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Facts
The assessee filed their return of income for AY 2021-22, which was processed U/s 143(1) of the Income Tax Act. The Assessing Officer (AO) disallowed the relief claimed U/s 90 (Foreign Tax Credit - FTC) because Form 67 was filed after the due date, though before the AO's intimation. The assessee's rectification application U/s 154 was rejected, and the appeal before the CIT(A) was dismissed, affirming the disallowance.
Held
The Income Tax Appellate Tribunal (ITAT) held that the filing of Form 67 is a procedural and directory requirement, not mandatory. A delay in filing Form 67, when it is eventually filed before the completion of assessment, does not extinguish the substantive right to claim Foreign Tax Credit (FTC). Relying on judicial precedents, the ITAT allowed the assessee's appeal, directing that the FTC should be granted.
Key Issues
Whether the delayed filing of Form 67, a procedural requirement, justifies the disallowance of Foreign Tax Credit (FTC) under Section 90 of the Income Tax Act, and if the requirement to file Form 67 within the prescribed due date is mandatory or directory.
Sections Cited
143(1), 90, 154, 139(1), 91, 80AC, 80-IA(7), 10A(5), 10B(5), 295(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI SUDHIR PAREEK
This appeal is preferred by the Assessee against the order dated 08.02.2024 passed by the Learned Commissioner of Income Tax (Appeal) (hereinafter referred to as ‘CIT (A)’)/ National
ITA No.-783/Del/2024 Maya Kapoor. Faceless Appeal Centre (NFAC), Delhi for the Assessment Year (‘AY’) 2021-22.
Facts of this case may be summarized that assessee / appellant filed its return of income on dated 13.10.2021 declaring total income of Rs. 28,77,320/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and intimation was issued on 05.07.2022.
The Learned Assessing Officer (‘Ld. AO’) assessed the income at Rs. 28,77,320/- but disallowed the relief claimed U/s 90 of the Act by stating that Form 67 was not filed and same was filed by the assessee on 25.01.2022. thereafter, the assessee / appellant filed application for rectification of the above assessment order u/s 154 of the Act on 23.01.2023 but the relief u/s 90 of the Act was again declined by CPC. Aggrieved by the above order, preferred an appeal before the Ld. CIT(A), but said appeal of the assessee was dismissed. Relevant operative para of impugned order as below:
“In view of the aforementioned detail, the Appellant was required to file return of income as well as form 67 before due date specified for furnishing the return of income under sub-section (1) of section 139. The Appellant submitted Form 67 as referred in ITA No.-783/Del/2024 Maya Kapoor. Rule 128 was only on 25.01.2022 which is after the due date specified for furnishing the return of Income under sub-section (1) of 139. Therefore, the Appellant is not eligible for relief u/s.90 of the I.T. Act, 1961. In view of these facts and the provisions of I.T Act and Rule 128 of the I.T Rules 2016 and notification No.9 dated 19.09.2017 of CBDT, I don't find any irregularities in the order of 154 of the I.T. Act, 1961 passed by the AO. Further, the Appellant could not submit any contrary view of evidence against the order of 154 of IT Act. Accordingly, I am of the considered view that the foreign tax credit of Rs. 4,74,780/- is not allowable in the case of Appellant as the Form 67 as referred in Rule 128 of the I.T. Rules, 2016 has been furnished after the due date specified for furnishing the Return of Income under sub-section (1) of section 139 of the I.T. Act, 1961. Therefore, the order of 154 of the I.T. Act is hereby confirmed and this ground of appeal is dismissed.”
The assessee / appellant has raised following substantive grounds of appeal for adjudication:
“1. That having regard to facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in rejecting the application u/s 154 and that too without any basis and without appreciating the facts and circumstances of the case and in violation of principles of natural justice.
2. That in any view of the matter and in any case, action of Ld. CIT(A) in not allowing the rectification application u/s 154, is bad in law and against the facts and circumstances of the case.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) ought to have allowed the relief of Rs.4,27,677/- as claimed assessee u/s 90/91 and ought to have deleted the alleged demand raised amounting to Rs.4,74,780/- and that too without any basis.
