The Income Tax Appellate Tribunal, Delhi, has clarified that a minor delay in filing Form 67 does not extinguish an assessee’s substantive right to claim Foreign Tax Credit under Sections 90 or 90A of the Income Tax Act. This ruling reinforces the principle that procedural lapses cannot override statutory entitlements absent explicit legislative intent.
Background & Facts
The Dispute
The assessee, a provider of actuarial services, claimed Foreign Tax Credit (FTC) for taxes paid abroad on income earned in foreign jurisdictions for Assessment Years 2018-19, 2019-20, and 2020-21. The Assessing Officer, under Section 143(1), disallowed the FTC claims on the ground that Form 67 - required for substantiating foreign tax payments - was filed after the due date of filing the return of income under Section 139(1). The Commissioner of Income Tax (Appeals) upheld this denial, relying on Rule 128(9) of the Income Tax Rules, 1962. The assessee challenged this through appeals under Section 254 of the Income Tax Act.
Key Facts
- The assessee filed returns for AY 2018-19, 2019-20, and 2020-21 declaring income of Rs. 53,22,940, Rs. 58,45,000, and Rs. 62,10,000 respectively
- FTC claims of Rs. 2,65,500, Rs. 2,97,000, and Rs. 3,04,483 were made under Sections 90 and 90A for the three assessment years
- Form 67 was filed one day after the due date under Section 139(1) in each case
- The CPC under Section 143(1) disallowed FTC and raised demand
- The assessee filed rectification applications under Section 154, which were rejected
- The ld. CIT(A) upheld the denial, holding that Form 67 filing was mandatory
Procedural History
- 22.05.2021: Assessment order under Section 143(3) for AY 2018-19 issued, disallowing FTC
- 02.09.2022: Assessment order under Section 143(3) for AY 2020-21 issued, disallowing FTC
- 27.10.2025: Orders of the ld. CIT(A) passed, upholding denial of FTC for all three AYs
- 30.03.2026: Hearing before ITAT Delhi
- 08.04.2026: Judgment pronounced
The Parties' Positions
For the Assessee
- Argued that Rule 128(9) is procedural and directory, not mandatory
- Cited judicial precedents, including Subramanian ShyamSunder v. CIT (ITA No. 639/Del/2024)
- Emphasized that the Act and Rules contain no express provision denying FTC for late filing of Form 67
- Highlighted that other provisions like Sections 80AC, 80-IA(7), 10A(5), and 10B(5) explicitly deny benefits for late filing, but no such language exists in Rule 128(9)
- Contended that the denial violates natural justice and lacks reasoning in the CPC and CIT(A) orders
For the Revenue
- Relied on the CIT(A)’s order, which held that Form 67 must be filed on or before the due date
- Did not present any new legal argument or distinguish the precedent cited by the assessee
- Maintained that compliance with Rule 128(9) is mandatory for claiming FTC
Relief Sought
The assessee sought:
- Allowance of FTC claims of Rs. 2,65,500 for AY 2018-19
- Allowance of FTC claims of Rs. 2,97,000 for AY 2019-20
- Allowance of FTC claims of Rs. 3,04,483 for AY 2020-21
- Setting aside of the CIT(A) orders dated 27.10.2025
- Direction to the Assessing Officer to allow the FTC claims and rectify the assessment orders
The Legal Issue
The central question was whether the failure to file Form 67 on or before the due date under Section 139(1) constitutes a mandatory condition for claiming Foreign Tax Credit under Sections 90 and 90A, or whether Rule 128(9) prescribes only a procedural, directory requirement.
Arguments Presented
For the Assessee
The assessee relied on the binding precedent of Subramanian ShyamSunder v. CIT (ITA No. 639/Del/2024), where the Chennai Bench of the Tribunal held that Rule 128(9) does not contain any express language denying FTC for late filing. The counsel argued that the absence of a specific disallowance provision in the Act or Rules means the condition cannot be read into the rule. The filing of Form 67 is a facilitative mechanism for verification, not a condition precedent to entitlement. The assessee further contended that the denial violated principles of natural justice, as the CPC and CIT(A) orders were non-speaking and mechanically adopted the AO’s view without independent reasoning.
For the Respondent
The Revenue did not advance any substantive legal argument beyond affirming the CIT(A)’s view. No distinction was drawn between the facts of the present case and the precedent cited. The Revenue’s position rested entirely on the literal reading of Rule 128(9), without addressing the legislative intent or the absence of penal consequences for non-compliance.
The Court's Analysis
The Tribunal undertook a detailed statutory interpretation of Rule 128(9) and its relationship with Sections 90 and 90A. It observed that while the rule states that Form 67 "shall be filed on or before the due date," it contains no express provision stating that failure to do so will result in denial of FTC. The Court contrasted this with other provisions of the Act - such as Sections 80AC, 80-IA(7), 10A(5), and 10B(5) - where the legislature explicitly denies deductions or exemptions for late filing. The absence of such language in Rule 128(9) was deemed significant.
"No doubt, rule 128(9) provides that Form 67 should be filed on or before the due date of filing the return of income as prescribed under section 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 for by the assesse under section 90 of the Act would be denied."
The Tribunal emphasized that substantive rights under Sections 90 and 90A cannot be defeated by a procedural default unless the law clearly so provides. The Court noted that the purpose of Form 67 is evidentiary and administrative, not jurisdictional. The one-day delay in filing, which was not contested as fraudulent or mala fide, could not override the statutory entitlement to FTC.
The Tribunal also found the CIT(A)’s order to be non-speaking and mechanically adopting the AO’s view, thereby violating principles of natural justice. The absence of reasoning rendered the order legally unsustainable.
The Verdict
The appeals of the assessee are allowed. The orders of the ld. CIT(A) dated 27.10.2025 are set aside. The Assessing Officer is directed to allow the Foreign Tax Credit claims of Rs. 2,65,500 for AY 2018-19, Rs. 2,97,000 for AY 2019-20, and Rs. 3,04,483 for AY 2020-21. The assessment orders under Section 143(3) are to be rectified accordingly. The Assessing Officer is directed to complete the rectification within four weeks from the date of this order.
What This Means For Similar Cases
Procedural Non-Compliance Does Not Nullify Substantive Rights
- Practitioners may now confidently argue that late filing of Form 67 cannot be grounds for denying FTC under Sections 90 or 90A
- The burden shifts to the Revenue to prove legislative intent to disallow FTC for procedural delay
- Any denial based solely on Form 67 timing must be challenged on the basis of Subramanian ShyamSunder
Non-Speaking Orders Are Legally Defective
- Orders by CIT(A) or AO that merely endorse lower authority decisions without independent reasoning are vulnerable to quashing
- Assessees should specifically plead violation of natural justice in appeals where reasoning is absent
- Tribunals will not uphold mechanical adjudication, even in technical tax matters
Rule Interpretation Must Follow Legislative Intent
- Courts will not read mandatory conditions into rules where the legislature has not inserted them
- Where the Act provides explicit disallowances for non-compliance (e.g., Sections 80AC, 10A), but omits them elsewhere, the omission is intentional
- Tax officers must distinguish between procedural formalities and substantive entitlements
