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Facts
The assessee, an individual working in Singapore, earned salary income which was also taxed in India. The assessee claimed Foreign Tax Credit (FTC) for taxes paid in Singapore. However, Form 67 was filed after the due date for filing the return of income, leading to the denial of FTC by the Assessing Officer and consequently by the CIT(A).
Held
The Tribunal held that the filing of Form 67 is a procedural or directory requirement, not mandatory. Non-compliance with this procedural requirement should not lead to the denial of the substantive right to claim Foreign Tax Credit, especially when supported by judicial pronouncements.
Key Issues
Whether the denial of Foreign Tax Credit (FTC) is justified due to the delayed filing of Form 67, despite the claim being otherwise admissible under the Act and DTAA.
Sections Cited
90, 91, 234B, 234C, 139(1), 143(1), 250, 295(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Addl/JCIT(A)-3, Mumbai [hereinafter referred to as Ld. ‘Addl/JCIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2021-22 dated 05.12.2024. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That on the facts and in the circumstances of the case, the disallowance and/or denial of claims and/or relief, imposition of tax and interest with reference thereto, quantification of taxable income and the tax liability, including interest, by the Ld. Assistant Director of Income Tax, CPC, Bangalore, (ADIT, CPC) (here-in-after referred to as A.O.) has been grossly unjustified, erroneous and unsustainable and necessary direction may please be given to the A.O. to give appropriate relief in accordance with law.
That on the facts and in the circumstances of the case, the A.O. was not justified and grossly erred in disallowance of the claim of credit of taxes ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. paid in Singapore u/s 90/91 of the IT Act, 1961 amounting to Rs. 8,57,617/- in computing total income of the appellant. The said disallowance was uncalled for and hence the same should be reversed.
For that A.O. erred on only relying on procedural Notification for not filing Form 67 before filing the return. Here as per section 295(1) of the Act, CBDT has been given the power to prescribe the procedure for granting foreign tax credit and board does not have power to prescribe for disallowance of foreign tax credit
For that CIT(A) erred in trite law that DTAA overrides the provisions of the Act and the Rules, as held by various Hon'ble High Courts, which has also been confirmed by Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471. 5. For that CIT(A) has ignored to follow judicial hierarchy as the recent juri ictional ITAT Bench B Kolkata order in case of Sukdev Sen ACIT, Circle-61, Kolkata (I.T.A. No.78/Kol/2024) on 18-04-2024 and this order states that merely because the assessee could not file Form No. 67 within the prescribed time limit as per the provisions of rule 128(9) of the Income- tax rules, 1962, as it stood during the year under consideration, will not preclude the assessee from claiming the benefit of foreign tax credit in respect of taxes paid outside India.
For that AO and CIT(A) erred in not following the provisions specified in under section 90 of Income Tax Act 1961 for avoidance of double taxation and granting of credit of taxes paid outside India on income which is taxed outside India even after claiming the details of foreign tax credit in Income Tax Return filed before the Income Tax Authority.
For that AO and CIT (A) erred in not following the spirit of Law and CBDT circular No. 14(XL-35), dated 11-4-1955 which directs AO not to take advantage of assessee ignorance and/or mistake and ignoring the principle of natural justice. Under no circumstances assessee can be asked to pay double tax on same income.
That on the facts and in the circumstances of the case, on the disposal of the appeal there will be reduction and/or deletion of interest u/s 234B of Rs. 83,844/-, hence necessary direction may please be given to the A.O. to modify the computation of interest u/s 234B.
That on the facts and in the circumstances of the case, on the disposal of the appeal there will be reduction and/or deletion of interest u/s 234C of Rs. 49,183/-, hence necessary direction may please be given to the A.O. to modify the computation of interest u/s 234C. ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra.
That the appellant craves leave to submit additional evidence as per Rule 46A, either before or at the time of hearing of this appeal.
That on the facts and in the circumstances of the case, on disposal of this appeal, material adjustments would be required in computing total income, and tax (including interest, if any, payable by and/or to the appellant) for the assessment year under reference and necessary direction may be given to the AO on this front.
That the assessee craves leave to add or modify, delete or alter all or any of the grounds of appeal.”
