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Facts
The assessee, employed in Germany, claimed Foreign Tax Credit (FTC) for taxes paid in Germany. The return was processed, disallowing FTC due to non-filing of Form 67 within the due date. The assessee subsequently filed Form 67 and a rectification application, which was also rejected.
Held
The Tribunal held that filing Form 67 within the prescribed time is directory, not mandatory. Various judicial pronouncements support this view, and the DTAA overrides the Act and Rules. Therefore, the FAA was not justified in dismissing the claim without examination.
Key Issues
Whether the disallowance of Foreign Tax Credit (FTC) for non-filing of Form 67 within the prescribed time is justified, or if the condition is directory and not mandatory.
Sections Cited
Section 90, Section 139(1), Section 154, Rule 128(9), Section 119(2)(b)
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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA
O R D E R PER GEORGE GEORGE K: This appeal filed by the assessee is directed against the Addl./JCIT(A)’s, Indore order dated 09.10.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2020-21.
2 -: 2. The solitary issue that is raised is whether the First Appellate Authority (FAA) had erred in law and on facts in not granting Foreign Tax Credit (FTC) of Rs.5,73,078/-.
Brief facts of the case are as follows: The assessee was employed with Continental Automobile Components India Pvt. Ltd. during the period 01.08.2018 to 31.07.2019. The assessee was sent on assignment to Germany by his employer. For the assessment year 2020-21, return of income was filed on 07.12.2020 declaring total income of Rs.37,41,850/-. The assessee had claimed FTC for the taxes paid in Germany as per section 90 of the Act. The return of income was processed u/s.143(1) of the Act on 24.12.2021. In the said intimation issued u/s.143(1) of the Act, the FTC claimed amounting to Rs.5,72,078/- was not granted. The reason for not granting the benefit of FTC was on account of assessee not filing Form 67. On receipt of intimation issued u/s.143(1) of the Act, assessee e-filed on 24.08.2023, a copy of Form 67. A copy of Form 67, the certificate issued by the employer and copy of Form 16 evidencing the claim of FTC are placed on record. Thereafter, the assessee filed multiple rectification application online. However, the rectification application was processed by the CPC without allowing the grant of FTC claimed u/s.90 of the Act.
3 -: 4. Aggrieved by the rectification order dated 11.07.2023 passed u/s.154 of the Act, assessee filed appeal before the FAA. The FAA held the word ‘shall’ has been used in Rule 128(9) of the Income Tax Rules, 1962 and assessee having not filed Form 67 within the prescribed time under the Act, assessee is not entitled to the benefit of FTC (Form 67 has to be filed along with return of income u/s.139(1) of the Act). The relevant finding of the FAA reads as follows:- “5.4 The Appellant claimed FTC of Rs. 5,72,078/- u/s. 90/91 of the Act in original return of income filed on 07.12.2020. The Appellant has not filed the Form 67. However, it is pertinent to note that the due date of filing of Return of Income was 10.01.2021. The Appellant has failed to furnish Form 67 on or before the due date of furnishing the return of income as prescribed u/s 139(1) of the Act which is mandatory according to Rule 128(9) of the Rules. Therefore, the return of income was processed by Centralized Processing Centre (CPC) electronically and intimation u/s 143(1) of the Act on 24.12.2021 was passed disallowing the claim of FTC. Thereafter the Appellant filed the Rectification request which was rejected vide 154. Order dated 11.07.2023 against which the present appeal has been filed. The Appellant has not filed Form 67 before the time allowed under section 139(5) of the Act. The word "shall" have been used in the rule 128(9) therefore the provisions of rule 128 are mandatory in nature and not directory. From the above, it is apparent that unless there is an order condoning the delay in filing Form No. 67 by the PCIT under Section 119(2)(b), such Form No. 67 can't be taken into consideration and the relief u/s. 90/91 cannot be allowed by the Appellate Authority even if other conditions are fulfilled. In view of the above, the appellant is not eligible for relief under section 90/91 and Grounds No. 1.1 to 1.7 are dismissed.”
