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Facts
The assessee filed a revised return claiming foreign tax credit (FTC) for tax paid in USA. The CPC denied the claim because Form 67 was filed beyond the due date specified under section 139(1) of the Income Tax Act, 1961.
Held
The Tribunal held that the requirement to file Form 67 before the due date for filing the return of income is directory and not mandatory, as Rule 128(9) does not prescribe any penalty for delay and the Act and DTAA do not prescribe a timeline. The assessee is eligible for FTC as Form 67 was filed before the completion of assessment.
Key Issues
Whether the assessee is eligible for foreign tax credit when Form 67 was filed after the due date but before the assessment completion.
Sections Cited
143(1), 250, 139(1), 90, 91
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Income Tax Appellate Tribunal, PUNE BENCHES “A” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
This is an appeal filed by the assessee against the order of ld.Addl./Joint Commissioner of Income Tax(Appeal), Gwalior passed under section 250 of the Income Tax Act, 1961 dated 09.12.2024 for the A.Y.2020-21 emanating from the Assessment Order under section 143(1) of the Income Tax Act, 1961, dated 31.05.2022. The Assessee has raised the following grounds of appeal : “(All grounds of appeals are independent and without prejudice to each other)
The learned CIT(A), ADDL/ICIT (A) Gwalior "CIT(A)"; erred in law and on facts in upholding intimation u/s 143(1) dated 31/05/2022 passed by CPC Bangalore thereby denying the foreign tax credit of Rs.6,15,561/- pertaining to the foreign sourced salary income of Rs.32,87,214 which is doubly taxed, i.e., in USA as well as India.
2. The lower IT authorities ought to have appreciated that: Rule 128(9) of the IT Rules does not provide for disallowance of FTC in case of delay in filing Form No.67. Filing of Form No.67 is NOT mandatory but a directory requirement. DTAA overrides the provisions of the Act, and the Rules cannot be contrary to the Act.
3. The appellant craves leave to add/modify/amend/delete all / any of the grounds of appeal.” Submission of ld.AR :
The ld.AR for the Assessee filed a paper book containing copy of Form 67 dated 30/03/2021, copy of return of income. Ld.AR filed case law paper book.
2.1 Ld.AR submitted that CPC has not allowed the credit for Tax Paid in USA only because the Form 67 was filed beyond the time allowed u/s 139(1) of the Act. Ld.AR submitted that there is no such provision in the Income Tax Act. Ld.AR relied on the decisions of ITAT filed in the paper book.
Submission of ld.DR :
Ld.DR for the Revenue relied on the order u/s 143(1) and u/s 250 of the Act.
Findings &Analysis : 4. We have heard both the parties and perused the records. In this case, Assessee had filed Original Return of Income on 05/09/2020. Then Assessee filed revised Return of Income on 30/03/2021. Assessee also filed Form Number 67 on 30.03.2021 as per Rule 128 of Income Tax Rules to claim Credit for Tax paid in United States of America (USA).
4.1 The Centralized Processing Center (CPC) processed the Return of Income and passed an order u/s 143(1) of the Act on 31/05/2021. The CPC denied the claim of assessee for tax paid in USA. Aggrieved by the Order u/s 143(1) of the Act, the Assessee filed appeal before the Commissioner of Income Tax (appeal) (NFAC). The Addl.CIT(appeal) passed an order u/s 250 confirming the order u/s 143(1), on the basis that the Form number 67 was filed on 30/03/2021 which was beyond the time allowed u/s 139(1) of the Act. The time allowed u/s 139(1) of the Act was 10/01/2021.
4.2 Aggrieved by the Order u/s 250 of the Act. The Assessee has filed an appeal before this tribunal.
4.3 In this case it is an admitted fact as reproduced in the Order u/s 250 of the Act that the Form Number 67 was filed by the Assessee on 30/03/2021 to claim Credit of tax paid in USA. Assessee was resident during the year in India. During the year the Assessee had earned Salary of Rs.32,87,214/- from Deere & Company,USA. Assessee also earned Salary in India from John 3 Deere India Pvt Ltd during the year. The Assessee claimed Credit Tax paid in USA of Rs.6,15,561/- as per Section 90 of Income Tax Act and DTAA between India & USA. One of the requirement as mentioned in Rule 128 of the Income Tax Rules to claim Credit of Tax paid in USA is that Taxpayer has to file a Form 67 within the time mentioned u/s 139(1) of the Act. In this case admittedly the Form 67 was filed beyond the time allowed u/s 139(1) of the Act. The CPC vide its Order u/s 143(1) has disallowed assessee’s claim for Foreign Tax credit.
4.4 In this case in the Order u/s 143(1) of the Act , the CPC has not given any reason for the disallowance of assessee’s claim for Credit of tax paid in USA. Thus, the Order u/s 143(1) is arbitrary.
