GOPAL RAMAKRISHNAN,MUMBAI vs. DCIT 27(1), NAVI MUMBAI

PER OM PRAKASH KANT, AM:

These two appeals filed by the assessee arise from separate orders dated 28.01.2026 and 03.03.2026 passed by the learned Additional Commissioner of Income-tax (Appeals), Gwalior ["Ld. CIT(A)"] under the faceless appellate scheme for Assessment Years

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2019-20 and 2020-21, respectively. Since the controversy involved in both the appeals is identical and arises from substantially similar facts, they were heard together and are being disposed of by this consolidated order for the sake of convenience and to avoid repetition. The appeal for Assessment Year 2019-20 was treated as the lead case and, with the consent of both parties, our decision therein shall apply mutatis mutandis to Assessment Year 2020-21. The grounds raised in assessment year 2019-20 accordingly reproduced as under:

i. The Learned CIT(A) erred in law and on facts in dismissing the appeal and upholding the disallowance of Foreign Tax Credit (FTC) of Rs. 43,69,076/-claimed under section 90/90A of the Act. ii. The Learned CIT(A) erred in holding that Rule 128(9) is mandatory merely because the word "shall" is used, without appreciating that the requirement of filing Form 67 is procedural and directory in nature. iii. The Learned CIT(A) failed to appreciate that procedural requirements under the Rules cannot override substantive relief granted under section 90/90A read with applicable DTAA. iv. The Learned CIT(A) erred in holding that FTC cannot be allowed in absence of condonation u/s 119(2)(b), despite settled judicial precedents holding that appellate authorities are empowered to grant relief where substantive conditions are satisfied. v. The adjustment under section 143(1) was bad in law as no prior intimation under first proviso to section 143(1)(a) was issued before making the adjustment.

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vi. Your Appellants crave leave to add, alter or amend or withdraw the ground of Appeal and submit such statements, documents and papers as may be considered necessary either at or before hearing of the appeal.

Country Income Tax paid Relief Name outside India claimed Malaysia 58,92,936 16,49,097 16,49,097 Singapore 1,36,09,996 24,15,087 24,15,087 Sri Lanka 16,63,280 3,04,892 3,04,892 Total 2,11,66,212 43,69,076 43,69,076

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2.1 The return was processed under section 143(1) of the Act by the Centralised Processing Centre ("CPC") on 08.03.2021. While processing the return, the CPC disallowed the claim of FTC amounting to ₹43,69,076/- on the ground that Form No.67 had not been furnished within the prescribed time under Rule 128 of the Income-tax Rules, 1962 ("the Rules"), resulting in a consequential demand. 2.2 Before the learned CIT(A), the assessee contended that the foreign income had been duly offered to tax in India and the foreign taxes had actually been paid in the respective jurisdictions. It was submitted that there was no dispute regarding either the taxability of the income in India or the quantum of foreign taxes paid. According to the assessee, the denial of FTC rested solely on the delayed filing of Form No.67, which constituted only a procedural requirement incapable of defeating the substantive statutory entitlement conferred under section 90 of the Act read with the applicable Double Taxation Avoidance Agreements ("DTAAs"). Reliance was placed upon several judicial precedents holding that filing of Form No.67 is directory and not mandatory.

2.3 The learned CIT(A), however, rejected the contention. According to him, Rule 128(9) employs the expression "shall" and, therefore, filing of Form No.67 on or before the due date prescribed

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under section 139(1) of the Act was mandatory. He further held that, in the absence of condonation of delay under section 119(2)(b) of the Act, the appellate authority lacked jurisdiction to grant the benefit of FTC. The Ld. CIT(A) rejected the claim of the assessee of observing as under:

“5.6 The grant of Foreign Tax Credit is governed by Rule 128 of the Income Tax Rules, 1962 (Rules) which is extracted as under:

"Foreign Tax Credit. 128. (1) An assessee, being a resident shall be allowed a credit for the amount of any foreign tax paid by him in a country or specified territory outside India, by way of deduction or otherwise, in the year in which the income corresponding to such tax has been offered to tax or assessed to tax in India, in the manner and to the extent as specified in this rule: Provided that in a case where income on which foreign tax has been paid or deducted, is offered to tax in more than one year, credit of foreign tax shall be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India."