Aggrieved by the order of the FAA, assessee has filed the present appeal before the Tribunal. The Ld.AR submitted that 4 -: uploading Form 67 belatedly is only a technical / venial breach and cannot affect substantive right for granting FTC. In other words, it was submitted that filing of Form 67 within the time prescribed u/s.139(1) of the Act is only directory and not mandatory. In support of his submission, the Ld.AR relied on the judgment of the Hon’ble Delhi High Court in the case of Real Time Data Services Pvt. Ltd., vs. PCIT in WP© No.959/2024 (judgment dated 13.02.2026) and the order of the Mumbai Bench of the Tribunal in the case of Tabassum Abdulla Inamdar vs. DCIT in (order dated 16.02.2026).
The Ld.DR supported the order of the FAA.
We have heard rival submissions and perused the material on record. Admittedly, assessee has not filed Form 67 along with return of income within the due date prescribed u/s.139(1) of the Act. The return was processed u/s.143(1) of the Act on 24.12.2021. The assessee on receipt of intimation u/s.143(1) of the Act and realizing the mistake that Form 67 was not filed, he e-filed the same on 24.08.2022.
The Hon’ble Delhi High Court in the case of Real Time Data Services Pvt. Ltd., (supra), had held that when petitioner had failed to upload Form 67 within due date of filing of the return, it is only a 5 -: technical or venial breach. It was further held by the Hon’ble Delhi High Court that the petitioner has substantial right of getting FTC and withholding the same is without any authority and would tantamount to unjust enrichment. The Hon’ble Court in the said case directed the AO to examine the Form 67 (which was admittedly filed subsequent to the intimation issued u/s.143(1) of the Act) and pass a speaking order in accordance with law.
The Mumbai Bench of the Tribunal in the case of Tabassum Abdulla Inamdar, (supra) had held that filing of Form 67 within the due date prescribed is not mandatory but only directory requirement. It was further held by the Mumbai Bench of the Tribunal, the DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. The relevant finding of the Mumbai Bench of the Tribunal reads as follows:- “5. We have perused the records and material placed before us. We take note of the provisions contained in Rule 128. From the reading of Rule 128 of the Rules, we find that sub-rule (9) of Rule 128 does not provide for disallowance of foreign tax credit in case of delay in filing Form No. 67. It is noted that filing of Form No. 67 is not mandatory but a directory requirement. Further, DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. In reference to Rule 128, it is a well- settled position 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 foreign tax credit. Also, under the Act, provisions of Section 90 and 91 do not prescribe timeline for 6 -: filing of such declaration on or before the due date of filing of return. Also, Rule 128(4) clearly provides the condition where the foreign tax credit would not be allowed. Thus, present case is not a 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. 5.1. The issue before us is no longer res integra as held by various Coordinate Benches of ITAT, few of which are listed below: i. Sonakshi Sinha vs. CIT [2022] 142 taxmann.com 414 (Mum) ii. Deepak Shimoga Parmaraju vs. ADIT [2024] 162 taxmann.com 96 (Bang) iii. Brinda Ramakrishna vs. ITO [2022] 135 taxmann.com 358 (Bang)
Considering the factual matrix on record as well as pending application before the ld. JAO u/s. 154, and the judicial pronouncements listed above read with Rule 128 of the Rules, we remit the matter back to the file of ld. JAO for a limited purpose of verification of the records and allow the credit for foreign taxes paid by the assessee as duly claimed in her return along with Form 67 already on record. Accordingly, ground raised by the assessee is allowed.”
In the case considered by the Mumbai Bench of the Tribunal, it is abundantly clear that Form 67 was filed only subsequent to the intimation issued u/s.143(1) of the Act (refer para 3.1 of the said order of the Tribunal).
The Chennai Bench of the Tribunal in the case of Ms.Chathadi Krishnan Parvathi vs. ITO in (order dated 18.06.2025) by following the earlier judicial pronouncement had directed the AO to examine the Form 67 which was filed subsequent to the intimation issued u/s.143(1) of the Act.
7 -: 12. Since various judicial pronouncements have held filing of Form 67 under Rule 128 of the Income Tax Rules, 1962 within the prescribed time is only directory in nature and not mandatory, we hold the FAA is not justified in not examining whether Form 67 filed by the assessee is in accordance with the rules prescribed. Since there has not been examination whether assessee is entitled to FTC, we deem it appropriate to restore the matter to the files of the AO. The AO is directed to examine the Form 67 filed by the assessee (which is already on record) and take a decision in accordance with law. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.