That the appellant craves to leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
ITA No.-783/Del/2024 Maya Kapoor. 4. Heard rival submissions and carefully scanned the material placed before us.
In the cause of hearing, it is submitted by Ld. AR that Ld. CIT(A) rejected his application U/s 154 of the Act without basis and appreciation of facts and circumstances and it is violative of principle of natural justice, also. He further submitted that CIT(A) ought to have allowed the relief of Rs. 4,27,677/- as claimed by assessee / appellant U/s 90/91 of the Act and deleted alleged demand raised amounting to Rs. 4,74,780/-.
Per contra, Learned Departmental Representative (“Ld. DR”) relied on the orders passed by lower authorities.
During submissions, following Judgments and orders f Co- ordinate Benches of ITAT have been referred by Ld. AR, for ease of reference the relevant operative part are held as under:
• In the case of Duraiswamy Kumaraswamy vs. PCIT,
(2024), 460 ITR 615 (Mad.) held 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 Page 4 of 12 ITA No.-783/Del/2024 Maya Kapoor. 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.
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.” • Gaurave Singh vs. ITO (2024) 158 taxmann.com 350
(Jabalpur)
“9. We considering the facts, circumstances provisions of the Act and judicial decisions are of the opinion that there is no amendment on these aspects in the section 90 of the Act and the Rules cannot override the Act and therefore the filing of Form.No 67 is not mandatory but it is directory. Accordingly, we considering the facts, circumstances and ratio of the judicial decisions restore the disputed issue for limited purpose to the file of the assessing officer to grant Foreign Tax Credit after verification and in accordance with the law. Further the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information and allow the grounds of appeal of the assessee for statistical purposes.”
• Ms. Brinda RamaKrishna vs. ITO, (2022) 193 ITD 840
(Bangalore)
“10. It was further submitted that rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed u/s 139(1) of the Act. However, the rule nowhere provides that if the said Form 67 is not filed within the above stated time frame, the relief as sought by the assessee u/s 90 of the Act would be denied. The learned counsel for the Assessee submitted that in case the intention Page 5 of 12
ITA No.-783/Del/2024 Maya Kapoor. was to deny the FTC, either the Act or the Rules would have specifically provided that the FTC would be disallowed if the assessee does not file Form 67 within the due date prescribed under section 139(1) of the Act. It was submitted that → that there are many sections in the Act which specifically deny deduction or exemption or relief in case the return is not filed within prescribed time. Reference was made to section 80AC, 80- IA(7), 10A(5) and 10B(5). Such language is not used in rule 128(9). Therefore, such condition cannot be read into rule 128(9).
It was further submitted that Filing of Form 67 is a procedural/directory requirement and is not a mandatory requirement. It was submitted that violation of procedural norm does not extinguish the substantive right of claiming the credit of FTC. Reliance was placed on the decision of the Hon'ble Supreme Court, in the case of Mangalore Chemicals & Fertilizers Ltd. v. Dy. Commissioner AIR 1952 SC 152 wherein it observed that:
"The mere fact that it is statutory does not matter one way or the other. There are conditions and conditions. Some may be substantive, mandatory and based on considerations of policy and some others may merely belong to the area of procedure. It will be erroneous to attach equal importance to the non-observance of all conditions irrespective of the purposes they were intended to serve."
Further reliance was placed on the decision of the Hon'ble Supreme Court, in the case of Sambhaji v. Gangabai [2008] 17 SCC 117, wherein it has been held that procedure cannot be a tyrant but only a servant. It is not an obstruction in the implementation of the provisions of the Act, but an aid. The procedures are handmaid and not the mistress. It is a lubricant and not a resistance. A procedural law should not ordinarily be construed as mandatory; the procedural law is always subservient to and is in aid to justice. It was submitted that filing of Form 67 as per the provisions of section 90 read with rule 128(9) is a procedural law and should not control the claim of FTC.” • Ashish Agarwal vs. ITO, (2023) 203 ITD 562 (Hyd).