5.7 One of the requirements of Rule 128 for claiming FTC is provided by Rule 128 (8) & (9) of the Rules and the same reads thus: "(8) Credit of any foreign tax shall be allowed on furnishing the following documents by the assessee, namely: -

(i) a statement of income from the country or specified territory outside India offered for tax for the previous year and of foreign tax deducted or paid on such income in Form No.67 and verified in the manner specified therein; (ii) certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee, -

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(a) from the tax authority of the country or the specified territory outside India; or (b) from the person responsible for deduction of such tax; or (c) signed by the assessee:

Provided that the statement furnished by the assessee in clause (c) shall be valid if it is accompanied by, (A) an acknowledgement of online payment or bank counter foil or challan for payment of tax where the payment has been made by the assessee; (B) proof of deduction where the tax has been deducted. (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 due date specified for furnishing the return of income under subsection (1) of section 139, in the manner specified for furnishing such return of income."

5.8 The Appellant has filed Return of Income on 31.08.2019 for A.Y. 2019- 20. The Appellant has claimed FTC of Rs. 43,69,076 /- u/s. 90 of the Act in the return of income. The Appellant did not file the Form 67 along with the return of income. The Appellant has failed to furnish Form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act which is mandatory according to Rule 128(9) of the Rules. Therefore, the return of income was processed by Centralized Processing Centre (CPC) electronically and intimation u/s 143(1) of the Act on 08.03.2021 was passed disallowing the claim of FTC. The word "shall" has been used in the rule 128(9) therefore the provisions of rule 128 are mandatory in nature and not directory. From the above, it is apparent that unless there is an order condoning the delay in filing Form No. 67 by the PCIT under Section 119(2)(b), such Form No. 67 can't be taken into consideration and the relief u/s. 90/90A cannot be allowed by the Appellate Authority even if other conditions are fulfilled.” 3. Before us, the learned counsel for the assessee filed a paper book comprising of pages 1-94 and addressing ground Nos. 1 to 4 of the appeal reiterated that the assessee had duly disclosed the

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foreign income in the return of income and had actually suffered taxes in the foreign jurisdictions. It was submitted that there is no dispute regarding the assessee's substantive eligibility for FTC under section 90 of the Act or under the applicable DTAAs. The only basis for denial of the claim is the delayed filing of Form No.67, which was admittedly furnished on 05.12.2025 during the appellate proceedings. It was argued that Rule 128 merely prescribes the procedural mechanism for claiming FTC and cannot curtail the substantive statutory right conferred by section 90 of the Act. Reliance was placed upon the decisions of the Hon'ble Madras High Court and various Coordinate Benches of the Tribunal. 3.1 The ld. Counsel further submitted that said form was duly filed on 05/12/2025 during the appellate proceedings before the Ld. CIT(A). He submitted that Section 90 of the Act grants a substantive statutory right to claim FTC. Once foreign income is taxed in India and foreign taxes are paid, the credit cannot be denied on a mere procedural lapse. The denial of FTC defeats the object of DTAA and results in double taxation, which is impermissible in law. He submitted that it is settled law that use of the word "shall" does not automatically render a provision mandatory. The intention of the statute, object of the provision and consequences of non-compliance must be examined. He submitted

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that Rule 128 is a procedural rule prescribing the manner of claiming FTC and it does not create or extinguish the right to FTC. The ld Counsel relied on following judgments wherein it was held that filing of Form 67 is directory and not mandatory:

(i) Venkatanarayanan Somayaji Lakshminarasimha v/s PCIT (Hon'ble High Court of Madras) (Writ Petition. No. 28199 of 2024 and Writ Misc. Petition. Nos. 30742 and 30744 of 2024)

(ii) Rohan Hattangadi Vs CIT (A) (Hon'ble ITAT Mumbai) (ITA No.1896/Mum/2022)

(iii) Ritesh Kumar Garg Vs ITO (Hon'ble ITAT Jaipur) (ITA No. 261/JP/2022)

(iv) Brinda Rama Krishna Vs ITO (2022) (Hon'ble ITAT Bangalore) (ITA. No. 454/Bang/2021)

(v) Commissioner Of Income Tax Vs. Shivanand Electronics (Hon'ble Bombay High Court) (IT Ref. No. 117 of 1981)

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3.2 The ld Counsel submitted that the Madras High Court specifically held that delay in filing Form 67 cannot disentitle an assessee from claiming FTC. The Learned CIT(A) failed to appreciate that Rule 128 must be interpreted in harmony with section 90 and DTAA.

3.3 The ld Counsel further submitted that Section 119(2)(b) is a parallel administrative remedy and does not bar Appellate Authority for accepting claim . He submitted that the Learned CIT(A) wrongly abdicated jurisdiction by refusing to adjudicate on merits.

