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Facts
The assessee, an employee on international assignment, filed a return of income with a delay in Form 67. The CIT(A) dismissed the appeal solely on the grounds of this delay.
Held
The Tribunal held that the delay in filing Form 67 was condonable and that Rule 128(9) of the Income Tax Rules should be read in conformity with the DTAA, which overrides the Act.
Key Issues
Whether the delay in filing Form 67 can be condoned, and if Rule 128(9) prevents Foreign Tax Credit when Form 67 is filed late, despite DTAA provisions.
Sections Cited
143(1), 139(1), 154, 128(9)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI LALIET KUMAR & SHRI MANOJ KUMAR AGGARWAL
HYBRID HEARING O R D E R PER LALIET KUMAR, JM
This appeal is filed by the assessee feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals)[in short ‘the CIT (A)’] dated 11.06.2025 passed for assessment year 2021-22.
The facts of the case are that during the assessment year under consideration, the assessee was an employee of Ernst & Young LLP (‘EY India’) and was on international assignment to A.Y.2021-22 2 Ernst & Young US LLP (‘EY US’) posted at U.S. There was a delay in filing Form 67 alongwith the return of income. It was submitted by the assessee that the assessee had filed the return of income on 31.07.2021 and thereafter filed the revised return of income on 31.03.2022 and alongwith the revised return of income, the assessee has filed Form 67 as contemplated u/s 128 of the Income Tax Rules,1962. Thereafter the intimation was issued by the lower authorities on 31.10.2022.
Despite the above, the ld. AR had submitted that the ld.CIT (Appeals) has dismissed the appeal of the assessee on the ground that there is a delay in filing the Form 67 and she has drawn our attention to paragraph Nos. 7 and 8 of the order passed by the ld.CIT (Appeals). It was submitted by the ld. AR that the issue raised by the assessee is covered in favour of the assessee by the decision of the Co-ordinate Benches and our attention was drawn to written submission filed before us on 07.11.2025 and the synopsis filed therein. The ld. AR has placed reliance on the following judgements of the Hon'ble High Courts/Tribunals :
A.Y.2021-22 3 a) Ms. Brinda Rama Krishna Vs The Income Tax Officer, Bangalore [ITA No.454/Bang/2021) b) Decision of Bangalore Tribunal dated 07.03.2022 in the case of Hertz Software Private Ltd. V ACIT c) Decision of ITAT Bangalore Bench in the case of Sanjiv Gopal Vs Assistant Director of Income-tax [2022] 145 taxmann.com 378 d) Decision of ITAT Bangalore Bench dated 19.09.2022 in the case of Shri Shashidhar Seetharam Sharma Vs ITO (ITA No.708/Bang/2022) e) Decision of the Madras High Court in case of Duraiswamy Kumaraswamy [TS-681 -HC-2023-(MAD)] dated 6 October 2023. f) Decision of Jaipur Tribunal in the case of Shri Ritesh Kumar Garg Vs ITO Jaipur [2022] 261 g) Decision of Mumbai Tribunal dated 20.09.2020 in the case of Sonakshi Sinha Vs ACIT [ITA No.1704/Mum/2022] 4. Per contra, ld. DR relied upon decision of the lower authorities.
We have heard both the parties and perused the material available on record. Admittedly, in the present case, Form 67 was filed alongwith the revised return of income on 31.03.2022 within the permissible time limit as provided by the Act. The solitary ground for not according the benefit of the DTAA and giving credit of the taxes paid in U.S. was that Form 67 as contemplated u/s 128(9) was not filed alongwith the return of income. In the present case, undoubtedly, the intimation was issued by the Competent Authority on 31.10.2022 and before that the assessee had already revised A.Y.2021-22 4 the return of income and Form 67 was already placed on record. That Form 67 was available for review to the CPC and therefore, it was incumbent upon the CPC to look into the form and decide the issue accordingly. However, the same has not been done. Quite surprisingly, when this issue was brought to the notice of the ld.CIT (Appeals) at the appellate stage, the ld.CIT (Appeals) sought closed over the abovesaid issue despite the binding decisions of various High Courts and the Tribunals. For the abovesaid purposes, it will be useful to mention here that the Hyderabad Bench in the case of Shri Ashish Agarwal V. ITO (2023) 203 ITD 562 in which one of us was the signatory, had decided the issue in favour of the assessee by giving the following reasoning :
“9. We have heard the rival submissions and perused the material placed on record. It could be seen from the record that there was a delay of 710 days in preferring the appeal before the learned CIT(A) and the reason attributed for the delay in filing the appeal to the pandemic. As a matter of fact, though the learned DR does not concede to condone the delay, there is no denial of the fact that the Hon'ble Supreme Court in the Suo Motu proceedings in the case of M.A.No. 21/2022 in M.A.No. 665/2021 in SMW(C) No.3 of 2020 by order dated Page 5 of 8 10/01/2022 held that in cases, where the limitation would have expired during the period between 15/03/2020 and 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022, and in the event of actual balance period of limitation remaining with effect from 01/03/2022 is greater than 90 days, that longer period shall apply. Since the limitation period is applicable to this appeal also, following the direction of Hon'ble Hon'ble Apex Court, we condone the delay.
