APARNA GIRISH HEBBANI,AUSTRALIA V. INT TAX WARD 2(2)(1), MUMBAI, MUMBAI

ITA 5061/MUM/2025

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The case revolves around the denial of Foreign Tax Credit (FTC) to the assessee, Aparna Girish Hebbani, a non-resident Indian, due to the delayed filing of Form-67. The assessee had paid taxes in Australia on her income from teaching, which was also taxed in India. She claimed relief under sections 90/90A of the Income-tax Act, 1961, for the taxes paid in Australia. The Centralized Processing Centre in Bengaluru denied the FTC due to the late submission of Form-67, which was attributed to technical glitches and the assessee's inability to receive OTPs for verification due to her residing outside India. The CIT(A) upheld the denial, leading to the appeal before the Tribunal.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 827558 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2019-2020
• Appeal Filed On: 16-08-2025
• Other Referred Cases: Sonakshi Sinha vs. CIT(A), Bharat Hari Singhania vs. CWT, Razabuland Sugar Company Ltd. Vs. Municipal Board, Rampur, Sambhaji and others vs. Gangabai and others, 42 Hertz Software India Private Ltd. vs. ACIT, Brinda Ramakrishna vs. ITO, Binod Kumar Lakshmipati vs. CIT
• Laws Referred To: Income-tax Act, 1961, Income-tax Rules, 1962, Double Taxation Avoidance Agreement (DTAA) between India and Australia
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Rectification of order; Double taxation relief; Procedural lapse
• Section: 154; 90

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 5061/MUM/2025 Assessment Year: 2019-20 Aparna Girish Hebbani 21, Hallow Crescent, Augustine Heights, Queensland, Australia (PAN : AHHPH4844H) Vs. Income Tax Officer, Ward – 2(2)(1), Mumbai (Appellant) (Respondent) Present for: Assessee : Shri Harshavardhan V. Bapat and Shri Raj Mehta, CAs Revenue : Shri Krishna Kumar, Sr. DR Date of Hearing : 15.10.2025 Date of Pronouncement : 06.01.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by assessee is against the order of CIT (A) 56, Mumbai vide ITBA/APL/S/250/2023-24/1061197750(1), dated 20.02.2024 passed against the assessment order by Assistant Commissioner of Income-tax – Centralized Processing Centre (CPC), Bengaluru, u/s. 154 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 15.01.2022 for Assessment Year 2019-20. 2. Grounds taken by assessee are reproduced as under: Printed from counselvise.com 2 ITA No. 5061/Mum/2025 Aparna Girish Hebbani AY 2019-20 “1. That on the facts and in the circumstances of the case, and in law, the learned Commissioner of Income Tax (Appeais) [CIT(A)] erred in upholding the deniat of Foreign Tax Credit (FTC) solely on the ground of delay in filing Form 67, without appreciating that such delay was due to genuine hardship. 2. That the learned CIT(A) failed to appreciate that Rule 128(9) of the Income-tax Rules, 1962 is directory and not mandatory, and non-filing or delayed filing of Form 67 cannot override the substantive right to claim credit of foreign taxes paid under Section 90 of the Act read with the applicable DTAA. 3. That The learned CIT (A) has erred in law and on facts by disallowing the Foreign Tax Credit (FTC) claimed by the appellant in respect of taxes paid in Australia on income (salary) earned and taxed in that country, despite the said income also being offered to tax in India. As per the provisions of the Article 15 of Double Taxation Avoidance Agreement (DTAA) between India and Australia, income derived by a resident of one Contracting State and taxed in the other is eligible for credit of taxes paid in the source country, to avoid double taxation. The failure to grant the FTC, while simultaneously taxing the same income in India, results in double taxation, which is contrary to the intent and provisions of the DTAA as well as the principles of equity and fairness in taxation. 4. That the learned CIT(A) erred in not considering the settled legal position that procedural lapses should not defeat substantive rights, particularly where no malafide is alleged and the claim is otherwise genuine and verifiable. 