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Facts
The assessee derived income from M/s. Acuvate Software Inc, UK, and declared income of Rs. 2,18,77,530/- in their return. They claimed Foreign Tax Credit (FTC) of Rs. 58,79,711/- under section 90/90A. However, Form-67 was not filed within the due date, leading to the denial of the FTC claim by the AO/CPC and subsequently by the CIT(A).
Held
The Tribunal held that the delay in filing Form-67 is a procedural irregularity and not mandatory, and therefore, the FTC claim should not be denied solely on this ground. The Tribunal relied on judicial pronouncements stating that DTAA provisions override domestic law and that FTC is a vested right.
Key Issues
Whether the denial of Foreign Tax Credit (FTC) is justified solely on the ground of delayed filing of Form-67, when DTAA provisions and judicial precedents support its allowance.
Sections Cited
143(1), 90, 90A, 139
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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
("नधा"रणवष"/ Assessment Year:2023-24) Mekala Rakesh Reddy, VS. DCIT, Hyderabad. Circle-1(1), PAN: AGNPM0062F Hyderabad. (अपीलाथ"/ Appellant) (""यथ"/ Respondent) करदाताका""त"न"ध"व/ : Shri C. Maheswar Reddy, CA Assessee Represented by राज"वका""त"न"ध"व/ : Shri S. Arun Kumar, Sr. AR Department Represented by सुनवाईसमा"तहोनेक""त"थ/ : 11/12/2025 Date of Conclusion of Hearing घोषणा क" तार"ख/ : 19/12/2025 Date of Pronouncement Mekala Rakesh Reddy vs. DCIT ORDER
PER RAVISH SOOD, JM:
The captioned appeals filed by the assessee are directed against the respective orders passed by the Additional/Joint Commissioner of Income Tax (Appeals)-2, Ludhiana dated 21/08/2025, which in turn arises from the respective orders issued by the CPC, Bengaluru vide Intimations issued under section 143(1) of the Act, dated 22/03/2022 and 04/03/2024 for Assessment Year 2021-22 and 2023-24, respectively. As a common issue is involved in the captioned appeals, therefore, the same are being taken up and disposed of vide a consolidated order. We shall first take up the appeal in wherein the impugned order has been assailed on the following grounds of appeal:
“1. The order passed by the Ld. CIT(A) is totally invalid as against the principles of natural justice and the provisions vested in IT Act.
2. The Ld. Add/CIT(A) out to have allowed Foreign Tax credit to the appellant for which the appellant is eligible to claim.
3. The Ld. Addl/JCIT(A) ignored the Form 67 filed by the appellant, without considering of it, upheld the order of CPC.
The Ld. Addl/)CIT(A) should have considered the fact that the appellant has shown the foreign income and claimed the foreign tax credit, mere delay in filing for form, cannot be penalized the appellant.
The Ld. Addl/JCIT(A) out to have considered the delay in filing of Form 67 and out to have allowed the Foreign Tax Credit.
6. The Ld. Addl/JCIT(A) should have considered that the CPC has no jurisdiction to deny the tax credit.
The Ld. CIT(A) has ignored the fact that the CPC has raised a demand of Rs. 71,44,030/- arbitrarily without considering the FTC claim u/s. 90 of the Income Tax which is devoid of the provisions vested under the law. Mekala Rakesh Reddy vs. DCIT 8. Any other ground will be raised at the time of hearing.”
Succinctly stated, the assessee who is, inter alia, deriving income from M/s. Acuvate Software Inc, United Kingdom, had filed the return of income for the subject year on 31/12/2021, declaring an income of Rs. 2,18,77,530/-. The assessee had disclosed the income derived from abroad in his return of income for the subject year. Also, the assessee in his return of income had claimed Foreign Tax Credit (FTC) of Rs. 58,79,711/- under section(s) 90/90A of the Act w.r.t the income that was derived from abroad and already taxed in the source country, i.e., United Kingdom (UK). However, as the assessee had not filed Form-67 within the due date as per the mandate of law, therefore, the AO/CPC, while processing his return of income under section 143(1) of the Act, declined his claim for tax credit raised by him under section(s) 90/90A of the Act. Accordingly, the AO/CPC processed the return of income filed by the assessee and vide intimation issued under section 143(1) of the Act raised a demand of Rs. 71,44,030/-.
3. Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.
