AMITH VISHNAV GUDIMELLA,HYDERABAD vs. ITO, WARD-12(1), HYDERABAD, HYDERABAD

5. The learned CIT(A) erred in upholding the disallowance of the Foreign Tax Credit merely on technical grounds relating to the filing of Form-67 after the due date, without appreciating that the appellant had duly paid foreign taxes accordingly.

6. The learned CIT(A) failed to appreciate that the appellant had substantially complied with the provisions of Rule 128 by furnishing Form-67 and supporting documents before completion of assessment, and that the delay was procedural in nature and should not deny a substantive relief.

3 ITA.No.1705/Hyd./2025 7. The learned CIT(A) erred in passing the order without granting proper opportunity of being heard to the appellant and without considering detailed submissions made through the e-response system.

8. The learned authorities erred in not allowing relief either under Section 90 or Section 91 even though the appellant was eligible under the Double Taxation Avoidance Agreement (DTAA). The denial is unjustified and contrary to the intent of the Act.

9. The CIT(A) failed to appreciate that the return processed under Section 143(1) cannot decide complex issues such as foreign-tax- credit eligibility and therefore exceeded jurisdiction by confirming the CPC's adjustment.

3. The only grievance of the assessee is regarding non grant of Foreign Tax Credit [in short “FTC”] by the CPC while processing the return of income u/sec.143(1) Income Tax Act [in short "the Act"], 1961 and thereafter, rejecting the application of assessee u/sec.154 of the Act which is confirmed by the learned CIT(A) while passing the impugned order. The learned Authorised Representative of the Assessee has submitted that the assessee was a non-resident during the relevant period and was employed onsite with Cognizant

4 ITA.No.1705/Hyd./2025 Technology Solutions US Corp. During the overseas employment in the United States of America, he earned salary income Rs.24,04,202/- and paid tax in US of Rs.5,55,111/-. After returning to India, the assessee was employed with Cognizant Technology Solutions India Pvt. Ltd., and earned salary income Rs.8,83,728/-in India during the previous year relevant to assessment year under consideration. The assessee duly reported the aggregate salary income earned both in USA and in India under the Head "Income from Salaries” in his return of income and also claimed relief in respect of taxes paid in USA in accordance with the provisions of the Double Taxation Avoidance Agreement [in short “DTAA”] between India and the United States of America. The learned Authorised Representative of the Assessee has pointed out that the assessee filed Form-67 for claiming the FTC in accordance with Rule 128 of the I.T. Rules, 1962 on 07.04.2021. However, the CPC did not allow the FTC while processing the return/sec.143(1) of the Act on 03.08.2022 on the ground that the assessee has not uploaded the proof of taxes paid in USA along with Form-67.

5 ITA.No.1705/Hyd./2025 Thereafter, the assessee uploaded the proof of tax paid in USA on 25.08.2022 but the credit was not given by the CPC. Thereafter, the assessee also filed an application for rectification of mistake u/sec.154 of the Act but the same was rejected vide order dated 03.03.2023. The assessee challenged the Order of the CPC before the learned CIT(A) but the appeal of the assessee was dismissed by the learned CIT(A) while passing the impugned order. The learned Authorised Representative of the Assessee has submitted that the return of income was filed by the assessee voluntarily and in full compliance with the provisions of law. The assessee also complied with the provisions of Rule 128 r.w.s.90 of the I.T. Act, 1961 for claiming the FTC by filing the Form-67 on multiple occasions. He has thus submitted that denial of the FTC to the assessee amounts to double taxation of the same income which is against the provisions of sec.90 as well as DTAA between India and USA. In support of his contention, he has relied upon the following decisions:

(i) Order of ITAT, Hyderabad Bench in the case of Smt. Sonali Verma, Secunderabad vs. ITO, Ward-

