MAHESH KUMAR PESALA,HYDERABAD vs. ITO, WARD-4(1), HYDERABAD

Succinctly stated, the assessee had filed his return of income for AY 2018- 19 on 28.08.2018 under Section 139(1) of the Act, claiming foreign tax credit (FTC) of Rs.1,46,204/- under Section 90 of the Act. However, as Form No.67 was not furnished within the time originally prescribed under Rule 128 of the Income- tax Rules, 1962, the AO/CPC, while processing the return under Section 143(1) of the Act, declined the assessee’s claim for FTC and consequently raised a demand of Rs.1,90,660/-.

Aggrieved, the assessee assailed the action of the Assessing Officer/CPC before the CIT(A), but without success.

The assessee, aggrieved with the CIT(A) order, has carried the matter in appeal before us.

We have heard the authorized representatives of both the parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service before us.

The Ld. Authorized Representative (for short, “AR”) for the assessee at the threshold of hearing of the appeal, submitted that the controversy is squarely covered by the order of the coordinate bench of the ITAT, “B” Bench, Mumbai in Nirmala Murli Relwani Vs. ADIT, ITA No. 2094/Mum/2022, dated 01/12/2022 and that of ITAT, “SMC-B” Bench, Bangalore in Mrs. Brinda Rama Krishna Vs. The ITO, Ward 5(3)(1), Bangalore, ITA No. 454/Bang/2021, dated 17/11/2021. Apart from that, it was submitted that as per the amendment carried out in Rule 128(9) vide CBDT Notification No.100/2022 dated 18.08.2022, it has been provided that Form No.67 may be furnished on or before the end of the relevant assessment year, provided the return of income has been furnished within the time prescribed under Section 139(1) or Section 139(4) of the Act. It was submitted that the assessee had admittedly furnished his return of income within the time prescribed under Section 139(1) and, therefore, the denial of FTC merely on account of delayed furnishing of Form No.67 cannot be sustained.

Per Contra, the Ld. Senior Departmental Representative (for short, “DR”) relied upon the orders of the authorities below.

The controversy involved in the present appeal lies in a narrow compass, i.e., whether the FTC claimed by the assessee can be denied merely because Form- 67 was furnished after the due date prescribed under Rule 128 of the IT Rules, 1962?

Admittedly, it is a matter of fact borne from the record that the assessee had furnished his return of income within the extended due date under section 139(1) of the Act. It is also not the case of the Revenue that the assessee was otherwise ineligible for claiming foreign tax credit. In fact, the claim has been declined solely because Form No.67 had not been furnished within the period originally prescribed.

We find that an identical issue had come up for consideration before the “SMC” Bench of ITAT, Bangalore in the case of Pornprapha Pholdahan vs. ITO, Ward-4(1)(1), Bangalore, in ITA No.1232/Bang/2026, dated 29/06/2026 (supra), wherein, it was held that where Form No. 67 is not filed within time but is available at the assessment or appellate stage, or within such further time as may be permitted by judicial decisions or circulars, the benefit should not be denied merely on account of delay. Accordingly, the Tribunal had directed the AO to grant the FTC where the substantive conditions stood satisfied.

In the case before us, we find that the facts therein involved are identical. Admittedly, the Revenue has not disputed the assessee’s entitlement to FTC except on the ground that Form-67 was filed belatedly. We thus, respectfully following the order of the Tribunal in the case of Pornprapha Pholdahan vs. ITO, Ward-4(1)(1), Bangalore, in ITA No.1232/Bang/2026, dated 29/06/2026 (supra), hold that in the totality of the facts involved in the present case before us the assessee cannot be denied FTC merely on account of delayed filing of Form-67. We, therefore, set aside the order of the CIT(Appeals) and direct the AO/CPC to allow the assessee’s claim for foreign tax credit of Rs. 1,90,660/- after necessary verification.

Before parting, we may herein observe that Rule 128 of the IT Rules, 1962 is a machinery provision intended to regulate the procedure to claim Foreign Tax Credit and the same cannot override the substantive relief available to an assessee under Section 90 of the Act r.w. applicable DTAA, once the conditions prescribed therein are otherwise fulfilled. Therefore, the denial of FTC merely because of delay in furnishing of Form-67 is unsustainable and is accordingly set aside.

In the result, the appeal filed by the assessee is allowed in terms of our aforesaid observations.

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