4. The CIT(A), while disposing of the appeal, observed that as per Rule 128(9) of the Income Tax Rules, 1962, the statement in Form-67 referred to in clause (i) of sub-rule (8) and the certificate or the Mekala Rakesh Reddy vs. DCIT statement referred to in clause (ii) of sub-rule (8) is to be furnished on or before the end of the assessment year relevant to the previous year in which the income referred to in sub-rule (1) has been offered to tax or assessed to tax in India and the return for such assessment year has been furnished within the time specified under sub-section (1) of sub- section (4) of section 139 of the Act. The CIT(A) had further observed that the assessee had filed his return of income on 31/12/2021, declaring the salary income earned in India and the United Kingdom (UK) and also filed Form-67 on 08/12/2022 (i.e., not before the end of the assessment year). It was further observed by him that the assessee was not allowed Foreign Tax Credit (FTC) under section 90 of the Act in the absence of Form 67 as was required under Rule 128(9) of IT Rules, 1962. It was further observed by him that the assessee had failed to submit Form-67 by the end of the assessment year as was required under Rule 128(9) of the IT Rules, 1962. Accordingly, the CIT(A) based on his aforesaid observations, held a firm conviction that as the declining of the Foreign Tax Credit under section 90 of the Act while processing the income tax return of the assessee was entirely based on information/documents that was submitted by him, thus, there was no infirmity in the view taken by the AO/CPC. Accordingly, the CIT(A) sustained the declining of the assessee’s claim for Foreign Tax Credit of Rs. 58,79,711/- as was carried out by the AO/CPC and dismissed the appeal. Mekala Rakesh Reddy vs. DCIT 5. The assessee aggrieved with the order of the CIT(A) has carried the matter in appeal before us.
We have heard the Learned Authorised Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
7. Shri C. Maheswar Reddy, CA, the Learned Authorised Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that both the parties below had grossly erred in law and facts of the case in declining the assessee’s claim of Foreign Tax Credit (FTC) merely for late filing of Form 67, which was just a procedural formality and not mandatory in nature. Elaborating further on his contention, the Ld. AR submitted that the provisions of the Double Taxation Avoidance Agreement (DTAA) override the provisions of section 90 of the Act. The Ld. AR to support his contention had pressed into service the judgment of the Hon’ble Supreme Court in the case of Union of India vs. Azadi Bachao Andolan (2003) 263 ITR 706(SC), wherein it was held that where a DTAA exists, and the provisions of the same are more beneficial to the tax payer, then the treaty will prevail over the domestic Act. The Ld. AR submitted that neither section 90A of the Act nor DTAA provides that the Foreign Tax Mekala Rakesh Reddy vs. DCIT Credit (FTC) shall be disallowed for non-compliance with any procedural requirement. Carrying his contention further, the Ld. AR submitted that the claim of the Foreign Tax Credit (FTC) is the vested right of an assessee as per Article 24 of the DTAA r.w.s 90A of the Act, and, thus, the same cannot be disallowed for a mere non-compliance with the rules or the procedural requirements. The Ld. AR to buttress his contention had relied upon a host of judicial pronouncements, viz., the judgment of the Hon’ble High Court of Madras in Duraiswamy Kumaraswamy vs. PCIT (2023) 156 taxmann.com 445 (Madras), and the orders of the ITAT, Hyderabad, in the case of Purushothama Reddy Vankireddy vs. ADIT (2023) 147 taxmann.com 398 (Hyderabad Trib) and Suresh Kumar Vobbilisetty vs. ITO, ITA No.1204/Hyd/2024. Also, Ld. AR had relied upon the orders of the ITAT, Kolkata, in Sanmoy Ray vs. ITO-24(2), Chinsurah, dated 24/07/2025 and that in the case of Rahul Anand vs. ADIT, CPC, Bangalore, dated 06/12/2024.
Per contra, Shri S. Arun Kumar, Learned Senior Departmental Representative (for short, “Ld. Sr. DR”) relied upon the orders of the authorities below.
