTC claimed. The Tribunal held that Form No. 67 is only a procedural requirement intended to facilitate verification and does not create or extinguish the right to claim Foreign Tax Credit. It further observed that delayed filing of Form No. 67 cannot be elevated to a substantive disqualification so as to defeat the relief against double taxation envisaged under Section 90 of the Act and the applicable DTAA.
Outcome/Final Judgement:
The Hon’ble ITAT, Mumbai held that delay in furnishing Form No. 67, by itself, cannot be a valid ground for denying Foreign Tax Credit when the assessee has established payment of foreign taxes and inclusion of the corresponding income in India. The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer/CPC to grant FTC of Rs. 2,76,317, subject only to limited factual verification of the foreign taxes paid, if required. The ruling reiterates that procedural requirements cannot override substantive statutory and treaty rights, and that beneficial provisions aimed at eliminating double taxation must be interpreted in a manner that advances, rather than frustrates, their object.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against the order dated 26.11.2025 passed by the learned Addl./JCIT (Appeals)-1, Visakhapatnam under section 250 of the Income Tax Act, 1961 for the assessment year 2019-20.
2. The effective grievance raised by the assessee is against the denial of Foreign Tax Credit (“FTC”) amounting to Rs.2,76,317 in respect of taxes paid in Germany. The authorities below have declined the claim solely on the ground that Form No.67, prescribed under Rule 128 of the Income Tax Rules, 1962, was furnished after the processing of the return under section 143(1) of the Act. Thus, the core issue which falls for our consideration is whether delayed filing of Form No.67, despite there being no dispute regarding payment of foreign taxes and inclusion of the corresponding income in the total income chargeable to tax in India, can by itself disentitle the assessee from availing the substantive benefit of Foreign Tax Credit under section 90 of the Act read with Article 23 of the Double Taxation Avoidance Agreement between India and Germany.
3. The facts, in brief, are that the assessee is an individual deriving income under the head “Salary”. During the relevant previous year, the assessee initially worked with Tata Consultancy Services Ltd. in India and thereafter was deputed to TCS Germany Ltd., where he earned salary income amounting to Rs.13,23,829 on which tax equivalent to Rs.2,76,317 was deducted and paid in Germany. The said foreign salary admittedly formed part of the assessee’s global income offered to tax in India while filing the return of income declaring total income of Rs.16,34,650. Simultaneously, the assessee claimed Foreign Tax Credit under section 90 of the Act in respect of taxes paid in Germany.
4. The return of income was, however, processed under section 143(1) of the Act on 12.03.2021 without granting the Foreign Tax Credit. The assessee thereafter preferred an application under section 154 pointing out that the income earned in Germany had already suffered tax in Germany and the same had also been subjected to tax in India as part of his global income and, therefore, the corresponding tax credit was liable to be granted in accordance with section 90 of the Act and the applicable Double Taxation Avoidance Agreement. The rectification application, however, came to be rejected, which ultimately led to the filing of the present appellate proceedings.
5. Before the learned CIT(A), the assessee furnished detailed written submissions along with the computation of income, Form No.67, salary details, foreign tax particulars and other supporting documents. It was specifically explained that Form No.67 had been electronically furnished on 20.03.2021 and all the material particulars relating to the foreign income as well as taxes paid outside India were fully available on record. It was contended that delayed filing of Form No.67 was merely a procedural lapse and could not defeat the substantive right of claiming Foreign Tax Credit conferred under section 90 of the Act and Article 23 of the India-Germany DTAA. Reliance was also placed upon various judicial precedents holding that filing of Form No.67 is directory in nature.
6. The learned CIT(A.), however, was not persuaded to accept the assessee’s contention. Though he noticed the judicial precedents relied upon by the assessee, he distinguished the same on the ground that in those cases Form No.67 had been furnished before completion of assessment, whereas in the present case Form No.67 was admittedly filed on 20.03.2021, i.e., subsequent to the intimation issued under section 143(1) dated 12.03.2021. Proceeding on this premise, he upheld the action of the CPC in denying the Foreign Tax Credit, leading to the present appeal before us.
7. The learned counsel submitted that there is absolutely no dispute with regard to the factual entitlement of the assessee. The foreign salary earned in Germany has admittedly been included in the total income offered to tax in India and taxes amounting to Rs.2,76,317 have also been duly paid in Germany. The entire claim has been denied merely because Form No.67 came to be filed after the processing of the return under section 143(1). He submitted that Rule 128 merely prescribes the procedural mechanism for claiming Foreign Tax Credit and cannot override either the substantive provisions contained in section 90 of the Act or the treaty obligations embodied in Article 23 of the India-Germany DTAA. It was thus contended that once the substantive conditions for grant of Foreign Tax Credit stand satisfied, delayed compliance with a procedural requirement cannot extinguish a vested statutory and treaty right.
