Rajan Adlakha vs AO, Bangalore

ITA No. 3663/Del/2026 (AY 2019-20)

1.

That on the facts and circumstances of the case and in law, the order dated 13.01.2026 passed by the Commissioner of Income Tax (Appeals) (“CIT(A)”) under section 250 of the Income-tax Act, 1961 (“the Act”) upholding the action of assessing officer (CPC, Banglore) in disallowing the foreign tax credit for Rs. 29,43,093 is bad in law and liable to be quashed.

2.

That the Ld. CIT(A) has erred in law and on facts in passing the impugned order without properly appreciating the facts, submissions and evidences on record and by mechanically confirming the action of the Assessing Officer.

3.

That the Ld. CIT(A) has failed to adjudicate the issue in a judicious manner and has wrongly upheld the disallowance without considering the legal and factual position, thereby rendering the appellate order unsustainable.

Jurisdictional issue - adjustment u/s 143(l)(a) /154

4.

That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the disallowance made under section 143(l)(a) and further upheld under section 154, which is beyond jurisdiction.

5.

That the Ld. CIT(A) has failed to appreciate that the issue relating to allowability of Foreign Tax Credit is a debatable issue and cannot be subject matter of adjustment under section 143(l)(a).

6.

That the Ld. CIT(A) has erred in upholding rectification under section 154 on a debatable issue, which is not a mistake apparent from record and hence the action is bad in law.

Disallowance of Foreign Tax Credit

7.

That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the disallowance of Foreign Tax Credit amounting to Rs. 29,43,093 claimed under section 90 of the Act, which is legally allowable and duly supported by evidences.

8.

That the Ld. CIT(A) has erred in law in holding that delay in filing Form 67 is fatal to the claim of Foreign Tax Credit, without appreciating that such requirement is procedural in nature and cannot defeat the substantive right of relief under section 90 read with applicable DTAA.

9.

That the Ld. CIT(A) has erred in treating Rule 128(9) as mandatory and in denying the claim solely on account of delay in filing Form 67, ignoring settled legal position that procedural provisions cannot override substantive benefits.

10.

That the Ld. CIT(A) has failed to appreciate that the appellant had duly paid taxes in the foreign jurisdiction and had disclosed the same in the return of income, thereby entitling the appellant to Foreign Tax Credit.

11.

That the Ld. CIT(A) has erred in law in not appreciating that CBDT Circular No. 9/2017 mandates grant of Foreign Tax Credit to avoid double taxation.

12.

That the denial of Foreign Tax Credit on mere procedural lapse defeats the object of section 90 and Double Taxation Avoidance Agreement and is contrary to settled legal principles. That the appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal at or before the time of hearing.”

“4.

Before us, Ld. AR has submitted that Form 67 was submitted on 09.04.2024 which was delayed but the delay in filing should not affect the eligibility for FTC as the tax was paid duly paid in Canada. Ld. AR has placed reliance on several judicial pronouncements in support of his contentions. In particular, he has relied on the recent decision of the Hon’ble Jurisdictional High Court dated 13.02.2026 in W.P (C) 959/2024 & CM Appl. 3939/2024, and other cases in the case of M/s Real Time Data Services Private Limited wherein under similar facts and circumstances, the Hon’ble Delhi High Court has held as under:

“4.

Learned counsel for the petitioner argued that the Commissioner has erred in rejecting the application. He argued that Section 119 of the Act of 1961 confers wide powers on the Commissioner, including the power to condone the delay in filing Form No. 67, while contending that Rule 128 is not mandatory.

5.

Mr. Puneet Rai, learned Senior Standing Counsel for the Income Tax Department, on the other hand, submitted that the petitioner has failed to adhere to the mandate of law and since there is no provision granting relaxation under Rule 128 of the Rules of 1962, the Commissioner has rightly rejected the application for revision. He further submitted that the power to relax the Rule may be exercised by the Central Board of Direct Taxes or a competent authority under Section 119 of the Act of 1961, that too in a case when such power is invoked.

6.

Heard learned counsel for the parties.

7.

Admittedly, the petitioner has not furnished Form No. 67 up to the due date of filing return and it realised such fault only when its return was processed and when its Foreign Tax Credit of Rs. 1,01,34,300/-being TDS on foreign receipts was not allowed by the AO. On inquiry, it found that the same had been rejected because Form No. 67 was not uploaded within the time prescribed.

8.

We are of the view that may be the petitioner omitted or failed to upload Form No. 67 by the due date of return but simply because of this technical or venial breach, its substantial right of getting Foreign Tax Credit of Rs. 1,01,34,300/-, deducted from its receipt cannot be denied. If that be so. it would amount to withholding of a substantial amount of an assessee without there being any authority of law which would amount to unjust enrichment in turn.

9.

In the case of Vijay Gupta v. Commissioner of Income Tax and Anr. reported in 2016 SCC OnLine Del 1961, wherein it had been held that the Principal Commissioner of Income Tax has enough powers to consider application under Section 264 of the Act of 1961, in the event of default by the assessee. In the instant case also, it is the default of the petitioner and the same could have been, rather should have been condoned by the Commissioner while exercising powers under Section 264 of the Act of 1961. If Section 119 of the Act of 1961 confers a power upon the Commissioner, he could have invoked such powers. We could have simply quashed the order and remanded the matter back to the Commissioner for deciding the application under Section 264 of the Act of 1961 afresh, but the same would be an empty formality.

10.

Concededly, the petitioner has subsequently furnished Form No. 67 on 14.09.2022. While exercising writ jurisdiction, we hereby direct the AO that in case the same has been furnished, he shall allow Foreign Tax Credit after verifying the facts in accordance with law. However, in case the AO is of the view that the Foreign Tax Credit cannot be allowed to the petitioner, he shall pass a speaking order, against which the petitioner's right to take remedies in accordance with law shall remain reserved.”

5.

We have heard the rival submissions and perused the material placed on record. Admittedly, the assessee has filed Form No. 67 belatedly which is a procedural defect. It is the settled legal position that breach of procedural requirement does not extinguish the substantive right. Thus, respectfully following the decision of the Hon’ble Jurisdictional High Court, reproduced hereinabove, we hereby, direct the Ld. AO to consider the Form 67 filed by the assessee with delay of 9 days and allow the claim of FTC after requisite verification. The matter is accordingly, restored to the Ld. AO for the limited purpose of verification of the FTC claimed by the assessee.

6.

In the result, the appeal of the assessee is allowed.”