“11. As far as the issue of FTC is concerned, learned AR placed reliance on the decision, the Bench of Ms. Brinda Rama Krishna
ITA No.-783/Del/2024 Maya Kapoor. Rama Krishna (supra) the Bench the considered the issue in the light of the provisions of DTAA, section 295(1) of Ltd. v. D. decisions of the Hon'ble Apex Court in the case of Mangalore Chemicals & Fertilisers Ltd 117 and a 10992 taxmann.com 24 (SC)/(1992 Supp (1) 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 (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.”
• Neha Kapoor vs. ITO, (2023) 155 taxmann.com 17
(Delhi)
“8. We have considered the submissions of the parties and perused the records. It is evident that the solitary ground of denial of the claim of the assessee for FTC is delay in filing Form 67. It is an admitted position that the assessee filed Form 67 on 26-3-2021 alongwith the revised return before the end of the relevant AY 2020-21 which is in conformity with the CBDT notification No. 100/2022 amending Sub Rule 9 of Rule 128 of the Rules. Various coordinate benches of the Tribunal have held that filing Form 67 is a procedural/directory requirement and is not a mandatory requirement. We, therefore, disagree with the view of the Ld. CIT(A) on the point and reproduce below the decision in the case of Ms. Brinda Ramakrishna (supra) in which facts are identical:
"16. I have given a careful consideration to the rival submissions. I agree with the contentions put forth by the learned counsel for the Assessee and hold that (1) Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; (ii) filing of Form No. 67 is not mandatory but a directory requirement and (iii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. I am of the view that the issue was not debatable and there was only one view possible on the Page 7 of 12
ITA No.-783/Del/2024 Maya Kapoor. issue which is the view set out above. I am also of the view that the issue in the proceedings u/s.154 of the Act. Even if it involves long drawn process of reasoning, the answer to the question can be only one and in such circumstances, proceedings u/s.154 of the Act, can be resorted to. Even otherwise the ground on which the revenue authorities rejected the Assessee's application u/s.154 of the Act was not on the ground that the issue was debatable but on merits. I therefore do not agree with the submission of the learned DR in this regard."
• Vikas Daga vs. ACIT, in of 2022, DATED
14.06.2023 (DELHI)
“8. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the assessee holds a foreign tax credit certificate for Rs.1887114/-. In our considered opinion filing of form 67 is a procedural / directory requirement and is not a mandatory requirement. Therefore, violation of procedural norms does not extinguish the substantive right of claiming the credit of FTC. We accordingly direct the AO to allow the credit of FTC and hold that rule 128(9) of the Rules does not provide for disallowance FTC in case of delay filing of form 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. • Ganesh Anandrao Ingulkar vs. Assistant Director of Income-Tax in ITA NO. 302/MUM/2023
“10. Considered the rival submissions and material placed on record, we observe that assessee has filed Form-67 by filing revised return of income and not at the time of original return of income. In this regard the Coordinate Bench has considered the similar issue in the case of Sonakshi Sinha v. CIT (supra) and decided the issue in favour of the assessee, with the following observations: - ITA No.-783/Del/2024 Maya Kapoor. "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 (1) of sub-rule (8) shall be furnished on or before the due date specified for furnishing the retum of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income. We find that 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 Page 9 of 12
ITA No.-783/Del/2024 Maya Kapoor. 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.”
In the present case, return of income for AY 2021-22 has been filed on 13.10.2021 and intimation order U/s 143(1) of the Act was passed on 05.07.2022 by Ld. AO for the AY 2021-22 and Form 67 filed by and appellant before Ld. AO dated 25.01.2022 and rectified return of income has been filed on 04.09.2022 by the assessee / appellant for AY 2021-22.
On the basis of foregoing discussion and binding judicial precedents. We are of the considered opinion that filing of Form 67 is more procedural and directing in nature, not mandatory and violation of directing procedural norms does not adversely effect the substantive right to claim. So grounds raised by the assessee / appellant accordingly allowed.
ITA No.-783/Del/2024 Maya Kapoor. 10. Consequently, this appeal allowed as indicated above.
Order pronounced in the Open Court on 31.05.2024