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Judgment
PER BRAJESH KUMAR SINGH, AM,
This appeal by the assessee is directed against the order dated 13.10.2025 of Ld. Commissioner of Income Tax (Appeal), ADDL/JCIT(A)-4, Mumbai, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the order dated 10.01.2023 passed under section 154 of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by the CPC, Bangalore, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2021-22.
Brief facts of the case: In this case order u/s 154 was passed by the CPC Bangalore on 10.01.2023 wherein claim of Foreign Tax Credit of Rs. 70,41,629/-was disallowed by the CPC on the ground of late filing of Form 67 by the assessee. Being aggrieved with the impugned rectification order u/s 154 of the Act, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee. The relevant extract of the order of the Ld. CIT(A) is reproduced as under:
“ 5. Decision: I have gone through the facts of the case and the submission filed by the appellant in this case. This appeal has been filed by the appellant against the rectification order passed by the Assessing Officer under section 154 of the Income Tax Act, 1961 dated 10.01.2023 for the assessment year 2021-22. In this case the only issue of grievance raised by the appellant was disallowance of Foreign Tax Credit by the CPC while passing order u/s. 143(1) and which was also disallowed in the present order in appeal passed u/s. 154 of the Act.
5.1Ground No. 1 to 5 relates to disallowance of Foreign Tax Credit due to non-filing / delayed filing of Form 67. The appellant has challenged the disallowance of Foreign Tax Credit amounting to Rs.70,41,629/-, citing that the disallowance is unjustified and that Form 67 was filed within the due time limit for filing the same.
5.1.1 Requirement of Form 67 is Mandatory:
As per Rule 128 of the Income Tax Rules, 1962, read with Section 90 of the Income Tax Act, 1961, it is mandatory for an assessee to furnish Form No. 67 before the due date of filing the return under Section 139(1) in order to claim Credit. The relevant rule is reproduced below for clarity:
Rule 128(9): "Form No. 67 shall be furnished on or before the due date specified for furnishing the return of income under sub-section (1) of section 139, in the manner specified for furnishing such return of income."
Therefore, the failure to file Form 67 within the prescribed time disentitles the assessee from claiming FTC.
5.1.2 CBDT Circular No. 9/2022 dated 01.06.2022
This circular clarified that Foreign Tax Credit shall not be allowed if Form 67 is not filed within the prescribed due date under Rule 128(9). The circular states:
"...the furnishing of Form 67 is a procedural requirement and if not filed within the time prescribed under Rule 128(9), the claim for FTC shall be disallowed.
The Circular being a binding direction under Section 119 of the Act, must be followed by the Assessing Authorities
5.1.3 Filing of Revised Return under Section 154 does not Cure the Defect
Merely filing a revised or rectified return under Section 154 after filing Form 67 does not cure the original lapse of missing the due date under Section 139(1). The eligibility to claim Foreign Tax Credit is governed by compliance with Rule 128(9), which requires timely filing of Form 67.
5.1.5 DTAA Provisions and Article 15 of India-Singapore DTAA:
While the appellant has referred to Article 15 of the India-Singapore DTAA, the credit mechanism therein is subject to domestic laws and procedural compliance. DTAA does not override procedural requirements mandated under the Income Tax Rules.
In view of the above, all the grounds raised by the appellant are dismissed and the disallowance of Foreign Tax Credit of Rs. 70,41,629/- by the AO is hereby confirmed.
Therefore, in absence of Form 67 being filed within the prescribed time, the claim of Foreign Tax Credit has rightly been disallowed by the A.O. Accordingly, Ground Nos. 2 to 5 are dismissed.”
We have heard both the parties and perused the material available on record. In this case, the assessee filed her return of income on 06.01.2022 declaring total income of Rs. 4,26,88,790/-, which was processed u/s 143(1) of the Act on 13.10.2022. The assessee filed copy of Form 67 on the e-file portal on 24.11.2022 and order u/s 154 of the Act, was passed on 10.01.2023 rejecting the claim of the assessee. The same was confirmed by the Ld. CIT(A) on the ground that Form 67 was not filed within the prescribed time i.e. it was a required to be furnish on or before the due date specified for furnishing the return of income under sub-section (1) of section 139 of the Act. The findings of the Ld. CIT(A) have been carefully considered by us but not found to be acceptable.
The assessee has filed the necessary ‘Details of Foreign Tax Credit (FTC) alongwith the details of taxes paid’ of Rs. 70,41,748/- placed on page no. 1-4 of the paper book filed by the assessee. Similar issue came up in the case of Anubhav Singhal vs. ITO in ITA No.- 1640/Del/2025, wherein the co-ordinate Bench of the Tribunal held that filing of Form 67 was directory and not mandatory. In this order, the Tribunal has referred to the orders of the various benches of the Tribunal, which held similar views. The relevant extract of the said order is reproduced as under:
“ 4. Heard rival submissions. On reading of the orders of the authorities below, we observe that the claim for Foreign Tax Credit was denied to the assessee for the reason that the assessee has filed Form 67 after filing return of income u/s 139(1) of the Act. Since the assessee filed Form 67 belatedly and not along with the return as specified u/s 139(1) of the Act the claim for FTC was denied.
