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Facts
The assessee, an individual, filed a revised return of income declaring foreign income and claimed foreign tax credit. The claim was disallowed by the lower authorities on the grounds that necessary documents were not furnished, and the Form 67 was filed late.
Held
The Tribunal held that the denial of foreign tax credit cannot be based on technical or procedural lapses when substantive evidence has been provided. The Tribunal noted that the delay in filing Form 67 was not deliberate and the necessary documents substantiating foreign tax payment were produced.
Key Issues
Whether the disallowance of foreign tax credit solely on the ground of late filing of Form 67 and non-furnishing of certain documents is justified when substantive evidence of tax payment is available.
Sections Cited
143(1), 154, 90, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the Addl/JCIT(A)-1, Guwahati vide order dated 03/03/2025 in DIN No. ITBA/APL/S/250/2024-25/1073934337(1) for the assessment year 2018-19.
The effective issue raised by assessee is that the learned CIT(A) erred in not allowing the foreign tax credit.
The facts in brief are that the assessee is an individual and for the year under consideration, originally filed return of income as on 31st August 2018 declaring total income at Rs. 3,12,400/- being income derived from long term capital gain and bank interest. Subsequently, the assessee realised that inadvertently foreign incomes on account of bank interest and dividend for Rs. 10,23,166/- and Rs. 1,54,460/- respectively were omitted to be declared in the original return of income. Hence, the assessee revised the return as on 30th January 2019 in which included the foreign income and also claimed the credit of taxes paid of Rs. 1,85,150/- on the impugned foreign income in relevant foreign territory (USA). The assessee before revising the return also filed Form -67 as on 24th January 2019.
The revised return of the assessee was processed under section 143(1) of the Act as on 9th June 2020 wherein the claim of foreign tax credit for Rs. 1,85,150/- was disallowed. The assessee also filed rectification application under section 154 of the Act but same was also rejected.
Thus, the assessee preferred an appeal before the learned CIT(A).
The assessee before the learned CIT(A) submitted that the adjustment under section 143(1) of the Act regarding the claim of FTC was made without prior intimation which is in violation of first proviso to section 143(1) of the Act and violation of principles natural justice. Further, the claim of FTC was disallowed in intimation order issued under section 143(1) of the Act without specifying any reason which is again a .
Page 3 of 6 violation of natural justice. Accordingly, the assessee prayed to the learned CIT(A) to quash the intimation order.
6.1 The assessee also submitted that all the requirements for claiming the FTC as per section 90 of the Act r.w.r. 128 of the IT Rule have been duly complied with. The form 67 was not filed on or before the due date prescribed under section 139(1) of the Act for the reason that the FTC was claimed through revised return. As such, the Form-67 was filed only before filing the revised return of income. Therefore, the delay in filing of Form-67 was not deliberate or intentional but due to the reasonable cause.
However, the learned CIT(A) found that the assessee though has filed Form 67 as required under rule 128(8)(i) of the IT Rules but failed to furnish other documents as specified under rule 128(8)(ii) of IT Rule which are detailed as under: (ii) Certificate or statement specifying the nature of income and the amount of tax deducted therefrom or paid by the assessee,— (a) from the tax authority of the country or 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.
7.1 Accordingly, the learned CIT(A) held that in the absence mandatory details the CPC rightly disallowed the claim of the assessee with respect to the claim of FTC.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us submitted paper book running from pages 1 to 160 and contended that the lower authorities have erred both in law and on facts in denying the claim of the assessee. It was argued that the intimation under section 143(1) of the Act, which was confirmed by the learned CIT(A), is bad in law and liable to be quashed. The ld. AR pointed out that the assessee had duly furnished all relevant details and supporting documents for claiming foreign tax credit as per section 90 of the Act, but despite this, the claim was rejected mechanically by the authorities below.
9.1 The ld. AR further submitted that the denial of foreign tax credit of ₹1,85,150/- is unjustified. The assessee had complied with the prescribed requirements and furnished proof of taxes paid abroad. On proper appreciation of facts and law, the assessee is entitled to such credit as claimed in the return of income. The authorities failed to appreciate that the assessee had fulfilled all the conditions laid down for availing the foreign tax credit and hence the credit ought to have been allowed.
On the other hand, the learned DR vehemently supported the finding of lower authorities.
We have heard the rival contentions of both the parties and perused the materials placed on record, including the paper book filed by the assessee. The undisputed facts are that the assessee, an .
Page 5 of 6 individual, had revised his return of income on 30th January 2019 declaring foreign income and claimed credit of foreign taxes paid amounting to ₹1,85,150/-. The assessee had also filed Form 67 on 24th January 2019, i.e., prior to filing of the revised return. The lower authorities have rejected the claim mainly on the ground that necessary documentary evidence of foreign taxes paid was not furnished.
11.1 On perusal of the records, we find that the assessee has produced before us the copy of Federal Tax Payment Voucher and copy of US Tax Return, available at pages 79 to 160 in the paper book. These documents substantiate that the assessee had indeed paid tax in the USA on the foreign income offered to tax in India. Thus, the requirement of Rule 128(8)(ii) of the Income-tax Rules, 1962, stands duly complied with.
11.2 It is a settled principle that denial of substantive benefit like Foreign Tax Credit, which is guaranteed under section 90/91 of the Act read with applicable DTAA, cannot be denied merely on technical or procedural lapses, particularly when the assessee has subsequently furnished all the relevant details and evidences. Several Hon’ble High Courts as well as the Tribunal in various decisions have held that the filing of Form 67 within prescribed time limit i.e. on or before due date specified u/s 139(1) of the Act (prior to amendment applicable from A.Y. 2022-23) is directory in nature and the assessee cannot be deprived of legitimate FTC merely on account of procedural delay.
11.3 In view of the above discussion and after considering the evidence of foreign tax payment placed in the paper book, We are of the . opinion that the assessee is entitled to claim the Foreign Tax Credit as per law. Accordingly, we direct the AO to verify the copies of the Federal Tax Payment Voucher and the US Tax Return filed by the assessee and thereafter allow the claim of FTC of ₹1,85,150/- in accordance with law. Hence, the ground of appeal of the assessee is hereby allowed subject to above direction.
In the result appeal of the assessee is hereby allowed subject to direction.
Order pronounced in court on 26th day of August, 2025