VEMBU KUMAR,CHENNAI vs. DCIT CORPORATE CIRCLE 1(1), CHENNAI

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ITA 734/CHNY/2025Status: DisposedITAT Chennai04 June 2025AY 2018-194 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the action of the Ld. CIT(A)/AO in denying the Foreign Tax Credit (FTC) was not to be countenanced. The Tribunal found that the condition prescribed for filing Form 67 along with the return of income under Section 139(1) is directory in nature. Since the assessee had filed Form 67 before the assessment was framed, the FTC claim ought to have been allowed. The Tribunal respectfully followed the decision of the Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy (WP No.5834 of 2022 & ors.), wherein it was held that the filing of Form 67 in terms of Rule 128 is only directory and that the Rule is for the implementation of the Act's provisions and is directory. Accordingly, the Tribunal directed the Ld. CIT(A) to grant the impugned Foreign Tax Credit to the assessee after verifying Form No. 67. No issue was expressly left undecided.

What were the facts?

The assessee, an individual, filed his return of income for Assessment Year 2018-19 on August 27, 2018, declaring a taxable income of Rs. 8,03,23,780. He received Rs. 7,30,95,488 as dividend from a US-incorporated foreign company and declared it under 'income from other sources'. The assessee claimed a withholding tax of Rs. 1,82,73,872 as Foreign Tax Credit (FTC) under Section 90 of the Income Tax Act, 1961. However, he inadvertently failed to file Form 67, as required by Rule 128 of the Income Tax Rules, 1962, by the due date for filing the return. The assessee later filed Form 67 belatedly on June 18, 2020. During scrutiny assessment, the Assessing Officer (AO) disallowed the FTC of Rs. 1,82,73,872 solely on the ground that Form 67 was not filed within the stipulated due date. The Commissioner of Income Tax (Appeals)/NFAC confirmed the AO's action.

What were the issues?

1. Whether the assessee is entitled to claim Foreign Tax Credit (FTC) amounting to Rs. 1,82,73,872 for Assessment Year 2018-19, despite the belated filing of Form 67. Assessee's Contentions: The assessee argued that while Form 67 was filed belatedly on June 18, 2020, it was filed before the assessment was framed. The assessee relied on the decision of the Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy (WP No.5834 of 2022 & ors.) which held that the condition of filing Form 67 by the due date is directory in nature. Revenue's Contentions: The revenue, through the AO and confirmed by the CIT(A), contended that the FTC claim should be denied because Form 67 was not filed within the stipulated due date of filing the Income Tax Return under Section 139(1) of the Act.

Which sections of the Income-tax Act were involved?

Section 90,Section 139(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI MANOJ KUMAR AGGARWAL

आदेश / O R D E R

PER ABY T. VARKEY, JM:

1.

1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 17.02.2025 for the Assessment Year (hereinafter referred to as "AY”) 2018-19.

2.

The only grievance of the assessee is against the action of the Ld.CIT(A) denying the Foreign Tax Credit (FTC) as claimed by the assessee.

3.

The brief facts are that the assessee, an individual, filed his return of income (RoI) for the AY 2018-19 on 27.08.2018 vide Ack.No.181726511270818, declaring taxable income of Rs.8,03,23,780/- under the head’s income from salaries, house property and other sources.

1.

During the year, the assessee received Rs.7,30,95,488 (USD 11,42,117) as dividend from a foreign company incorporated in the USA and the same was duly declared in the ITR under the head ‘income from other sources’. The withholding tax of Rs.1,82,73,872/- (USD 2,85.529.29) made by the foreign company was duly claimed as relief u/s.90 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) in the ITR.

However, the assessee inadvertently omitted to file Form 67, as required under Rule 128 of the Income Tax Rules, 1962, on or before the due date of filing the ITR u/s.139(1) of the Act. According to the assessee, the said Form was later filed voluntarily on 18.06.2020 on coming to know about the omission. During the scrutiny assessment, the AO asked the assessee ‘as to why’ the FTC claim should not be denied since Form 67 was not filed within the stipulated date. And the assessee brought to his notice that Form 67 has been filed though belatedly on 18.06.2020 before him.

However, the AO disallowed FTC of Rs.1,82,73,872/- only on the ground that Form 67 was not filed within the stipulated due date.

4.

On appeal, the Ld.CIT(A) has confirmed the action of the AO. It is noted that the assessee has filed ITR for AY 2018-19 on 27.08.2018 declaring income of Rs.8,03,23,780/- and claimed FTC of Rs.1,82,73,872/- (USD 2,85.529.29) remitted/withheld by the foreign company in USA, while giving assessee dividend of Rs.7,30,95,488/- (USD 11,42,117). The assessee while filing ITR inadvertently omitted to file Form 67 as required under Rule 128(9) of the Income Tax Rules, 1962 on or before the due date of ITR u/s.139(1) of the Act. However, it is not disputed that the assessee had filed belatedly Form 67 on 18.06.2020 and brought to the notice of the AO that it has filed Form 67 on 18.06.2020 during the course of assessment proceedings. However, the AO passed the assessment order on 10.01.2021 denying the claim only on the ground that the assessee didn’t file Form 67 before the due date of filing of the ITR u/s.139(1) of the Act, which has been confirmed by the Ld CIT(A). We don’t countenance this action of the Ld.CIT(A)/AO. In the light of the settled position, we are of the view that the condition prescribed for filing Form 67 along with RoI u/s.139(1) is directory in nature, and since, the assessee has filed the same before the assessment was framed, the FTC claim ought to have been allowed as held by the Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy (WP No.5834 of 2022 & ors. order dated 06.10.2023), wherein it was held by their Lordship that filing of this Form in terms of Rule 128 was only directory in nature. And further observed that the Rule is only for the implementation of the provisions of the Act and it would always be directory in nature. Respectfully following the same, we direct Ld. CIT(A) to grant impugned Foreign Tax Credit to the assessee after verifying Form No.67.

5.

In the result, appeal filed by the assessee is allowed and Stay Petition filed by the assessee is dismissed as infructuous.

Order pronounced on the 04th day of June, 2025, in Chennai.

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