6 ITA.No.1705/Hyd./2025 12(6), Hyderabad in ITA.No.778/Hyd./2025 dated 30.07.2025; (ii) Order of ITAT, Kolkata in the case of Timirbaran Mazumder vs. DCIT/ACIT, Circle-2(1), International Taxation in ITA.No.1905/Kol/2024 dated 20.03.2025; 3.1. Thus, the learned Authorised Representative of the Assessee has submitted that the limitation provided under Rule 128 of IT Rules, 1962 is only a directory provision and if Form-67 was filed before the Order passed by the CPC then, the claim of the assessee cannot be denied. The assessee was not asked to file supporting evidence of payment of tax which was the reason for disallowing the claim of FTC while passing the Order u/sec.143(1) of the Act and therefore, the assessee filed the said proof of payment of tax in USA but the same was not considered by the authorities below.

7 ITA.No.1705/Hyd./2025 of Rule-128(9) of IT Rules, 1962 which contemplates the due date for filing the Form-67 as specified for furnishing the return of income u/sec.139(1) of the Act. Hence, the learned DR has submitted that when the assessee has not complied with the conditions prescribed u/sec.90/90A of the I.T. Act, 1961 read with Rule 128(9) IT Rules, 1962, then, the CPC has rightly disallowed the claim of FTC.

8 ITA.No.1705/Hyd./2025 dated 03.03.2023. The assessee challenged the action of the CPC before the learned CIT(A) but could not succeed.

6. At the outset, we note that an identical issue has been considered by the Coordinate Bench of this Tribunal and one of us [Shri Vijay Pal Rao, Vice President] is party to the Order dated 30.07.2025 in the case of Smt. Sonali Verma, Secunderabad vs. ITO, Ward-12(6), Hyderabad (supra), in Para nos.5 to 7 held as under:

“5. We have considered the rival contentions as well as the relevant material available on record. There is no dispute that the assessee has declared the salary income earned in US in the revised return of income filed on 23/02/2021 and also claimed FTC by filing Form-67 along with the revised return. Thus, before the revised return, the assessee has neither declared the salary income earned in the US, nor claimed FTC. When the revised return of the assessee was filed within the limitation provided under section 139(5) of the Act, then the claim of FTC of the assessee is linked with the foreign income declared in the revised return. Even otherwise, this issue of denial of FTC on the ground of delay in filing Form-67 has been considered by this Tribunal in a series of decisions wherein a consistent view has been taken and in the case of Shri Sridharan Venkatanarayanan vs. Dy. CIT in dated 27/03/2025, the Tribunal has considered an identical issue in Para 5 to 7 as under:

9 ITA.No.1705/Hyd./2025 “5. We have considered the rival submission as well as perused the relevant material available on record. At the outset we note that the learned CIT (A) has recorded the relevant facts and rejected the claim of the assessee in Para 7.4 as under:

7.4. The Appellant claimed FTC of Rs.815869/-u/s.91 of the Act in original return of income filed on 09-08-2018. The Appellant had filed the Form 67 also on 15-03- 2019. The Appellant also filed a Revised Return of income on 20/03/2019. However, it is pertinent to note that the due date of filing of Return of income was 31.08.2018. 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 20.03.2020 was passed disallowing the claim of FTC. The Appellant has not filed Form 67 before the time allowed under section 139(5) of the Act. The word shall" has 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. 91 cannot be allowed by the Appellate Authority even if other conditions are fulfilled. ln view of the above, the appellant is not eligible for relief under section 91 and the Ground No. 1 is dismissed.”

6. Thus, it is clear that the assessee has filed Form 67 on 15/03/2019 along with the revised return of income.

10 ITA.No.1705/Hyd./2025 However, the CPC while processing the return of income u/s 143(1) of the Act on 20/03/2020, has disallowed the claim of FTC debit. Form-67 was available before the CPC at the time of processing the return. An identical issue has been considered by this Tribunal in a series of decisions relied upon by the assessee and in the latest decision dated 7/3/2025 in case of Shri Suresh Kumar Vobbilisetty vs. Income Tax Officer in for the A.Y 2021-22, this Tribunal has held as under:

“5. We have considered the rival submissions as well as relevant material available on record. There is no dispute that in the case of the assessee there was a TDS deducted by the Foreign Government to the extent of Rs.95,539/- which was claimed as Foreign Tax Credit in accordance with section 91 of the I.T. Act, 1961. The CPC while processing the return u/s 143(1) dated 22/03/2022 disallowed the claim of Foreign Tax Credit on the ground that the assessee has not filed Form 67 within the prescribed limit i.e. 31st Dec. 2021 in case of the assessee. The assessee filed Form 67 on 6/8/2022 and challenged the order of the CPC before the learned CIT (A) but could not succeed. At the outset, we note that there are series of decisions on this point as relied upon by the learned AR of the assessee. In case of 42 Hertz Software India (P) Ltd vs, ACIT (Supra), the Bangalore Bench of the Tribunal has held in para 6 to 8 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 11 ITA.No.1705/Hyd./2025 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.

7. It's a trite law that DTAA overrides the provisions of the Act and the Rules, as held by various High Courts, which has also been approved by Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.com 42/281 Taxman 19/432 ITR 471.

8. We accordingly hold that FTC cannot be denied to the assessee. Assessee is directed to file the relevant details/evidences in support of its claim. We thus remand this issue back to the Ld.AO to consider the claim of assessee in accordance with law, based on the verification carried out in respect of the supporting documents filed by assessee.”

12 ITA.No.1705/Hyd./2025 “8. In the case of Sumedha Arora v. Income -Tax Officer [2023] 154 taxmann.com 535 (Delhi - Trib.) the Co- ordinate bench held as under: "7. As stated, section 90 of the Act provides that Government of India can enter into agreement with other countries for granting relief in respect of income on which taxes are paid in the country outside India and such income is also taxable in India. Article 24 of India-Italy DTAA provides for credit towards foreign taxes paid for earning income arising from foreign soil. Section 90(2) of the Act provides that the provisions of this Act shall apply to the extent they are more beneficial to the assessee. Article 24(3)(a) seeks to provide for method of elimination of Double Tax and the amount of Italian tax payable under the laws of Italy in respect of income from sources within Italy which has been subjected to tax both in India and Italy, shall be allowed as credit against the Indian tax payable in respect of such income. The assessee thus contends that a combined reading of Section 90 of the Act read with Article 24(3)(0) of DTAA provides in no uncertain terms that Italian tax paid shall be allowed as credit against Indian Tax. Neither Section 90 nor DTAA provides that FTC shall be disallowed for mere non- compliance with any procedural requirement of enabling nature. The assessee thus contended that FTC is assessee's vested right as per Article 24(3)(a) of the DTAA r. w. section 90 of the Act and such FTC approved to the assessee cannot be denied on the grounds of non- compliance of procedural requirements prescribed in the Rules which are subservient to the Act as well as DTAA. The assessee further contended that provisions of DTAA override the 13 ITA.No.1705/Hyd./2025 provisions of the Income Tax Act and thus denial of vested right to claim the FTC is in direct infringement of the tax treaty.

8. Rule 128 (8) and (9) provides that the credit for any foreign tax shall be allowed on furnishing of Form 67 on or before the due date of filing the return of income as prescribed under Section 139(1) of the Act. The question thus arises as to whether where a substantial compliance has been made and Form 67 has been eventually filed albeit after the due date of filing of return of income under Section 139(1) of the Act, the denial of FTC would be justified. In this regard, the assessee contends that Rule 128 provides machinery for seeking relief and compliance thereof are the procedural formality which has been duly complied with, albeit with some delay. The provisions of sections 90, section 91 and DTAA does not provide for denial of exemption merely on account of delay in filing of certain forms/reports in contrast to other provisions of the Act such as 80AC, 801A(7), 10A(5) and 10B(5) where attendant conditions of compliance are mandatory.

