PUKHRAJ SINGH GUJRAL,CHANDIGARH vs. CPC, BENGALURU

8. Against the assessment order the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A), vide order dated 22.02.2024, upheld the AO’s disallowance of the FTC claim. The CIT(A) observed that Rule 128(9) explicitly requires Form No. 67 to be furnished on or before the due date of filing the return under Section 139(1). Since the assessee filed Form No. 67 on 27.08.2022, after the due date of 31.07.2022, the claim did not comply with the procedural mandate. The CIT(A) rejected the assessee’s reliance on various judicial pronouncements, noting that these were from non-jurisdictional tribunals and lacked finality, as no Supreme Court ruling confirmed their position. The CIT(A) further held that Rule 128(9) was not merely procedural but a substantive condition for claiming FTC, and non-compliance justified the disallowance. The Ld. CIT(A) upheld the addition made by the CPC and dismissed the appeal of the assessee.

9. Against the order of the Ld. CIT(A) the assessee came in appeal before us.

10. During the course of hearing the Ld. Counsel for the Assessee submitted that the disallowance of FTC was erroneous and contrary to law. It was argued that Rule 128(9) is a procedural requirement and not mandatory, as neither the Income Tax Act nor the Rules explicitly state that failure to file Form No. 67 by the due date results in denial of FTC. The assessee emphasized that Section 90, read with the Double Taxation Avoidance Agreement (DTAA) between India and Canada, grants a substantive right to claim FTC, which cannot be curtailed by subordinate legislation like Rule 128. Reliance was placed on judicial precedents, including Brinda RamKrishna v. ITO (ITAT Bangalore), Sonakshi Sinha v. CIT(A) (ITAT Mumbai), and others, which held that filing Form No. 67 is directory, and FTC cannot be denied for procedural delays if the form is filed before assessment completion. The assessee further cited the amendment to Rule 128(9) effective from 01.04.2022, allowing Form No. 67 to be filed by the end of the assessment year, and argued that this liberalized approach supported their claim. Additionally, reference was made to a favorable order in a similar case involving Pavit Gujral, where FTC was allowed despite a delayed Form No. 67 filing.

12.1 The Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy in W.P.No.5834 of 2022 and W.M.P.Nos.5925 and 5927 of 2022 vide its judgement dt. 06.10.2023 had held as under: 9. In the present case, the petitioner initially worked at Kenya and subsequently, he became the resident of Indian from the assessment year 2018-2019 and 2019-2020. The petitioner admitted the fact that he has filed his return in India on 10.08.2019. The intimation under Section 143(1) was issued on 26.03.2020. However, he has filed the return without Form-67 which is required to be filed under Rule 128 to claim the benefit of FTC and the same came to be filed on 02.02.2021 which was well before the completion of the assessment year. The intimation under Section 143(1) was issued from the CPC only on 26.03.2021.

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.

13. 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 aside only to the extent of disallowing of FTC claim made by the petitioner and hence, the first respondent is directed to consider only on the aspect of rejection of FTC claim within a period of 8 weeks from the date of receipt of copy of this order.

12.2 Similarly the Coordinate Bench decision in the case of Income Tax Officer Vs. Venigandla Krishna in dt. 27/02/2024.

We have heard learned DR and perused the material on record. On a careful consideration of the contentions raised by learned DR, we are of the considered opinion that this issue is squarely covered by the decision of the Co-ordinate Bench of the Tribunal in the case of Natco Pharma Limited vs. DCIT, in dt. 31/07/2023, wherein the identical issue has been decided as under: “10. Learned AR submits that filing of Form 67 in accordance with rule 128 of the tax rules is only a procedural requirement to enable the tax authorities to verify the FTC available to the assessee, but it does not take away altogether the right of the assessee to claim the FTC.

Insofar as this issue is concerned, this is no longer res integra and we find that the Bangalore Bench of the Tribunal in the case of M/s.42 Hertz Software India Pvt.Ltd vide order dated 07/03/2022 for the assessment year 2017-18, decided an identical issue and held that FTC cannot be denied to the assessee, where the assessee filed FTC in Form 67, although belatedly since filing of such Form 67 is not mandatory but directory in nature. Relevant observation of the Tribunal from para 6 onwards reads as under:- "6. There is no dispute that the Assessee is entitled to claim FTC. On perusal of provisions of Rule 128 (8) & (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view, 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.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda Kumar Krishna vs. ITO in by order dated 17/11/2021”.

A Co-ordinate Bench of this Tribunal in the cases of Shridhar Madhav Diwan vs. DCIT in dated 24/05/2023 and Purushothama Reddy Vankireddy vs. ADIT in dated 05/12/2022, followed the same and held the issue in favour of the assessee. These decisions are applicable to the facts of the case and while respectfully following the said view, we hold the issue in favour of assessee.” Respectfully following the said decision of the Co-ordinate Bench of the Tribunal, we deny the contentions of learned DR and while rejecting the plea taken by the Revenue, dismiss the grounds raised.