5.We observe that identical issue came up before the coordinate bench of the Delhi Tribunal in the case of Neha Kapoor vs. ITO in ITA 135/Del/2023 dated 29.08.2023, wherein the Tribunal directed the Assessing Officer to allow credit for Foreign Tax Credit to the assessee observing as under:
“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 26.03.2021 along with 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 Miss Brinda Rama Krishna (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 (i) 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 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."
9.Respectfully we follow the decision (supra).
10.Accordingly, we hereby direct the Ld. AO to allow the impugned credit of FTC to the assessee in the light of the decision in the case of Ms. Brinda Rama Krishna (supra).”
6.Similar view has been taken by the coordinate benches in the following cases:
1.Ajay Kumar Mishra in ITA No.1835/Del/2022 dated 17.04.2023;
2.Suchi Agarwal vs. ITO in ITA No.568/Del/2024 dated 24.1.2024;
3.Dharmendra Kumar Singh vs. ITO in ITA No.1661/Del/2024 dated 24.01.2025;
4.Vinod Kumar Laxmi Pati vs. CIT, NFAC 145 taxmann.com 235 (Bang.);
5.Ritesh Kumar Garg vs. ITO in ITA No.261/Jaipur/2022 dated 15.09.2022 (Jaipur);
6.Sanjeev Agarwal vs. DIT in ITA No.71/Jaipur/2023 dated 10.05.2023
7.Surender Kumar Goenka vs. ADIT in ITA No.1831/Kol/2024 dated 20.11.2024.
7.Following the above orders, we direct the Assessing Officer to accept Form 67 filed by the assessee and allow Foreign Tax Credit after due verification and in accordance with law.
8.In the result, assessee’s appeal is allowed.”
(emphasis supplied by us)
Further, the Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy vs PCIT (supra) has observed that the filing of Form-67 for claiming Foreign Tax Credit (FTC) in terms of Rule 128 of the Income-tax Rules, 1962, is only a directory in nature. The relevant extract of the same is reproduced as under:
“8.Heard the learned counsel appearing on either side and perused the materials available on record.
9.In the present case, the petitioner initially worked at Kenya and subsequently, he became the resident of India from the assessment years d 2018-19 and 2019-20. The petitioner admitted the fact that he has filed his return in India on August 10, 2019. The intimation under section 143(1) was issued on March 26, 2020. However, he has filed the return without form 67 which is required to be filed under rule 128 to claim the benefit of foreign tax credit and the same came to be filed on February 2, 2021 which was well before the completion of the assessment year. The intimation under section 143(1) was issued from the Centralized Processing Centre only on March 26, 2021.
10.According to the learned counsel appearing for the respondent, the procedure under rule 128 is mandatory and cannot be considered as directory in nature. The petitioner has filed his return including his Kenya income along with his Indian income-tax and claimed the benefits of foreign tax credit. However, the petitioner would submit that it is not mandatory. The rule cannot make anything mandatory and it can be directory in nature, that too before the assessment, the claim to avail of the benefits of foreign tax credit is filed. Therefore, it would amount to due compliance under the Act. The petitioner referred to the judgment of the hon'ble Supreme Court in the case of CIT v. G. M. Knitting Industries (P.) Ltd. in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated July 24, 2015, wherein it was held that form 3AA is required to be filed along with the h return of income to avail of the benefit and even if it is not filed, but the same is filed during assessment proceedings but before the final order of assessment is made that would amount to sufficient compliance.
11.The law laid down by the hon'ble apex court in CIT v. G. M. Knitting Industries (P.) Ltd. in Civil Appeal Nos. 10782 of 2013 and 4048 of 2014 dated July 24, 2015, which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without foreign tax credit, however the same was filed before passing of the final assessment order. The filing of foreign tax credit 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 subsequent to the passing of the assessment order.
12.Further, in the present case, the intimation under section 143(1) was issued on March 26, 2021, but the foreign tax credit was filed on February 2, 2021. Thus, the respondent is supposed to have provided the due credit to the foreign tax credit of the petitioner. However, the foreign tax credit 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 January 25, 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 foreign tax credit filed by the petitioner on February 2, 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 foreign tax credit claim made by the petitioner and hence, the first respondent is directed to con-sider only on the aspect of rejection of foreign tax credit claim within a period of eight weeks from the date of receipt of a copy of this order.
14.With the above direction, this writ petition is disposed of. No costs. Consequently, connected miscellaneous petitions are also closed.”
(emphasis supplied by us)
Even though, the facts in the case of Duraiswamy Kumaraswamy vs PCIT (supra) is slightly different in as much as that in the said case, the Form 67 was filed before the processing of the return u/s 143(1) of the Act, unlike the case of the assessee wherein the said Form 67 was filed after the processing of the return u/s 143(1) of the Act, but the underlying principle of law laid down by the Hon’ble Court in this case is also that the filing of foreign tax credit in terms of Rule 128 of the ITAT Rules, 1962 is only directory in nature and not mandatory as held by the Ld. CIT(A) in this case.
Therefore, respectfully following the order of the Co-ordinate Bench in the case of Anubhav Singhal vs. ITO (supra) and the order of the Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy vs PCIT (supra), we direct the Assessing Officer to accept Form 67 filed by the assessee and allow Foreign Tax Credit of Rs. 70,41,629/- after due verification and in accordance with law.
In the result, appeal of the assessee is allowed.