9. In the factual backdrop, we notice that the Co-ordinate Bench of Tribunal in the case of Ms. Brinda Ramakrishna v. ITO [2022] 135 taxmann.com 358/193 ITD 840 (Bangalore - Trib.) in [ITA No.454/Bang/2021 order dated 17.11.2021] clearly held that filing of Form 67 is a directory requirement and having regard to the position that DTAA overrides the provisions of the Act and Rule cannot be contrary to the Act, the assessee is fully entitled to the FTC. The Tribunal also observed that the issue of allowability of FTC is not a debatable issue and only one view is possible and thus seeking rectification under Section 154 14 ITA.No.1705/Hyd./2025 could be resorted by the assessee. Similar view has been taken in 42 Hertz Software India (P.) Ltd. v. Asstt. CIT [2022] 139 taxmann.com 448 (Bangalore - Trib.) /[ITA No.29/Bang/ 2021 order dated 7th March, 2022). A reference is made to another Co- ordinate Bench decision in the case of Vinodkumar Lakshmipathi v. CIT (Appeals) NFAC [2022] 145 taxmann.com 235 (Bangalore - Trib.), [ITA No.680/Bang/2022 order dated 06.09.2022]; Sonakshi Sinha v. CIT (Appeals) [2022] 142 taxmann.com 414/197 ITD 263 (Mumbai - Trib.)/[ITA no.1704/ Mum/2022 order dated 20th September, 2022] and host of other judgments referred to and relied upon.”

“6. We have gone through the record in the light of the submissions made on either side. It could be seen from the view taken in Muralikrishna Vaddi (supra), the decision of the Bangalore Tribunal in the case of 42 Hertz Software India (P.) Ltd. (supra), was brought to the notice of the Bench, but looking at the abnormal delay of more than two years without any valid and reasonable cause, the Bench held that such delayed filing of Form 67 was in compliance with rule 128(9) of the Rules.

15 ITA.No.1705/Hyd./2025 7. Coming to the decisions relied upon by the assessee it could be seen that in the case of Hertz Software India (P.) Ltd. (supra), reliance was placed on the decision in Ms. Brinda Ramakrishna (supra) and all the other decisions were following of the same. In Ms. Brinda Ramakrishna (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. v. Deputy Commissioner 1992 (1) Supp SCC 21, Sambhaji v. Gangabai [2008] 17 SCC 117 and a lot many decisions of the Hon'ble Apex Court including the case in Union of India v. Azadi Bachao Andolan [2003] 132 Taxman 373/263 ITR 706 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.

8. 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 16 ITA.No.1705/Hyd./2025 rights, liabilities and disabilities of the parties.

8. The Hon'ble Madras High Court in the case of Duraiswamy Kumaraswamy v. Principal Commissioner of Income-tax, reported in 460 ITR 615 has also held in para 11 to 13 as under:

“11. The law laid down by the Hon'ble Apex Court in G.M.Knitting Industries (P) Ltd. (supra), which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without FTC, however the same was filed before passing of the final assessment order. The filing of FTC in terms of the Rule 128 is only directory in nature. The rule is only for the implementation of the provisions of the Act, and it will always be directory in nature. This is what the Hon'ble Supreme Court had held in the above cases when the returns were filed without furnishing Form 3AA and the same can be filed the subsequent to the passing of assessment order.

9. Accordingly, in view of the series of decisions of this Tribunal as well as to maintain the rule of consistency with the decisions of the Coordinate Benches and the decision of the Hon'ble Supreme Court in the case of Vegetable Products Ltd vs. CIT reported in (1973] 88 ITR 192 (SC) dated 29-01- 1973, in case of divergent views, the precedent in favour of the assessee shall be followed. Hence, in view of the facts and circumstances as discussed above as well as the decisions of this Tribunal, Hon'ble High Court and Hon'ble Supreme Court, we hold that the Foreign Tax Credit cannot be denied merely because there is a 18 ITA.No.1705/Hyd./2025 delay in filing Form-67. Accordingly, we direct the Assessing Officer to allow the Foreign Tax Credit to the assessee.”

