Requirement for filing Form 67 for claiming FTC only directory not mandatory – ITAT

Requirement for filing Form 67 for claiming Foreign Tax Credit (FTC) is only directory and not mandatory – ITAT

In a recent judgment, ITAT Allahabad has reiterated that requirement for filing Form 67 for claiming Foreign Tax Credit (FTC) is only directory and not mandatory, recourse to provisions of section 154 of the Act can be availed of.

ABCAUS Case Law Citation:
5176 (2026) (07) abacus.in ITAT

The appellant assessee was an employee of a foreign company and was employed outside India during the year under consideration.   The assessee filed his return of income for the relevant Assessment Year and claimed relief under section 90 of the Income Tax Act, 1961 (‘the Act’) towards Foreign Tax Credit (FTC). 

The Centralized Processing Centre (CPC) processed the return of the assessee and vide intimation under section 143(1) of the Act rejected the relief claimed by the assessee under section 90 for the reason that Form 67 had been filed beyond the due date prescribed.

Subsequently, the assessee moved a Rectification Application under section 154 of the Act and vide rectification order passed u/s 154 of the Act, the CPC retained the Demand.  The assessee for the second time moved a Rectification Application under section,154 of the Act and vide rectification order passed under section 154 of the Act the impugned demand was retained by the CPC.

The Assessee preferred an appeal before the First Appellate Authority.  Subsequently, the appeal was assigned to the NFAC, which dismissed the appeal of the assessee and confirmed the order of the CPC.

Before the Tribunal the assessee submitted that but since Form 67 had not been filed by the assessee, the CPC did not allow the credit of Foreign Tax Credit.  It was further submitted that the captioned year pertained to the year of Corona Pandemic and all the global flights had been suspended. 

It was submitted that the assessee was an NRI at that point of time and due to the Corona Pandemic, he could not travel back to India in time to collect various documents and information required to file Form 67 within time, as there was complete lockdown in Europe also and all the offices were closed.  It was submitted that, thus, there was a genuine reason for delay in filing of Form 67.

It was further submitted that Double Tax Avoidance Agreement does not provide that Foreign Tax Credit should be disallowed for non-compliance of any procedural requirements.  He also referred to Rule 128(1) of the Income Tax Rules and submitted that this Rule provides that Form 67 should be filed on or before due date for filing of return of income under section 139(1) of the Act, but all the same, the said Rule nowhere provides that if the said Form 67 is not filed within the specified time, the benefit of Foreign Tax Credit would be denied.

The Tribunal observed that there was no dispute to the claim of the assessee that he was entitled to the claim of Foreign Tax Credit and the only objection of the Department for not granting the benefit of Foreign Tax Credit was that the prescribed Form 67 was filed beyond the prescribed date.  However, although the Form 67 could not be filed before the due date for filing of return of income under section 139(1) of the Act, but it was also not in dispute that the amount of Foreign Tax Credit being claimed was duly reflected in the original return of income.  

The Tribunal opined that the assessee could not file Form 67 in time for the reason that there was outbreak of Corona Pandemic and as such since the global flights were suspended, It was a reasonable cause and for circumstances beyond the control of the assessee, the assessee cannot be held to be in fault. 

The Tribunal further observed that the issue was squarely covered by the order of the ITAT Bangalore Bench in which it was held that (i) Rule 128(9) 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 (ii) DTAA overrides the provisions of the Act and the Rules cannot be contrary to the Act. It was also held that the issue was not debatable and there was only one view possible. Also, in the proceedings us. 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.

The Tribunal noted that it had been held by the ITAT Bangalore that since the requirement for filing Form 67 was only directory and not mandatory, recourse to provisions of section 154 of the Act can be availed of. The Co-ordinate Bench also had also observed that the issue in this regard was not a debatable one, but was to be considered on merits.

Following the aforesaid orders of the ITAT Bangalore Bench, the Tribunal ordered that assessee be allowed the benefit of Foreign Tax Credit.

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