12.3 Further, I may also refer to the decision of Coordinate Bench in case of CES Limited Vs. The Deputy Commissioner of Income Tax in dt. 22/03/2024.

We have heard the rival submissions and perused the material on record. We agree with the contentions put forth by the learned counsel for the assessee and hold that Rule 128(9) of the 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 and DTAA overrides the provisions of the Act and Rules cannot be contrary to the Act. Before me, ld. AR submitted that the case is already covered in favour of the assessee and filed the orders of Tribunal wherein the Tribunal gave decision in favour of assessee, including the order in ITA No.337/Hyd/2023. Further, the said decisions are not stayed or over-ruled by any of the higher Judicial Forums. In view of the above circumstances, I respectfully following the decision of the co-ordinate Bench of the Tribunal passed in the case of Ashish Agarwal Vs. ITO in dt.26.09.2023, allow the appeal. Thus, the appeal of the assessee is allowed.

12.4 Lastly the Coordinate Amritsar Bench in the case of Harbans Singh [2024] 165 taxmann.com 146 (Amritsar - Trib.) has held as under:

10.1 In the instant case we find that the original return of income is within time u/s 139(1) of the Act 61, filed on a returned income of Rs. 14,92,640/-, which was subsequently revised u/s 139(5), at a higher figure of Rs.16,91,220/-, which is the finally assessed figure u/s 143(1) dated 28/10/2022, meaning thereby, the revised return has been considered and accepted by CPC, ignoring the claim of the assessee in Form 10-IE, which was also on record before the AO, on the date of assessment. Form 10.2 We find that an identical issue has been decided by the coordinate bench of the ITAT , Pune in the case of Akshay Devendra Birari v. Dy. CIT, CPC PUN/ 2024 dated 05/06/2024/ [2024] 164 taxmann.com 58 (Pune - Trib.), where the Hon'ble Bench has held on the facts case that filing of Form 10-IE is not a mandatory requiredment but only directory in nature and CPC ought to have considered the same allowing the benefit of new tax regime. 10.3 We would also like to consider the decision of the Bangalore Bench of the tribunal in the case of 42 Hertz Software India (P.) Ltd. v. Asstt. CIT 2021, dated 07/03/2022/[2022] 139 taxmann.com 448 (Bangalore - Trib.), which relates to the matter of delayed filing of Form 67 , under Rule 128, in the matter of claim of FTC. On the facts of the case it was held that one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before due date prescribed u/s 139(1) of the Act , but this requirement cannot be treated as mandatory, rather it is directory in nature , because Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67. Similar view has been taken in the case of Ms. Brinda RamaKrishna v. ITO(2022 (2) TMI 752- ITAT/[2022] 135 taxmann.com 358/193 ITD 840 (Bangalore - Trib.) Bangalore, for the purpose of Form 67 rwr 128 relating to FTC. 10.4 We also consider the decision of the ITAT , Ahmedabad Bench, in the case of Income-tax Officer (Exemptions) v. Ramji Mandir Religious and Charitable Trust [2024] 158 taxmann.com 114/205 ITD 150 (Ahmedabad - Trib.)(Ahmedabad), where in the matter of filing of Form 10/10B which is required to be furnished before due date u/s 139(1) of the Act, the tribunal held the same to be merely directory in nature and opined that the same cannot be so fatal so as to deny exemption u/s 11(2) specially when the said Form - 10/10B was available before the AO when intimation was passed by CPC, u/s 143(1). 10.5 Regarding the issue of technical glitch raised by the assessee , that Form 10-IE could not be uploaded in the portal within the time allowed u/s 139(1) , due to technical incompatibility in the portal we refer to a judgment of the Hon'ble Gujrat High court in the matter of section 115BBA of the Act , in the case of Pr. CIT v. KGY Glass Industries (P.) Ltd. [2023] 156 taxmann.com 18/296 Taxman 180/464 ITR 129, where Form 10-1C was required to be filed by the domestic company within time allowed u/s 139(1) of the Act ,opting to be taxed as per provisions of section 115BBA , was not practically possible due to technical glitches in the portal, the Hon'ble court held that in absence of any fault on the part of the assessee , the assessee cannot be deprived of benefit under section 115BBA of the Act . 10.6 As such considering all aspects of the matter, and noting the legal conclusions derived at by various courts and tribunals, on the facts of respective cases, cited above, we are in agreement with the decision of the coordinate bench of the Pune tribunal in the case of Akshay Devendra Birani (supra), and we hold that requirement of filing Form 10-IE is directory in nature and not mandatory and it is sufficient compliance if the said Form is before the AO at the time of assessment. As such we direct the CPC to take into consideration the Form 10-IE filed by the assessee and pass appropriate orders.

12.5 Accordingly, we set aside the orders of the AO and CIT(A) and direct the AO to allow the FTC claim of Rs. 10,32,088 after verifying the supporting documents. The appeal is allowed.

(Order pronounced in the open Court on 16/04/2025)