RAMESH JETHANAND JETHNANI,JAIPUR vs. ITO WARD 26(1)(1), MUMBAI, MUMBAI

The impugned order passed by the Ld. CIT(A) under Section 250 dated 19.02.2026 for Assessment Year 2023-24 is bad in law and facts and liable to be quashed as the Ld. CIT(A) erred in law and on facts in confirming the action of CPC in disallowing Foreign Tax Credit of Rs. 33,915 claimed under Section 90/90A read with the relevant DTAA between India and Indonesia.

That the Ld. CIT(A) erred in law and on facts in upholding the consequential increase in additional tax liability under Section 140B on account of filing of Updated Return (ITR-U), without appreciating that such increase is solely attributable to the wrongful disallowance of Foreign Tax Credit under Section 2 90/90A amounting to 733,915. The said disallowance has resulted in enhancement of additional tax on updated income from 221,300 to 235,856, which is arbitrary, excessive, and not in accordance with law. The appellant submits that once the Foreign Tax Credit is allowed, the additional tax computed under Section 140B is liable to be reduced accordingly.

The Ld. CIT(A) erred in law and on facts in upholding the CPC failure to appreciate that the appellant had duly disclosed foreign income and corresponding foreign taxes paid in Schedule FSI and Schedule TR of the return of income and therefore the claim of Foreign Tax Credit was fully supported by the information furnished in the return.

The Ld. CIT(A) erred in not adjudicating CPC denial of relief in contradiction of CBDT Circular No. 2/2021 dated 25-03-2021 and Rule 128(9) of the Income-tax Rules, 1962, which lays down the mechanism for grant of foreign-tax relief on the basis of information furnished in the return and Form 67, as applicable.

The Ld. CIT(A) wrongly upheld CPC action in confirming the disallowance merely on the ground that Form No. 67 was filed after the filing of the return of income, without appreciating that such requirement is procedural and directory in nature and cannot defeat the substantive right to claim foreign tax relief.

The Ld. CIT(A) erred in upholding the adjustment made under Section 143(1)(a) by CPC thereby ignoring that the issue of allowability of foreign tax credit involves verification of facts and interpretation of P a g e | 3 A.Y. 2023-24 Ramesh Jethanand Jethnani DTAA provisions, which falls outside the limited scope of prima facie adjustments permissible under Section 143(1)(a).

The Ld. CIT(A) erred in not adjudicating that no prior intimation OR opportunity of being heard was provided by CPC as mandated under the proviso to Section 143(1)(a), thereby rendering the adjustment void ab initio.

The Ld. CIT(A) erred in confirming an addition made without any defect, discrepancy OR mismatch in the return of income OR accompanying documents, thereby sustaining an arbitrary and mechanical adjustment.

The Ld. CIT(A) erred in upholding consequential levy of interest under Sections 234A, 234B, 234C and 234D, which is unjustified and liable to be deleted once the Foreign Tax Credit is allowed.

Brief facts of the case are that the assessee, an individual filed return of income declaring total income of Rs. 38,18,740/-.During the relevant previous year, he had earned income from Indonesia and foreign tax amounting to Rs. 33,915/- was paid in the said country on such income. Accordingly, he claimed Foreign Tax Credit(in short „FTC‟) of Rs. 33,915/- under Section 90/90A of the Act read with Article25of the India Indonesia Double Taxation Avoidance Agreement, which provides relief against double taxation of the same income. The return of income was processed by the Centralised Processing Centre (CPC), Bengaluru under Section 143(1) of the Act wherein the claim of above FTC was disallowed.

In the subsequent appeal, the assessee contested the intimation order claiming that delay was only procedural lapse for which P a g e | 4 A.Y. 2023-24 Ramesh Jethanand Jethnani the assessee should not have been allowed otherwise a valid claim as per the Act.