8. Per contra, the learned Departmental Representative strongly relied upon the reasoning given in the impugned order and submitted that Rule 128 specifically requires furnishing of Form No.67 within the prescribed time. Since the assessee admittedly furnished the said form after the intimation under section 143(1), the authorities below were justified in denying the claim of Foreign Tax Credit.
9. We have thoughtfully considered the rival submissions and carefully perused the material available on record. The facts giving rise to the controversy are largely undisputed. It is not the case of the Revenue that the foreign income earned by the assessee in Germany has not been offered to tax in India. Likewise, there is no dispute regarding the payment of foreign taxes amounting to Rs.2,76,317 in Germany, nor has the authenticity of the documents evidencing such payment been questioned. The denial of Foreign Tax Credit rests exclusively on the premise that Form No.67 was furnished after the processing of the return under section 143(1). Thus, the controversy before us lies in a narrow legal compass, namely, whether delayed furnishing of Form No.67 can, by itself, defeat the assessee’s otherwise undisputed entitlement to Foreign Tax Credit under section 90 of the Act read with the India-Germany DTAA.
10. The only objection of the Revenue is that the assessee furnished Form No.67 after the processing of the return under section 143(1) of the Act and, therefore, in terms of Rule 128 of the Income Tax Rules, the claim of Foreign Tax Credit was liable to be rejected. In our considered opinion, such an approach is legally unsustainable. Rule 128 merely prescribes the procedural framework for making a claim of Foreign Tax Credit and Form No.67 is intended to furnish the necessary particulars of the foreign income and taxes paid outside India so as to enable the tax authorities to verify the claim. The Rule neither creates the right to claim Foreign Tax Credit nor stipulates that delayed furnishing of Form No.67 would result in forfeiture of the substantive benefit available under section 90 of the Act or the applicable Double Taxation Avoidance Agreement. Once the assessee has placed on record all the relevant particulars evidencing the foreign income, the taxes paid thereon and the inclusion of such income in the total income chargeable to tax in India, the procedural requirement of filing Form No.67 cannot be construed so rigidly as to defeat the very relief against double taxation which section 90 seeks to provide.
11. The learned CIT(A.) has upheld the denial of Foreign Tax Credit by distinguishing the judicial precedents relied upon by the assessee on the ground that in those cases Form No.67 had been furnished before completion of the assessment, whereas in the present case it was furnished after processing of the return under section 143(1). In our considered opinion, such distinction is more apparent than real and does not alter the legal position. The decisive factor is not the stage at which Form No.67 was furnished but whether the assessee has established his entitlement to Foreign Tax Credit by demonstrating that the income in question has suffered tax in the foreign jurisdiction and has simultaneously been subjected to tax in India. Once these essential conditions stand satisfied and are supported by the relevant documentary evidence, delayed filing of Form No.67, though undoubtedly a procedural lapse, cannot be elevated to the status of a substantive disqualification so as to extinguish the benefit otherwise available under section 90 of the Act. The consistent judicial view emerging from various decisions of the Tribunal has also recognised that the requirement of filing Form No.67 is directory in nature and procedural compliance cannot override the substantive relief envisaged under the Act and the Double Taxation Avoidance Agreement.
12. Applying the aforesaid principles to the facts before us, we find that the Revenue has not disputed the genuineness of the foreign income earned by the assessee, the payment of taxes in Germany or the quantum of Foreign Tax Credit claimed. The denial rests exclusively upon the timing of filing Form No.67. In our considered view, such an approach accords undue predominance to a procedural requirement while overlooking the undisputed substantive entitlement of the assessee. Acceptance of such an interpretation would result in denial of treaty relief notwithstanding the admitted fact that the same income has suffered taxation in both jurisdictions, thereby frustrating the very object for which section 90 of the Act and the Double Taxation Avoidance Agreement have been enacted. Once the factual foundation supporting the claim remains undisputed, delayed filing of Form No.67 by itself cannot be regarded as sufficient to deny the corresponding Foreign Tax Credit.
13. In view of the foregoing discussion, we set aside the impugned order of the learned CIT(A.) and direct the Assessing Officer/CPC to grant Foreign Tax Credit of Rs.2,76,317 to the assessee in accordance with section 90 of the Act read with Article 23 of the India-Germany Double Taxation Avoidance Agreement. However, the Assessing Officer shall be at liberty to carry out only such limited factual verification regarding the quantum of foreign tax paid, if considered necessary, on the basis of the documentary evidence already available on record. Subject thereto, the claim of the assessee shall stand allowed. Accordingly, the grounds raised by the assessee are allowed.
14. In the result, the appeal of the assessee is allowed.
Order pronounced on 30th June, 2026.
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