Brief facts of the case as filed before the Ld. CIT(A) are that the assessee is an individual and was working for a company M/s. Garea Online Pte. Limited based in Singapore and had earned income from salary. The assessee had filed his return of income for the AY 2021-22 on 30.11.2021 showing total income of ₹1,10,00,600/-. The Assessing Officer i.e. ADIT, CPC, Bengaluru, (hereinafter referred to as the ld. 'AO') found that the assessee had claimed tax relief of ₹8,57,617/- u/s 90/91 of the Act on salary income earned in Singapore. However, since the assessee had not complied with the procedure for claiming relief mandated by the CBDT, the Ld. AO did not provide the tax credit of ₹8,57,617/- to the assessee as Form No. 67 was not filed within the due date and the said return was processed u/s 143(1) of the Act with imposition of interest u/s 234B & 234C of the Act amounting to ₹83,844/- and ₹49,183/-, respectively. The assessee was a resident and ordinarily resident during the year and had credit for foreign tax paid (FTC) but there was a delayed filing of Form No.
The rectification application filed was also not allowed. The Form No. 67 was filed on 30.08.2022 for the AY 2021-22 while the return of income had been filed earlier on 30.11.2021 and which was processed on 05.07.2022. Since the credit for foreign tax paid was not allowed, the assessee filed an application on 30.08.2022 which was rejected on 21.10.2022. The ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. intimation for not filing Form No. 67 was not given, as was alleged. Aggrieved with the intimation, the assessee filed an appeal before the Ld. CIT(A) who vide his order dated 05.12.2024 dismissed the appeal of the assessee after observing as under: “5.2 Ground no. 2 In the intimation order u/s 143(1) of the Act dated 05/07/2022, the AO, CPC has accepted total income of Rs 1,10,00,600/- as returned by the appellant for the AY. 2021-22. The tax payable was determined at Rs9,90,640/-. However, the tax credit u/s 90/91 amounting to Rs.8,57,617/- which was claimed by the appellant on foreign tax credit has been denied. The order u/s 154 r.w.s 143(1) and the submission made by the appellant has been considered. The appellant is a resident and ordinarily resident (ROR) of India during AY 2021-22 as per the provisions of the Act and accordingly, subject to tax on his global income in India during AY 2021-22. The appellant for the relevant previous year earned income from salary and the said income was received by the appellant from outside India, i.e. from an entity based in Singapore. He also earned rental income from his house properties situated in India and Income from Capital gains and income from other sources. The appellant had earned the following income from outside India (Singapore) which was subject to tax in both India and Singapore: Salary income from Singapore during AY 2021-22, total foreign source income taxed in India of Rs. 99,84,781/- for salary earned in Singapore. This income relating to the Singapore employment period was taxable in Singapore also. Therefore, the said income was doubly taxed in both India and Singapore. Accordingly, while filing his return of income in India, the appellant had claimed the foreign tax credit (being lower of average tax rate on doubly taxed income in India and actual taxes paid in Singapore of Rs.8,57,617/-. The appellant filed Form No 67 on 30/08/2022. As per rule 128 (as it stood for AY 2021-22), the appellant was under obligation to file declaration in form no.67 within the due date of filing of the return of income. Tax relief u/s 90 was disallowed as Form No 67 was filed late.
3 The appellant filed form no.67 on 30/08/2022, as required under rule 128 of the IT Rules to claim the foreign tax credit of Rs.8,57,617/-. As per rule 128, the appellant was under obligation to file declaration in form no.67 within the due date of filing of the return of income. The due date of filing of return of the income in the case of the appellant was 31/12/2021. The ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. appellant has filed form no.67 after due date of filing of the return of income. The appellant has submitted that the requirement of filing of form no.67 is procedural and non-compliance of such procedural requirement should not result into denial of foreign tax credit.
4 On the facts of the case, the issue which required adjudication is whether the appellant is entitled to claim foreign tax credit, where form no.67, as required under rule 128 of the I T Rule, 1962 was not filed within the due date of filing of the return of income for the relevant assessment year. …..
8 Taking strength from the ratio laid down by the Hon'ble Supreme Court in the case of Bharat Hari Singhania v/s CIT(supra) and Muralikrishna Vaddi V/s ACIT (Supra) and also the express provisions of Sec 90 of the I.T. Act providing for making rules for implementation of agreement between the central government and foreign government with respect to credit of foreign tax filing of statement in Form No. 67, on or before the due date of filing of return of the respective assessment year is mandatory.
9 Reiterating the facts of the case of the appellant that the original return of income for AY 2021-22 was filed by the appellant on 30/11/2021. The form No. 67 was filed on 30/08/2022. The due date of filing of original return of income was 31/12/2021. Further no express powers have been vested on any authority to condone the delay in filing Form 67. Therefore, the appellant has not followed the rule 128 in respect of filing form no.67 on or before the due date of filing the return of income for relevant assessment year. Therefore, the denial of foreign tax credit amounting to Rs.8,57,617/- , which was claimed by the appellant in the return of income, by the AO in order u/s 143(1), is upheld. Accordingly, the above ground of appeal is dismissed.
