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Facts
The assessee, employed in the UK, filed a revised return claiming foreign tax credit (FTC) of Rs. 76,51,818. Form 67, required for claiming FTC, was filed after the original return due date but before the revised return was processed.
Held
The Tribunal held that the time limit for filing Form 67 is directory and not mandatory. Since the assessee filed Form 67 before the processing of the revised return, the denial of FTC was not justified.
Key Issues
Whether denial of foreign tax credit is justified when Form 67 was filed after the due date of the original return but before the processing of the revised return, and if the time limit for filing Form 67 is mandatory or directory.
Sections Cited
143(1), 139(1), 246A, 119(2)(b)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
This appeal is filed by Shri Alok Kumar Jain (the assessee/appellant) for the assessment year 2019-20 against the appellate order passed by the Addl./JCIT(Appeals) [ld. CIT(A)] dated 10.01.2025 wherein the appeal filed by the assessee against the intimation passed u/s. 143(1)
dated 17.3.2021 by the CPC, Bangalore denying foreign tax credit of Rs.76,51,818 for non-filing of Form 67, was dismissed.
The assessee is aggrieved with the same and has preferred this appeal raising several grounds as under:-
“Ground No. 1: Non grant of Foreign Tax Credit ('FTC') of Rs. 76,51,818 On the facts and circumstances of the case and in law, the Ld. Additional/ Joint Commissioner of Income-tax (Appeals) — 6, Delhi .ADDL/JCIT(A)] has erred in confirming the action of the Ld. Assessing Officer, CPC (Ld. AO) of making the adjustment in the Intimation under Section 143(1) of the Income-tax Act, 1961 ('Act') of not allowing Foreign Tax Credit ('FTC') of Rs. 76,51,818 on the premise that Form 67 in support of claim of FTC was filed beyond the due date of filing of the Return of Income under Section 139(1) of the Act. It is prayed that the Order of the Ld. ADDL/JCIT(A) is contrary to the following Judicial Pronouncements relied upon during the Appellate Proceedings before the Ld. ADDL/JCIT(A): • Decision of the Hon'ble High Court in the case of Duraiswamy Kumaraswamy Vs. The Principal Commissioner of Income Tax • Order of the Hon'ble ITAT in the case of Ms. Brinda RamaKrishna vs. The Income Tax Officer, Ward 5(3)(1), Bangalore [ITA No. 454/Bang/2021] (Order of Hon'ble Jurisdiction ITAT for my case) • Order of the Hon'ble ITAT in the case of Ms. 42 Hertz Software India Pvt. Ltd. vs. ACIT, Circle 3(1)(1), Bangalore [ITA No. 29/Bang/2021] • Order of Hon'ble ITAT in case of Vinodkumar Lakshmipathi vs. CIT(A), NFAC [ITA. 680/Bang/2022]
• Order of the Hon'ble ITAT in case of Ms. Sonakshi Sinha vs. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (ITA No. 1704/Mum/2022) • Order of the Hon'ble ITAT in case of Income-tax officer, Ward 1(1), Asansol vs. Sandip Choubey [ITA No. 742/Kol/2022] It is therefore, prayed that the Learned Jurisdictional Assessing Officer (Ld. JAO) be directed to grant the FTC of Rs. 76,51,818. Ground No. 2: Form 67 in support of FTC was e-filed and e- verified on 23 July 2020 On the facts and circumstances of the case and in law, the Ld. ADDL/JCIT(A) erred in stating in Para 6.1 of his Order that Form 67 in support of claim of FTC in the Revised Return of Income was not filed. It is prayed that Form 67 in support of claim of FTC in the Revised Return of Income was e-filed and e-verified on 23 July 2020 as - c -: gyred by Ld. ADDL/JCIT(A) himself in the subsequent paragraph. Ground No. 3: Appellant had approached the Ld. ADDL/JCIT(A) in an appeal and not for condonation of delay in filing of Form 67 On the facts and circumstances of the case and in law, the Ld. ADDL/JCIT(A) erred in stating in his Order that the Appellant needs to file an application before the Ld. Principal Commissioner of Income Tax for condoning the delay in filing of Form 67. It is prayed that the Ld. ADDL/JCIT(A) should have appreciated that the Appellant had approached the Ld. ADDL/JCIT(A) in an appeal under Section 246A of the Act and not for condonation of delay in filing of Form 67. The decision sought by the Appellant from the Ld. ADDL/JCIT(A) was: • Whether FTC can be denied for delay in filing of Form 67 beyond the due date of filing of Return of Income under Section 139(1) of the Act, in view of several judicial precedents relied upon during the Appellate Proceedings before the Ld. ADDL/JCIT(A); and • Whether 143(1) proceedings are valid in law as the Ld. AO had not followed the provisos to Section 143(1)(a) of the Act of giving an opportunity to