3.4 The Ld. Counsel submitted that in AY 2018-19, the Assessing Officer himself has allowed Foreign Tax Credit in order passed under section 154 of the Act dated 26/06/206. 3.5 The learned Departmental Representative, on the other hand, supported the orders of the lower authorities.

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4.1 There is no dispute that the foreign income in question has been offered to tax in India. Equally, there is no dispute that foreign taxes were actually paid in Malaysia, Singapore and Sri Lanka. The Revenue has not disputed either the genuineness of the foreign taxes paid or the assessee's substantive entitlement to claim FTC under section 90 of the Act. The claim has been denied exclusively on the ground that Form No.67 was not furnished within the time stipulated under Rule 128(9).

4.2 This issue is no longer res integra. The Coordinate Bench of Nirmala Murli Relwani v. ACIT this Tribunal in (ITA No.2094/Mum/2022), after considering the scheme of section 90, Rule 128 and the amendment brought into Rule 128(9) with effect from 01.04.2022, held that the requirement of filing Form No.67 is procedural in nature and that mere delay in filing the prescribed form cannot defeat an assessee's substantive entitlement to Foreign Tax Credit. For ready reference, relevant finding is reproduced as under:

“5. During the hearing, the learned Authorised Representative ('learned A.R) submitted that the assessee is an old lady of about 84 years of age. The assessee received some income from the Company headed by her brother on which tax was already paid in Ghana. Due to the death of her brother, the repatriation of money was delayed due to some paperwork and the assessee was unable to file Form No.67 within the prescribed due date. Upon receipt of Form No. 67, the assessee filed a revised return of income under section 139(5) of the Act and claimed the foreign tax credit of Rs.

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11,79,796. The learned AR submitted that the revised return of income was filed within the extended time provided under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, and notifications issued thereunder by the CBDT. Learned AR also submitted that provisions of section 90/91 of the Act are substantive provisions and the provisions of Rule 128 of the Income Tax Rules, 1962, cannot override the same. Learned AR placed reliance upon certain decisions of the coordinate bench of the Tribunal in support of its submissions.

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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). In the present case, the assessee though filed her original return of income within the extended time granted vide order dated 23/07/2019, passed by the CBDT under section 119 of the Act, however, furnished Form No.67 along with her revised return of income on 26/08/2020. We further find that Rule 128(9) has recently 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 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, in ITA No. 1704/Mum./2022, vide order dated 08/09/2022, 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 under: "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

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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 decisions of the coordinate

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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 in another decision in Anuj Bhagwati vs DCIT, in ITAS No.1844 and 1845/Mum./2022, the coordinate bench of the Tribunal vide order dated 20/09/2022, while deciding a similar issue held that section 90/91 of the Act has not been amended insofar as grant of foreign tax credit is concerned and Rules cannot override the Act and therefore filing of Form No. 67 is not mandatory but it is directory. The relevant findings of the coordinate bench of the Tribunal in the aforesaid decision are as under: "8. We considering the facts, circumstances provisions of the Act and judicial decisions are of the opinion that there is no amendment on these aspects in the Section 90 of the Act and the Rules cannot override the Act and therefore the filing of Form No 67 is not mandatory but it is directory. Accordingly, We restore the disputed issue to the file of the CIT(A) to adjudicate afresh on merits considering the observations in above paragraphs and the ratio of judicial decisions. Further the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal and allow the grounds of appeal of the assessee for statistical purposes. 12. Thus, respectfully following the aforesaid decisions of the coordinate bench of the Tribunal, 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 foreign tax credit 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, therefore, we deem it appropriate to direct the jurisdictional Assessing Officer to decide the claim of the foreign tax credit on merits, after accepting the Form No. 67 and other related documents filed by the assessee. Accordingly, grounds raised by the assessee are allowed for statistical purposes.”

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4.3 Further, the Tribunal in the case of Aparna Girish Hebbani in ITA No. 5061/MUM/2025 held as under:

