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Facts
The assessee, Bidyut Prakas Bhattacharya, claimed Foreign Tax Credit (FTC) of Rs. 6,39,970 for tax paid in Kenya for AY 2018-19. The prescribed Form 67 was filed two days after the due date for filing the income tax return (ITR) but before the CPC processed the return. The CPC denied the FTC, resulting in a demand under Section 143(1) and interest levies under Sections 234A, 234B, and 234C, which was upheld by the CIT(A) by deeming Rule 128(9) mandatory.
Held
The Tribunal, relying on various High Court and Supreme Court judgments and its own coordinate benches, held that the filing of Form 67 under Rule 128(9) is a procedural/directory requirement and not mandatory. It reiterated that the provisions of a Double Taxation Avoidance Agreement (DTAA) override the Income Tax Act, and therefore, the foreign tax credit cannot be denied merely due to the delay in filing Form 67, as it does not extinguish the substantive right.
Key Issues
Whether the requirement to file Form 67 within the prescribed due date under Rule 128(9) of the Income Tax Rules is mandatory or merely directory for claiming Foreign Tax Credit, and if delayed filing extinguishes the substantive right to claim FTC under Section 90 read with DTAA provisions.
Sections Cited
250, 154, 143(1), 139(1), 90, 234A, 234B, 234C, 143(3), 264, 90(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
order
: 07-October-2025 ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2018-19 dated 30.07.2024, which has been passed against the rectification order u/s 154 of the Act, dated 06.06.2023.
The assessee is in appeal before the Bench raising the following grounds of appeal:
1. That on facts as well as on law, the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), has erred in confirming the order under section 154 read with section 143(1) without allowing Foreign Tax Credit (FTC) amounting to Rs. 6,39,970 irrespective of the fact that the same was duly claimed in the income tax return as per provisions of the Income Tax Act.
The assessee individual had filed his income tax return for assessment year 2018-19 on 12 February, 2019 claiming foreign tax credit amounting to Rs. 6,39,970 which was paid in Kenya against salary income from Kenya. The prescribed Form 67 towards claim of foreign tax credit could not be filed by mistake before filing of income tax return. The same was filed on 14 February, 2019 which was the two days after filing of income tax return. Hence, the assessee had correctly complied with the provision of Rule 128. Thereafter, the income tax return was duly processed by the CPC, Bengaluru and foreign tax credit amounting to Rs. 6,39,970 was denied without any reasons even though Form 67 was duly filed in the income tax portal. Hence, there was a demand of Rs.8,83,450 as per intimation under section 143(1) due to unjustified denial of foreign tax credit. The appellant would like to prefer an appeal before the 1 appellate authority on the below mentioned grounds: 1. Impugned denial of claim for foreign tax credit amounting to Rs. 6,39,970 in tax computation “6.1 Grounds of Appeal No. 1 to 4: In these grounds, the appellant has raised the issue of denial of claim for foreign tax credit amounting to Rs.6,39,970/- in tax computation. 6.2 The appellant had filed return of income on 12.02.2019 claiming foreign tax credit of Rs.6,39,970/-. Further, the appellant filed Form No. 67 on 14.02.2019. 6.3 The moot question that arises is whether the FTC claimed by the appellant can be allowed, even if requirement mentioned in Rule 128(9) has not been fulfilled by the appellant? Whether the requirement mentioned in the relevant rule is only procedural in nature or mandatory in nature which is vital to the claim of FTC? The questions arisen are duly discussed in the following paras 6.4 One of the requirements of Rule 128 for claiming FTC is prescribed by Rule 128(8) & (9) of the Rules and the same reads as under:-
(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;
6. None appeared on behalf of the assessee and the case was heard with the assistance of the Ld. DR. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.
We have considered the submission made. The facts are similar to those in the case of Swapan Bhttacharya vs. ACIT, Circle-61, Kolkata in order dated 05.05.2025 (in which the Accountant Member was part of the Bench) in which the Coordinate Bench has held as under: “5. Rival submissions were heard and the record and the submissions made have been examined. During the course of the appeal, the Ld. DR submitted that the Form No. 67 was filed on 30.03.2019, which was late and was filed beyond the due date of filing the return of income. The Ld. AR submitted that during the year the income was earned in USA and section 90 of the Act read with the DTAA was applicable. Though Form No. 67 was filed late but the same was filed on 30.03.2019 and was available at the time of processing of the return of income carried out u/s 143(1) of the Act on 25.12.2019 as well as at the time of completion of assessment under section 143(3) of the Act on 27.12.2019 and, therefore, the credit for Foreign Taxes paid in the USA should have been allowed. Reliance was placed by the Ld. AR on the case of Rahul Anand vs. ADIT (CPC, Bengaluru) in 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 assessee had filed multiple returns which was countered by the Ld. DR by