the Appellant to defend his case, in view of several judicial precedents relied upon during the Appellate Proceedings before the Ld. ADDL/JCIT(A). it is, therefore, prayed that the Ld. JAO be directed to allow FTC of Rs. 76,51,818. Ground No. 4: Proceedings under Section 143(1) of the Act are invalid in law On the facts and circumstances of the case and in law, the Ld. ADDL/JCIT(A) has erred in mentioning that FTC was denied in the Intimation under Section 143(1) of the Act after formal communication with the Appellant about the same. It is prayed that no formal communication was sent to the Appellant as required by the proviso to Section 143(1)(a) of the Act. Hence, the order of the Ld. ADDL/JCIT(A) is contrary to the following orders of Hon'ble ITAT relied upon during the Appellate Proceedings before the Ld. ADDL/JCIT(A): • Arham Pumps v. Deputy Commissioner of Income Tax (CPC), Bengaluru (ITA No.206/Ahd/2021) • Ernst & Young Merchant banking Services LLP Vs. ADIT, CPC, [ITA No. 2333/Mum/2022] It is, therefore, prayed that the Ld. JAO be directed to allow FTC of Rs. 76,51,818. Ground No. 5: Orders of the Hon'ble High Court/ ITAT not followed by the Ld. ADDL/JCIT(A) On the facts and circumstances of the case and in law, the Ld. ADDL/JCIT(A) has erred in not following Judicial Pronouncements mentioned in Ground Nos. 1 and 4 above relied upon during the appellate proceedings before the Ld. ADDL/JCIT(A). It is prayed that the Order of the Ld. ADDL/JCIT(A) of not following the above-mentioned Judicial Precedents is contrary to the judicial pronouncements:
• Decision of the Hon'ble Supreme Court in the case of Assistant Collector of Central Excise vs. Dunlop India Ltd. [(1985) 154 ITR 172 (SC)] • Decision of the Hon'ble Telangana High Court in the case of Mylan Laboratories Limited v. The Additional/Joint/Deputy/Assistant Commissioner of Income Tax/income-Tax Officer National Faceless Assessment Centre, Income Tax Department, Delhi & Another [TS-46-HC- 2022(TEL)] • Order of the Hon'ble ITAT in the case of Northern Coalfields Limited Vs. Assistant Commissioner of Income Tax, Circle 2(1), Jabalpur (I.T.A. No. 18/Jab/2014) It is, therefore, prayed that the Ld. JAO be directed to allow FTC of Rs. 76,51,818. The Appellant craves leave to add, alter, amend or withdraw any/ all of the above Grounds of Appeal either before or during the hearing of the Appeal.”
3. The brief facts of the case show that assessee is an individual, employed with Blackstone Advisors India Pvt. Ltd., who was sent on assignment to UK from 15.1.2018 to 31.12.2018. For the impugned assessment year, the assessee was Resident and Ordinarily Resident, filed his return of income on 31.8.2019 at a total income of Rs.3,05,22,440. In the return of income assessee claimed tax relief of Rs.3,67,548, but did not file any Form
67. As the assessee was to include his salary earned during the deputation period and consequent tax paid in UK is also eligible for relief, he revised his return of income on 30.7.2020 at a total income of Rs.3,78,60,990 and claimed tax relief of Rs.76,51,818. He did file Form 67 along prior to filing revised return i.e. on 23/07/2022. The CPC considered the revised return of the assessee, determined the total income of assessee at Rs.3,78,60,990, however did not grant any credit for foreign taxes paid. The intimation u/s. 143(1) was passed on 17.3.2021.
4. The assessee preferred an appeal before the ld. CIT(Appeals) wherein it was submitted assessee has already filed Form 67 in accordance with Rule 128 of the I.T. Rules on 23.7.2020 which is prior to filing of the revised return on 30.7.2020 and therefore he should have been granted the tax credit. The ld. CIT(Appeals) held that there is a delay in filing Form 67 which can only be condoned by the PCIT u/s. 119(2)(b) of the Act and therefore he recommended the assessee to approach that authority. Accordingly he allowed the appeal of the assessee for statistical purposes stating that if the delay is condoned, then the assessee may revisit the AO consequentially for credit of foreign tax credit.
5. The assessee is aggrieved with the appellate order and has preferred this appeal.
The ld. AR submitted a paperbook containing 139 pages wherein various judicial precedents were relied upon. The claim of the ld. AR is that as assessee filed Form 67 on 23.7.2020, prior to filing of revised return which was processed by CPC on 17.3.2021, should have considered the same by granting foreign tax credit of Rs.76,51,818. This was denied. The ld. CIT(Appeals) should have entertained the claim of the assessee and granted the foreign tax credit.