5. That the learned CIT(A) failed to take into account the judicial precedents, including various decisions of Hon'ble ITAT and High Courts, which have held that FTC cannot be denied merely due to delay in filing Form 67, especially when the return of income was filed within the prescribed due date and the taxes were paid abroad. 6. That the learned CIT(A) ought to have appreciated the bona fide reasons for the delay in filing Form 67, including technical difficulties faced by the Appellant, being a Non-Resident Indian residing outside India with limited access to OTP- based verification systems. 7. That the order passed under Section 250 upholding the denial of FTC is bad in law, contrary to the principles of natural justice, and liable to be quashed.” 2.1. The sole issue involved in the present appeal is in respect of foreign tax credit claimed by the assessee which was not granted due to delay in the filing of Form – 67. 3. Brief facts of the case are that assessee is a non-resident Indian (NRI) and is engaged in teaching in Australia. Return of income was filed on 31.08,2019 reporting total income at Rs.46,41,830/-. Assessee claimed relief u/s. 90/90A of Rs.11,95,270 with respect to tax paid by Printed from counselvise.com 3 ITA No. 5061/Mum/2025 Aparna Girish Hebbani AY 2019-20 her in Australia in respect of income from teaching. According to the assessee, Form-67 was filed along with the Income-tax return itself but remained to be verified within the prescribed due date due to technical glitches. Assessee being resident outside India, could not verify and submit Form-67 within the prescribed due date as her mobile number of India was not active and therefore One Time Password (OTP) required to verify could not be received. The return filed by the assessee was processed by the Centralised Processing Centre, Bengaluru (CPC), of the Department and intimation was issued on 17.03.2021 u/s.143(1) denying the credit of foreign taxes paid in Australia and raising a demand on the assessee. Assessee could not visit India until November, 2021 due to Covid 2019 restriction on international travels. She visited India in December, 2021 and got her Indian mobile number activated which is registered with the Department and filed Form – 67 on 06.12.2021. Pursuant to this, rectification application u/s.154 was filed claiming credit for the foreign taxes paid by her. Rectification order u/s.154 was passed on 15.01.2022 declining the claim made by the assessee in respect of foreign tax credit, against which assessee went in appeal before the ld. CIT(A). 4. Though ld. CIT(A) noted that assessee qualifies u/s.6(1) as a “resident and ordinarily resident” in India for the year under consideration, he by referring to Rule 128 of the Income-tax Rules, 1962 (The Rules) for filing of Form-67 and referring to various judicial precedents, dismissed the appeal of the assessee. In para – 6.10, ld. CIT(A) despite cognisance of the decision of Coordinate Bench of ITAT, Mumbai in the case of Sonakshi Sinha vs. CIT(A) in ITA No. 1704/Mum/2022, dated 20.09.2022 did not follow the said decision, by taking strength from the ratio laid down by the Hon'ble Supreme Court Printed from counselvise.com 4 ITA No. 5061/Mum/2025 Aparna Girish Hebbani AY 2019-20 in the case of Bharat Hari Singhania vs. CWT 73 Taxman 3 (SC). Aggrieved, assessee is in appeal before the Tribunal. 5. Before us, ld. Counsel for the assessee reiterated the facts narrated above. We have heard both the parties and perused the material on record. Having considered the orders of the authorities below as well as paper book along with written submission placed on record, what is important for us to deal with in the present appeal is the compliance of Rule 128 of the Rules while claiming credit for foreign taxes claimed by the assessee. Rule 128(9) prescribes that Form-67 shall be furnished on or before the due date of furnishing the return of income. This provision is procedural and aims to streamline processing, not to restrict the substantive right conferred u/s.90 of the Act and the Double Taxation Avoidance Agreement (DTAA). The context and object of Rule 128 are embedded in chapter IX of the Act, titled ‘Double Taxation Relief’. Thus, denial of foreign tax credit leads to unjust double taxation which defeats the purpose of DTAA and India’s international obligation as enunciated by section 90 of the Act. The object of Rule 