Ground 3 & 4 relates to levy of interest u/s 234B & 234C of the Income tax Act. The levy of interest is consequential and mandatory hence leviable. This ground is dismissed.”
The appeal was accordingly dismissed. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival submissions were heard and the record and the submissions made have been examined. During the course of the appeal, the Ld. AR ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. submitted that during the year the income was earned in Singapore and section 90 of the Act read with the DTAA was applicable and, therefore, the credit for Foreign Taxes paid in the Singapore should have been allowed. Reliance was placed by the Ld. AR on the case of Rahul Anand vs. ADIT (CPC, Bengaluru) in ITA No. 1497/KOL/2024 order dated 06.12.2024, a copy of which was filed along with the case law paper book in which reliance has also been placed upon several other judicial pronouncements. The Ld. DR submitted that the order of the Ld. CIT(A) be upheld and the appeal of the assessee may be dismissed.
We have gone through the submissions made and also considered the facts of the case. Similar issue arose in the case of Jaspal Singh Bindra vs. DCIT in ITA No. 1826/KOL/2024 order dated 19.11.2024 in which the Coordinate Bench (in which the Accountant Member was a member) on similar issue of FTC allowed the appeal. The following cases have been referred in the said order as well as in the order of Rahul Anand (supra) relied upon by the assessee: “i. CIT vs. G.M. Knitting Industries (P) Ltd. 71 Taxmann.com 35(SC) ii. Brinda Ramakrishna us. ITO 193 ITD 840 (Bang) iii. 42 Hertz Software India Pvt. Ltd vs Asst. CIT. ITA No. 29/ Bang/2001 iv. Duraiswamy Kumaraswamy vs. PCIT, W.P. No.5834 of 2022”
Before proceeding further, we would like to reproduce rule 128 of the Income-tax Rules, 1962 (the Rules) which relates to foreign tax credit and is as under: “Foreign Tax Credit. 128 (1) An assessee, being a resident shall be allowed 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 ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. corresponding to such lax 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.”
We further note that section 90 of the Act provides that Government of India can enter into Agreement with other countries for granting relief in respect of income on which taxes are paid in country outside India and such income is also taxable in India. Article 25 of DTAA between India and Singapore provides for credit for foreign taxes. Article 25(2) is relevant in the present context and the same is extracted below:
“2. Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Singapore, India shall allow as a deduction from the tax on the income of that resident an amount equal to the Singapore tax paid, whether directly or by deduction. Where the income is a dividend paid by a company which is a resident of Singapore to a company which is a resident of India and which owns directly or indirectly not less than 25 per cent of the share capital of the company paying the dividend, the deduction shall take into account the Singapore tax paid in respect of the profits out of which the dividend is paid. Such deduction in either case shall not, however, exceed that part of the tax (as computed before the deduction is given) which is attributable to the income which may be taxed in Singapore.”
Thus, Section 90 of the Act read with Article 25(2) of the DTAA provides that tax paid in Singapore shall be allowed as a credit against the tax payable in India but limited to the proportion of Indian tax. Neither section 90 nor the DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirement. Foreign Tax Credit is an assessee's vested right as per Article 25(2) of the DTAA read with Section 90 and same cannot be disallowed for non-compliance with procedural requirement as prescribed in the rules. ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra.
Further, we would like to mention that rule 128(9) provides that Form No. 67 should be filed on or before the due date of filing the return of income as prescribed u/s 139(1) of the Act. However, the rule nowhere provides that if the said Form No. 67 is not filed within the required time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. It is therefore evident that if the intention of the legislature were to deny the foreign tax credit, either the Act or the rules would have specifically provided that the foreign tax credit would be disallowed if the assessee does not file Form No. 67 within the due date prescribed under section 139(1) of the Act. We further note that as is judicially held, filing of Form No. 67 is a procedural/directory requirement and is not a mandatory requirement and violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC and such is the finding in the cases of the coordinate Benches referred to in the order of Jaspal Singh Bindra (supra).
Hon'ble Supreme Court, in the case of Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, [1992 Supp (1) Supreme Court Cases 21] in respect of compliance with the procedural requirements have observed that: "The mere fact that it is statutory does not matter one way of that other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve.”