1 The ld.CIT(A) however, rejected the contentions of the assessee holding that filing of Form 67, before filing of original return of income for the year under consideration is a mandatory procedural step to claim FTC against their Indian tax liability and avoid double taxation of the same income. In the instant case, the assessee had filed the Form on 16.12.2024 and the return of income was filed by the assessee on 27.11.2024. The due date for filing original return of income for the said assessment year was 31.07.2023. Since the assessee had filed it after filing his original return of income for the said assessment year, the appeal was dismissed.

When the case was called up for hearing, the case was not represented by anyone. No adjournment petition was also not filed. However, we find that the assessee had e-filed a written submission claiming that the assessee had filed detailed written submissions and documentary evidences including the return of income, schedules relating to foreign income and foreign tax credit, and Form-67 evidencing payment of foreign taxes. He specifically submitted that the foreign income and the foreign taxes paid were duly disclosed in P a g e | 5 A.Y. 2023-24 Ramesh Jethanand Jethnani Schedule FSI and Schedule TR of the return of income, and therefore the claim of Foreign Tax Credit was fully supported by the information furnished in the return. It was further submitted that denial of FTC merely on the ground relating to the timing of filing of Form-67 is contrary to the provisions of Section 90 of the Act, Rule 128 of the Income-tax Rules, 1962 and the applicable DTAA, which provide substantive relief against double taxation.

1 It is contended that the ld.CIT(A), without properly appreciating the facts and evidences placed on record and without considering the legal submissions made by the assessee proceeded to confirm the adjustment made in the intimation issued under Section 143(1). The ld. CIT(A) dismissed the appeal primarily on the ground that Form- 67 was filed after filing of the return of income and therefore the claim of Foreign Tax Credit was not allowable. It was submitted that the impugned order passed was contrary to the provisions of the Act, the applicable DTAA and settled principles of law, as the requirement of filing Form-67is procedural and cannot override the substantive entitlement to FTC in respect of taxes paid in the foreign country.

The ld.DR on the other hand argued that the assessee failed to adhere to the time limit and therefore, the credit was rightly not allowed.

We have duly considered all the related aspects of the case qua the provisions of the Act in this regard. It is not disputed that the assessee made the claim in the prescribed form though belatedly. There was no other deficiency in the claim of the assessee. Short question in this appeal is whether assessee is entitled to foreign tax credit even when the Form no. 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 Act. In such a return of income, he claimed the FTC. However, Form No. 67 was not filed before the „due date‟ of filing return. Rule 128 (9) of 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.

1 We have considered the rival submissions and perused the material available on record. The limited controversy is whether the assessee's claim of FTC can be rejected solely for delayed furnishing of Form No. 67, when the foreign income has been offered to tax in India

Same view was also taken by a coordinate Division Bench in Vinodkumar Lakshmipathi V CIT(A) NFAC ITA No.680/Bang/2022 06.09.2022. Similar decisions have been rendered in Nirmala Murli Relwani v. ACIT, ITA No. 2094/Mum/2022, Satyen Sanghavi No. 1704/Mum/2022 dated 08.09.2022 and Sonakshi Sinha v. CIT, ITA No.6707/MUM/2026. 8.2 Thus, the issue is no more res integra as 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 P a g e | 8 A.Y. 2023-24 Ramesh Jethanand Jethnani prescribe denial of credit of FTC. Further, the Act i.e. section 90 or 91 also does not prescribe timeline for filing of such declaration on or before due date of filing of ROI. 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 No. 67 on or before the end of the assessment year. Therefore, legislature in its own wi om has extended such date which is beyond the due date of filing of the return of income.

3 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 decisions of the coordinate bench on this issue, we hold the assessee is eligible for Foreign tax credit, as he had filed Form no. 67 before though late but not in accordance with Rule 128 (9) of the Income Tax Rules, which provide that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground no.3 to 5 of the appeal which deals with such credit are allowed.

Other grounds of appeal are also revolving around the issue of claim of foreign tax credit and therefore those are allowed.

In the result, the appeal of the assessee is allowed.