“5.3. The Coordinate Bench of ITAT, Mumbai in the case of Sonakshi Sinha (supra) had succinctly dealt with this issue by holding that it is well settled that while laying down a particular procedure, if no negative or adverse consequence 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. Coordinate Bench also observed that u/s.90 or 91 of the Act, no time line for filing of such declaration on or before the date of filing of return of income is prescribed. For not allowing credit of foreign taxes, conditions are specifically prescribed in Rule 128(4). Amendment brought to Rule 128 to this effect is effective from 01.04.2022, not applicable to the present case. Coordinate Bench while giving its decision has placed reliance on other decisions of the Coordinate Bench in the case of 42 Hertz Software India Private Ltd. vs. ACIT [2022] 139 taxmann.com 448 (Bng), wherein it followed the earlier order in the case of Brinda Ramakrishna vs. ITO [2022] 135 taxmann.com 358 (Bng). It also referred to the decision of Binod Kumar Lakshmipati vs. CIT in ITA No. 680/Bng/2022, dated 06.09.2022. In all these decisions, it was held that "one of the requirement of Rule 128 for claiming FTC is that Form-67 is to be submitted by the 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 of filing of Form No.67% 5.4. It is further noted that amendment to Rule 128 is effective from 01.04.2022 whereby assessee is allowed to file Form-67 on or before the end of the Assessment Year, whereby legislature has extended such date which is beyond the due date of filing of return of income. It was submitted that filing of Form 67 as per the provisions of section 90 read with Rule 128(9) is a procedural law and should not control the claim of FTC. In the present case, it is also important to note that assessee has made all possible efforts within the provisions of the Act to claim credit for FTC including

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application filed u/s.119(2)(b) which was also rejected. Also, it is a case where assessee was constrained from meeting the compliance of uploading Form-67 owing to Covid 2019 restrictions for travelling to India. The technical glitches relating to OTP could not be resolved by the assessee until she visited India in December, 2021 where upon all the required steps were taken on priority basis. Thus, assessee has substantively complied with the requirements in filing Form-67 for claim of FTC which cannot be denied on account of technical glitches/grounds, more particularly when DTAA provisions and section 90 would overrule such procedural requirement for lapses when substantive compliance has been made. 6. Considering holistically the factual matrix and the provisions of the Act u/s. 90/91 r.w. India-Australia DTAA and the judicial precedents discussed above, Id. Assessing Officer is directed to give credit for the foreign taxes paid by the assessee and claimed in her return. Accordingly, grounds raised by the assessee in this respect are allowed.” 4.4 The Tribunal in above cases has followed decision of Coordinate Benches in Sonakshi Sinha vs CIT, in ITA No. 1704/Mum./2022, vide order dated 08/09/2022, Ms. Brinda Rama Krishna v.ITO [2022] 135 taxmann.com 358 (Bang Trib) 42 Hertz Software India (P.) Ltd v. ACIT [2022] 139 taxmann.com 448 (Bangalore - Trib.) and several other decisions.

4.5 The consistent judicial view emerging from these decisions is that Rule 128 neither creates the substantive right to claim FTC nor provides for forfeiture of such right in the event of delayed filing of Form No.67. The substantive right emanates from section 90 of the Act read with the applicable DTAA. A procedural requirement cannot be interpreted so as to frustrate the legislative object of

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avoiding double taxation, particularly when no adverse consequence has been expressly prescribed for delayed compliance.

4.6 We are in respectful agreement with the aforesaid line of decisions. The learned CIT(A), in our considered opinion, was not justified in holding that the assessee could seek relief only by invoking the condonation mechanism under section 119(2)(b) of the Act. The remedy under section 119(2)(b) is administrative in character and cannot curtail the appellate jurisdiction to grant relief where the assessee otherwise satisfies the substantive conditions prescribed under the Act.

4.7 In the present case, the assessee has admittedly furnished Form No.67, though belatedly, and there is no allegation that the claim of FTC is either fictitious or otherwise inadmissible on merits. In these circumstances, denial of FTC merely on account of delayed filing of Form No.67 would elevate a procedural requirement over a substantive statutory right and would defeat the very object underlying section 90 of the Act and the relevant DTAAs.

4.8 Accordingly, the impugned orders are set aside and the matter is restored to the file of the Assessing Officer with a direction to examine the assessee's claim of Foreign Tax Credit on merits after taking on record Form No.67 and the supporting evidences furnished by the assessee. Subject to verification that the taxes

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claimed as credit have actually been paid in the respective foreign jurisdictions and that no refund thereof has been claimed or received abroad, the Assessing Officer shall grant the admissible Foreign Tax Credit in accordance with law. Since we have held that the delay in furnishing Form No.67 cannot, by itself, disentitle the assessee from claiming FTC, no separate recourse to the condonation mechanism under section 119(2)(b) of the Act would be necessary in the facts of the present case.

4.9 Ground Nos.1 to 4 are, accordingly, allowed for statistical purposes.

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directions. Our findings for Assessment Year 2019-20 shall apply mutatis mutandis to that year as well.

Order pronounced in the open Court on 15/07/2026.

Sd/- Sd/- (PAWAN SINGH) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 15/07/2026 Z.U., P.S.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER,

//True Copy// (Assistant Registrar) ITAT, Mumbai