We have given thoughtful consideration to the contentions of the Ld. Authorised Representatives of both parties in the backdrop of the orders of the authorities below. Mekala Rakesh Reddy vs. DCIT 10. Admittedly, as the assessee who had filed his return of income for AY 2021-22 on 31/12/2021, had filed Form-67 on 08/12/2022, while for the same was required to be filed on or before the end of the assessment year relevant to the previous year in which the subject income had been offered to tax or assessed to tax in India, therefore, the AO/CPC for the said reason had declined his claim for foreign tax credit (FTC) of Rs. 58,79,711/-, which was raised by him in his return of income. Although, we principally concur with the CIT(A) that as per Rule 128(9) of the Income-tax Rules, 1962, the statement in Form-67 is required to be furnished on or before the end of the assessment year relevant to the previous year in which the income referred to in sub-rule
(1) has been offered to tax or assessed to tax in India, and return of income for such assessment year has been furnished within the time specified under sub-section (1) or sub-section (4) of section 139 of the Act, but as the filing of the said Form-67 is merely a procedural requirement, therefore, the credit for the same cannot be summarily declined though subject to satisfaction of the substantive requirements. We find that our aforesaid view is supported by the judgment of the Hon’ble High Court of Madras in the case of Duraiswamy Kumaraswamy vs. PCIT (2023) 156 taxmann.com 445 (Madras). The Hon’ble High Court in its order had observed that the filing of Form-67 for claiming Foreign Tax Credit (FTC) in terms of Rule 128 of the Income-tax Rules, 1962, is only a directory in nature, which had been Mekala Rakesh Reddy vs. DCIT made available to facilitate implementation of the provisions of the Act. We find that the Hon’ble High Court had drawn an analogy from the judgment of the Hon’ble Supreme Court in the case of CIT v s. G.M. Knitting Industries (P) Ltd in Civil Appeal Nos.10782 of 2013 and 4048 of 2014, dated 24/06/2015, wherein it was observed that as Form 3AA, which is required to be filed along with the return of income to avail the benefit was not filed along with the return of income, but was filed during the assessment proceedings, the same would amount to sufficient compliance of the statutory requirement. Accordingly, the Hon’ble High Court, based on its aforesaid observations, directed the AO to allow the credit of Foreign Tax Credit (FTC) based on Form-67 that was filed by the assessee/petitioner on 02/02/2021. Also, we find that the ITAT, Hyderabad in the case of Shri Suresh Kumar vs. ITO (International Taxation)-2, Hyderabad in dated 07/03/2025, had after relying upon a host of judicial pronouncements, observed that the Foreign Tax Credit (FTC) cannot be denied merely on the ground of delay in filing of Form-67, which is not mandatory but only directory. The Tribunal, while so concluding, had observed that the provisions of the DTAA override the provisions of the Act. The Tribunal had observed that though the assessee had not filed Form-67 within the prescribed period, i.e., up to 31/12/2021, and had filed the same only as on 06/08/2022, but for the said reason his claim of Foreign Tax Credit (FTC) that was raised in his return of income for the Mekala Rakesh Reddy vs. DCIT subject year could not be summarily declined while processing the same under section 143(1) of the Act, dated 22/03/2022. The Tribunal in its order had relied upon the order of the ITAT, Bangalore in the case of 42 Hertz Software India (P) Ltd vs. ACIT (2022) 139 taxmann.com 448 (Bang.) and that of the ITAT, Delhi in the case of NICDC Neemrana Solar Power Ltd vs. DCIT, 171 Taxmann.com 653 (Delhi). Also, the order of the ITAT, Jabalpur Bench in the case of Gaurav Singh vs. ITO, 158 Taxmann.com 350 (Jabalpur) and that of the ITAT, Hyderabad in the case of in the case of Purushothama Reddy Vankireddy vs. ADIT (2023) 147 taxmann.com 398 (Hyderabad-Trib) was relied upon by the Tribunal.
We, thus, in the backdrop of our aforesaid deliberations, respectfully follow the aforementioned judicial pronouncements, and are of the view that merely because the assessee had delayed the filing of Form-67, his claim for Foreign Tax Credit (FTC) of Rs. 5879,711/- could not have been denied by the revenue. Accordingly, we herein direct the AO to allow the Foreign Tax Credit (FTC) to the assessee.
(Assessment Year:2023-24) 12. As the facts and the issue involved in the captioned appeal remains the same as were there before us in the appeal filed by the assessee for the AY 2021-22 in therefore, the view therein taken shall apply mutatis mutandis for the purpose of Mekala Rakesh Reddy vs. DCIT disposing of the present appeal, i.e., AY 2023-24. Accordingly, the AO is directed to allow the Foreign Tax Credit (FTC) of Rs. 51,28,213/- to the assessee.
Resultantly, both the appeals filed by the assessee are allowed in terms of our aforesaid observations.
Order pronounced in the open court on 19th December, 2025. S - (मधुसूदन साव"डया) (रवीश सूद) (MADHUSUDAN SAWDIA) (RAVISH SOOD) लेखासद"य/ACCOUNTANT MEMBER "या"यकसद"य/JUDICIAL MEMBER d/- Hyderabad, dated 19.12.2025. *OKK/sps आदेशक"""त"ल"पअ"े"षत/ Copy of the order forwarded to:- "नधा"रती/The Assessee 1. : Mekala Rakesh Reddy, 16-2-756/121 & 122 Gaddiannaram, Dilsukhnagar, Hyderabad, Telangana-500026. (ii) Medkala Rakesh Reddy, 16-2/753/121 & 122, Gaddiannaram, Dilsukhnagar, Hyderabad-500036. राज"व/ The Revenue 2. : DCIT, Circle-1(1), IT Towers, Hyderabad, Telangana-500028.
The Principal Commissioner of Income Tax, Hyderabad. "वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad. 4.