7. To maintain the rule of consistency, we follow the earlier decisions of this Tribunal and accordingly direct the Assessing Officer to allow the claim of Foreign Tax Credit to the assessee.

6. Further, in a recent decision in the case of Shri Vishal Negi vs. Dy. CIT, this Tribunal vide order dated 30/06/2025 in dated 30/06/2025 has again considered this issue in para 7 as under:

“7. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has claimed credit for Foreign Tax Credit in the return of income filed on 30/07/2022 which is on or before the due date specified u/s 139(1) of the Act. The Assessing Officer denied the credit for Foreign Tax Credit for non-filing of Form No.67 on or before the due date specified u/s 139(1) of the Act by considering rule 128(9) of the I.T. Rules, 1962 which was prevailing in the statute before the amendment by the I.T. Act (27th amendment) Rule 1962 and the same has been notified by the CBDT on 18/08/2022. Further, as per the amended rule 128(9) w.e.f. 1/4/2022 which is applicable from A.Y 2022-23, the statement in Form 67 shall be furnished on or before the end of the A.Y relevant to previous year in which the income referred to in Sub- 19 ITA.No.1705/Hyd./2025 Rule (1) has been offered to tax or assessed to tax in India and the return for such A.Y has been furnished within the time specified time sin sub- section (1) or sub section (4) of section 139 of the Act. The amended rule is applicable for the A.Y 2022-23. In the present case, the dispute is also for the A.Y 2022-23. As per the amended rule, the assessee can file Form 67 before the end of the A.Y relevant to the previous year. In the present case, the assessment year involved is A.Y 2022-23 and end of the A.Y is 31/03/2023. The assessee has filed Form 67 on 15/12/2022, which is well before the due date for furnishing the relevant form. Although these facts have been brought to the notice of the learned CIT (A), but the learned CIT (A) rejected the claim of the assessee by considering the pre-amended rules. Therefore, we are of the considered view that the learned CIT (A) is erred in upholding the reasons given by the Assessing Officer to deny credit for Foreign Tax Credit. Thus, we set aside the order of the learned CIT (A) and direct the Assessing Officer to allow credit for Foreign Tax Credit as claimed by the assessee in the return of income by considering the relevant form 67 filed on 15/12/2022 indicating the details of income and taxes paid outside India and delete the demand raised by rejecting the credit for Foreign Tax Credit. We order accordingly.

7. Accordingly, to maintain the rule of consistency, we follow the earlier decisions of this Tribunal and hold that the 20 ITA.No.1705/Hyd./2025 claim of FTC cannot be denied merely on the ground of delay in filing Form-67 without considering the fact that the assessee has filed the revised return declaring the salary earned in US and along with the revised return also claimed the FTC as paid in the US on the salary income. Further, to remove this anomaly, Rule 128(9) of I.T Rules has been amended w.e.f 1/4/2022 whereby the statement in Form 67 is allowed to be furnished on or before the end of the A.Y relevant to the previous year in which such foreign income has been offered to tax and the return of income has been furnished within the specified time provided u/s 139(1) or (4) of the Act. Accordingly, we set aside the impugned order of the learned CIT (A) and direct the Assessing Officer to allow the claim of the assessee for FTC.”

7. Accordingly, the Tribunal has taken a consistent view that the claim of FTC cannot be denied merely on the ground of delay in filing Form-67 as the limitation provided under Rule128(9) is a directory condition. Similar view has been taken by the Kolkata Bench of the Tribunal in the case of Timirbaran Mazumder vs. DCIT/ACIT, Circle-2(1), International Taxation (supra). Following the earlier decision of this Tribunal in the case of Smt. Sonali Verma, Secunderabad vs. ITO, Ward-12(6), Hyderabad (supra), the impugned order of the learned CIT(A) is set aside and the 21 ITA.No.1705/Hyd./2025 matter is remanded to the record of the Assessing Officer for considering the claim of the assessee for grant of FTC on the basis of Form-67 already filed by the assessee.

Order pronounced in the open Court on 06.03.2026.