The ld. DR vehemently supported the order of the ld. CIT(Appeals) stating that Form 67 is required to be filed along with original return of income which was not filed by the assessee. The assessee filed Form 67 only at the time of filing revised return. Therefore, in clear-cut violation of Rule 128 and absence of any power to condone the delay with the ld. CIT(Appeals), his order could not be found fault with.
We have carefully considered the rival contentions and perused the order of the ld. lower authorities. The assessee-individual filed his original return of income on 31.8.2019, claimed partial foreign tax credit. Subsequently he filed revised return on 30.7.2020 and prior to that on 23.7.2020 he filed Form 67 as per Rule 128 of the I.T. Rules wherein he claimed foreign tax credit of Rs.76,51,818. Form 67 is placed at page 20 to 62 of the PB. When this revised return was processed u/s. 143(1), the above foreign tax credit was denied to the assessee. On appeal, the ld. CIT(Appeals) did not grant him credit, but recommended to approach the PCIT for condonation of delay in filing Form 67. The assessee is entitled to the foreign tax credit naturally on salary income earned in United Kingdom (UK) and also capital gain earned therein. The assessee has also earned capital gain, interest income, dividend income in USA. Thus, the sum of Rs.344,81,042 was foreign income taxed in India in the hands of the assessee. On the above sum, the foreign tax credit of Rs.76,51,818 was computed.
According to Rule 128 of the I.T. Rules, the resident-assessee is entitled for credit of amount of any foreign tax credit paid in the year in which income corresponding to such tax is assessed to tax in India. To claim such credit, Form 67 is required to be filed in accordance with Rule 128(8) on or before the due date specified for furnishing return of income u/s. 139(1) of the act.
The above Rule is amended with retrospective effect from 1.4.2022 wherein the time limit is due date for filing of return u/s. 139(1) or 139(4). Therefore w.e.f. 1.4.2022 even if Form 67 is filed before the time prescribed for filing of revised return, foreign tax credit should be allowed to the assessee.
However, the impugned assessment year before us is AY 2019-20 wherein the due date for filing Form 67 was the due date prescribed u/s. 139(1) of the Act. Therefore for the impugned AY, Form 67 is required to be filed on or before the due date of filing of the original return. Thus, admittedly, the assessee did not file Form 67 on or before the due date of filing of original return and thus is not in accordance with Rule 128(8) of the I.T. Rules.
However Hon’ble High courts have held that the time limit prescribed u/r 128 is merely directory and not mandatory. In a Writ Petition No.5834/2022 in the case of Duraiswamy Kumaraswamy v. PCIT, Chennai dated 06.10.2023 for AY 2019-20 where the foreign tax credit was denied to the assessee, the Hon’ble Madras High Court held that filing of Form 67 in terms of Rule 128 of the I.T. Rules is only directory in nature. Therefore, if such Form is available at the time of processing of the return, the assessee should be granted the credit for the same. Similarly, the Hon’ble Madras High Court in 168 taxmann.com 622 held that time limit specified in Rule 128 is directory in nature. Thus, the Hon’ble Madras High Court on five separate occasions has held that the delay in filing Form 67 does not hamper the case of the assessee in obtaining the foreign tax credit.
In Ms. Brinda Rama Krishna v. ITO [2022] 135 taxmann.com 358/193 ITD 840 (Bangalore - Trib.) (para 6), Bhaskar Dutta v. Dy. CIT (International taxation) [2023] 147 taxmann.com 481/199 ITD 432 (Delhi - Trib.) (para 7), Sonakshi Sinha v. CIT (Appeals) [2022] 142 taxmann.com 414/197 ITD 263 (Mumbai - Trib.) (para 8), Vinodkumar Lakshmipathi v. CIT (Appeals) NFAC, Delhi [2022] 145 taxmann.com 235 (Bangalore - Trib.) (para 9) and Shridhar Madhav Diwan v. Dy. CIT [IT Appeal No. 102 (Hyd.) of 2023, dated 24-5-2023] similar view is taken that time limit for filing form no 67 for claiming foreign tax credit is directory and not mandatory.
Therefore, we do not have any hesitation in holding that when the assessee has filed Form 67 before the due date of filing of revised return of income and available to the CPC prior to the processing of the return, which is also in tune with the retrospective amendment made in sub-Rule (9) of Rule 128 of the I.T. Rules, the denial of tax credit to the assessee is not justified.
Accordingly we direct the ld. AO for granting the credit of foreign taxes paid to the assessee after the verification of Form 67 filed by the assessee on 23.7.2020. Accordingly all the grounds of appeal as indicated above are allowed.
In the result, the appeal of the assessee is allowed.
Pronounced in the open court on this 08th day of May, 2025.