Further, in the case of Engineering Analysis Centre of Excellence (P.) Ltd. vs. Commissioner of Income-tax [2021] 125 taxmann.com 42 (SC)/[2021] 281 Taxman 19 (SC)/[2021] 432 ITR 471 (SC), Hon'ble Supreme Court have held as under that the ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. provisions of DTAA shall override the provisions of the Income-tax Act unless they are more beneficial to the assessee: “165. The conclusions in the aforestated paragraph have no direct relevance to the facts at hand as the effect of section 90(2) of the Income-tax Act, read with explanation 4 thereof, is to treat the DTAA provisions as the law that must be followed by Indian courts, notwithstanding what may be contained in the Income-tax Act to the contrary, unless more beneficial to the assessee.”
We have gone through the decisions of the coordinate Benches and concur with their findings in this regard that filing of Form No. 67 is directory and not mandatory and the credit for foreign taxes paid cannot be denied merely on the delay in filing the Form No. 67. 14. We have also gone through the decision of the Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy us. PCIT (supra) and find that the facts are identical to the facts of the case of the assessee and the decision is squarely applicable to the facts of the case of the assessee. In that case, the petitioner was resident of India and had filed Indian ITR and claimed benefit of FTC u/s 90/91 of the Act r.w. Article 24 of the India-Kenya DTAA. During the year, he had income of both Kenya and India but while filing the Indian ITR for the impugned assessment year 2019-20, the Form No. 67 prescribed in rule 128 of the rules for claiming FTC was inadvertently not uploaded along with the ITR which was uploaded on 02.02.2021 The return was processed on 26.03.2021, however, the credit of FTC was not given effect to and the request made to the CPC to give effect to the FTC was not accepted and intimation along with notices of demand was received. The assessee also could not succeed with the rectification application filed and approached the CIT u/s 264 of the Act and at the same time filed a writ petition before the Hon'ble Madras High Court. It was stated by the ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. respondent-department that rule 128 is mandatory and cannot be considered as directory in nature. The petitioner referred to the judgment of the Hon'ble Supreme Court in the case of CIT vs. G.M. Knitting Industries (P) Ltd. Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015. The Hon'ble High Court allowed the Writ Petition in favour of the assessee by holding as under:- “11. The law laid down by the Hon'ble Apex Court in Commissioner of Income Tax, Maharashtra v. G.M. Knitting Industries (P) Limited in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated 24.06.2015, which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act and it will always be directory in nature. This is what the Hon'ble Supreme Court had held in the above cases when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of assessment order. W P. No 5834 of 2022. 12. Further, in the present case, the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC was rejected by the respondent, which is not proper and the same is not in accordance with law. Therefore, the impugned order is liable to be set aside.
Accordingly, the impugned order dated 25.01.2022 is set aside. While setting aside the impugned order, this Court remits the matter back to the respondent to make reassessment by taking into consideration of the FTC filed by the petitioner on 02.02.2021. The respondent is directed to give due credit to the Kenya income of the petitioner and pass the final assessment order. Further, it is made clear that the impugned order is set wade only to the extent of disallowing of FTC clam made by the petitioner und hence, the first respondent is directed to consider only on the aspect of rejection of FTC clam within a period of 8 weeks from the date of receipt of copy of this order.”
Respectfully following the order of the Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy vs. PCIT (supra) and concurring with the views held by the coordinate Benches of the ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. Tribunal in the cases relied upon in the cases of Rahul Anand and Jaspal Singh Bindra (supra), we hold that merely because the assessee could not file Form No. 67 within the prescribed time limit as per the provisions of rule 128(9) of the Income-tax rules, 1962, as it stood during the year under consideration, will not preclude the assessee from claiming the benefit of the Foreign Tax Credit in respect of taxes paid outside India. Therefore, the claim of the assessee is allowed and the Assessing Officer is directed to verify the return of income with the computation made and give benefit of Foreign Tax Credit in respect of taxes paid outside India by the assessee in accordance with law and the DTAA between India and the Singapore. Accordingly, Ground nos. 2 to 7 of the appeal are allowed.
Ground nos. 1, 10, 11 and 12 are general in nature and do not require any separate adjudication.
Ground nos. 8 and 9 relating to interest u/s 234B and 234C of the Act are consequential in nature and the Ld. AO shall recompute the same after the income is recomputed as directed above.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 29th December, 2025. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 29.12.2025 Bidhan (Sr. P.S.) ITA No.: 35/KOL/2025 Assessment Year: 2021-22 Vaibhav Das Mundhra. Copy of the order forwarded to:
Vaibhav Das Mundhra, 37, 38 & 39, Ezra Street, BNC Chambers, Kolkata, West Bengal, 700001. 2. ADIT, CPC, Bengaluru.
Addl/JCIT(A)-3, Mumbai.
CIT-
CIT(DR), Kolkata Benches, Kolkata.
Guard File. //// By order