A.Y.2021-22 5 10. Besides the above, the assessee after the receipt of intimation u/s. 143(1) of the Act, had filed a rectification application before the CPC on 07/11/2022 and the CPC had passed order on 09/01/2023, thereby not accepting the request of the assessee for granting the relief as claimed in the original return of income. Having heard the rival submissions, we are of the considered opinion that delay in filing the appeal before the learned CIT(A) was on account of the reasons mentioned hereinabove and more particularly for the assessee to avail the proceedings u/s. 154 of the Act before the CPC. In view of the above, the delay in filing the appeal before the learned CIT(A) is required to be condoned. We also observed from the perusal of the learned CIT(A)’s findings that the learned CIT(A) has not adjudicated the appeal of the assessee on merits and merely dismissed the same on account of delay in filing the appeal before the learned CIT(A). In our view, though invariably the issue is required to be remitted to the file of learned CIT(A), considering the smallness of the issue and the issue is covered in favour of assessee, we deem it appropriate to adjudicate the grounds on merits. Accordingly, we have also taken into account that the rectification application was also filed well within the permissible time limit i.e., upto 31st March, 2025 as per Section 154(7) of the Act.
As far as the issue of FTC is concerned, learned AR placed reliance on the decision in the case of Ms. Brinda Rama Krishna (supra). In the case of Ms. Brinda Rama Krishna (supra), the Bench considered the issue in the light of the provisions of DTAA, section 295(1) of the Act, the decisions of the Hon'ble Apex Court in the case of Mangalore Chemicals & Fertilizers Ltd. Vs. Deputy Commissioner (1992 Supp (1) SCC 21), Sambhaji Vs. Gangabai (2008) 17 SCC 117 and a lot many decisions of the Hon'ble Apex Court including the case in Union of India Vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC) etc. and reached a conclusion that since Rule 128(9) of the Rules does not provide for disallowance of FTC in the case of delay in filing Form 67 and such filing within the time allowed for filing the return of income under section 139(1) of the Act is only directory, since DTAA over rides the Act, and the Rules cannot be contrary to the Act.
We find from Article 25(2)(a) of the DTAA that where a resident of India derives income which, in accordance with the provisions of the convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of the resident an amount equal to the income tax paid, paid in the United States, whether directly or by deduction. In view of this provision over riding the provisions of the Act, according to us, Rule 128(9) of the Rules has to be read down in conformity thereof. Rule 128(9) of the Rules cannot be read in isolation. Rules must be read in the context of the Act and the DTAA impacting the rights, liabilities and disabilities of the parties.
In the case of Purushothama Reddy Vankireddy (supra) also the Co-ordinate Bench of the Tribunal, in the similar circumstances, allowed the appeal of assessee for FTC claim. Respectfully following the same, we are of the considered opinion that the decisions relied upon by the assessee A.Y.2021-22 6 are applicable to the facts of the case and the grounds raised
by the assessee are accordingly allowed.
14. In the result, appeal of the assessee is allowed.
6. Therefore, respectfully following the rationale of the Hon'ble Co-ordinate Bench in the case of Shri Ashish Agarwal (supra) we deem it appropriate to allow the appeal filed by the assessee and accordingly, the appeal of the assessee is allowed and the Assessing Officer is directed to give credit of the taxes paid by the assessee in U.S. as reflected in Form 67, though filed on 31.03.2022.
In the light of the above, the appeal of the assessee is allowed.
Order pronounced on 09.12.2025.