4.5 The issue is covered in favour of Assessee by plethora of decisions of various benches of ITAT.
4.6 ITAT Mumbai Bench in in the case of Sonakshi Sinha vs CIT(A) has held as under :
Quote, “012. We have carefully considered the rival contention and perused the orders of the lower authorities. Short question in this appeal is whether assessee is entitled to foreign tax credit even when form number 67 required to be filed according to the provisions of rule 128 (9) of the Income Tax Rules on or before the due date of filing of the return of income, not complied by the assessee, but same was filed before the completion of the assessment proceedings. Precisely, the fact shows that assessee filed return of income u/s 139 (1) of the income tax act. In such a return of income, she claimed the foreign tax credit. However, form number 67 was filed during the course of assessment proceedings and not before the due date of filing return. Rule 128 (9) of the Income Tax Rules 1962 provides that the statement in Form No. 67 referred to in clause (i) of sub-rule (8) and the certificate or the statement referred to in clause (ii) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. We find that 4 coordinate bench in 42 Hertz Software India (P.) Ltd v. ACIT [2022] 139 taxmann.com 448 (Bangalore - Trib.) wherein following its earlier order in the case of Ms. Brinda Rama Krishna v.ITO [2022] 135 taxmann.com 358 (Bang - Trib) it was held that "one of the requirements of Rule128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns and that this requirement cannot be treated as mandatory, rather it is directory in nature. This is because, Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form No.
Same view is also taken by a coordinate division bench in Vinodkumar Lakshmipathi V CIT(A) NFAC 06.09.2022. It is well settled that while laying down a particular procedure, if no negative or adverse consequences are contemplated for non- adherence to such procedure, the relevant provision is normally not taken to be mandatory and is considered to be purely directory. Admittedly, Rule 128 does not prescribe denial of credit of FTC. Further the Act i.e. section 90 or 91 also do not prescribe timeline for filing of such declaration on or before due date of filing of ROI. Further rule 128 (4) clearly provides the condition where the foreign tax credit would not be allowed. Rule 128 (9) does not say that if prescribed form would not be filed on or before the due date of filing of the return no such credit would be allowed. Further by the amendment to the rule with effect from 1 April 2022, the assessee can file such form number 67 on or before the end of the assessment year. Therefore, legislature in its own wisdom has extended such date which is beyond the due date of filing of the return of income. Further , the fact in the present case is quite distinct then the issue involved in the decision of the honourable Supreme Court in case of Wipro Ltd (supra). Here it is not the case of violation of any of the provisions of the act but of the rule, which does not provide for any consequence, if not complied with. Therefore, respectfully following the decisions of the coordinate bench on this issue, we hold the assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income Tax Rules,which provided that such form shall be filed on or before the due date of filing of the return of income. Accordingly, ground number 2 of the appeal of the assessee is allowed. ” Unquote.
4.7 Similar view has been taken by ITAT Pune Bench in the case of Shashank Karkare ITA 204/PUN/2024.
4.9 Therefore, as per Rule of Precedence and judicial discipline, respectfully following the ITAT decisions (supra) we hold that Assessee is eligible for credit of Tax paid in USA as mentioned in Form 67 which was filed on 30/03/2021, which was available when the order u/s 143(1) was passed by CPC. Accordingly we direct the Assessing Officer to allow the Foreign Tax credit claimed by the assessee.
In this case it is noted that the Addl.CIT(appeal) while passing the Order u/s 250 has not followed the decisions of ITAT which were available when he passed the order u/s 250 of the Act.
5.1 Hon’ble Supreme Court in the case of Union Of India And Others vs Kamlakshi Finance Corporation AIR 1992 SC 711 has explained the rule of precedence as under :
Quote, “The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate heirarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this 6 [A] healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws ………” Unquote. 5.2 Hon’ble Bombay High Court in K. Subramanian, ITO And Another vs Siemens India Ltd1985 156 ITR 11 Bom vide order dated 20 April, 1983 has held as under :
Quote, “So far as the legal position is concerned, the ITO would be bound by a decision of the Supreme Court as also by a decision of the High Court of the State within whose jurisdiction he is (functioning), irrespective of the pendency of any appeal or special leave application against that judgment. He would be bound by a decision of another High Court on the point, because not to follow that decision would be to cause grave prejudice to the assessee. Where there is a conflict between different High Courts, he must follow the decision of the High Court within whose jurisdiction he is (functioning), but if the conflict is between decisions of other High Courts, he must take the view which is in favour of the assessee and not against him. Similarly, if the ITAT has decided a point in favour of the assessee, he cannot ignore that decision and take a contrary view, because that would equally prejudice the assessee. He can, however, reject claims which are clearly and indisputably untenable and about which a different view is not rationally possible. We may make it clear that, in our opinion, the ITO in making assessment under s. 7 of the said Act is clearly bond by the decision of a single judge or a Division Bench of the court within whose jurisdiction is operating as well as, of course, a decision of the Supreme Court. The mere fact that an appeal has been preferred against such decision or is pending can make no difference whatever to the binding nature of that decision, so far as the ITO is concerned. In view of this, although it is not necessary, we may make it perfectly clear that the decision appealed against shall continue to be binding on all ITOs operating within the jurisdiction of this court for the purposes of making provisional assessments under s. 7 of the said Act, unless a contrary view is taken by a Division Bench of this court or the Supreme Court ”(emphasis supplied) Unquote.
5.3 Thus, Hon’ble Supreme Court and Hon’ble Jurisdictional High has laid down the law that the AO and CIT(A) are bound by decision of ITAT. In this case the Additional Commissioner of Income Tax(Appeal) while passing the order u/s 250 has not 7
In the result, for all the reasons discussed, Appeal of the Assessee is allowed.
Order pronounced in the open Court on 29th August, 2025.