128 is to grant relief from double taxation in accordance of section 90 of the Act and the applicable DTAA. It is not to deprive tax payers of such relief on procedural grounds. Reading “shall” as mandatory in the said Rule would directly result in double taxation which is contrary to both the intent of the legislature and the principles of equity and fairness recognised by the Apex Court, in Razabuland Sugar Company Ltd. Vs. Municipal Board, Rampur AIR 1965 SC 895. In this decision, Hon'ble Supreme Court observed that determination of whether the provision is mandatory or directory depends on legislative intent, purpose and the consequences of interpretation. If a mandatory reading results in injustice or defeats the objects of the provision, it should be read as directory. Reliance is also placed on the decision of Hon'ble Supreme Printed from counselvise.com 5 ITA No. 5061/Mum/2025 Aparna Girish Hebbani AY 2019-20 Court in the case of Sambhaji and others vs. Gangabai and others [2008] 17 SCC 117 where 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”. 5.1. Undisputed facts in this respect are that assessee has paid taxes in Australia on income earned therein, which have also been subjected to tax in India. As per Article 15 of India-Australia DTAA, when income taxable in both the countries, the other country has to grant credit for the taxes paid in the source country to avoid double taxation. Section 90(1)(a) empowers the Central Government to enter into agreement with foreign countries for avoidance of double taxation. 5.2. Reliance placed by ld. CIT(A) on the decision of Bharat Hari Singhania (supra) is not relevant to the present case as it pertains to valuation of assets under the Wealth Tax Act, having no nexus to the issue of procedural compliance u/r. 128 for grant of FTC u/s.90 of the Act. 5.3. The Coordinate Bench of ITAT, Mumbai in the case of Sonakshi Sinha (supra) had succinctly dealt with this issue by holding that it is well settled that while laying down a particular procedure, if no negative or adverse consequence 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. Coordinate Bench also observed that u/s.90 or 91 of the Act, no time line for filing of such declaration on or Printed from counselvise.com 6 ITA No. 5061/Mum/2025 Aparna Girish Hebbani AY 2019-20 before the date of filing of return of income is prescribed. For not allowing credit of foreign taxes, conditions are specifically prescribed in Rule 128(4). Amendment brought to Rule 128 to this effect is effective from 01.04.2022, not applicable to the present case. Coordinate Bench while giving its decision has placed reliance on other decisions of the Coordinate Bench in the case of 42 Hertz Software India Private Ltd. vs. ACIT [2022] 139 taxmann.com 448 (Bng), wherein it followed the earlier order in the case of Brinda Ramakrishna vs. ITO [2022] 135 taxmann.com 358 (Bng). It also referred to the decision of Binod Kumar Lakshmipati vs. CIT in ITA No. 680/Bng/2022, dated 06.09.2022. In all these decisions, it was held that “one of the requirement of Rule 128 for claiming FTC is that Form-67 is to be submitted by the 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 of filing of Form No.67”. 5.4. It is further noted that amendment to Rule 128 is effective from 01.04.2022 whereby assessee is allowed to file Form-67 on or before the end of the Assessment Year, whereby legislature has extended such date which is beyond the due date of filing of return of income. 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. In the present case, it is also important to note that assessee has made all possible efforts within the provisions of the Act to claim credit for FTC including application filed u/s.119(2)(b) which was also rejected. Also, it is a case where assessee was constrained from meeting the compliance of uploading Form-67 owing to Covid 2019 restrictions for travelling to India. The technical glitches relating to OTP could not be resolved by the assessee until she visited India in December, 2021 Printed from counselvise.com 7 ITA No. 5061/Mum/2025 Aparna Girish Hebbani AY 2019-20 where upon all the required steps were taken on priority basis. Thus, assessee has substantively complied with the requirements in filing Form-67 for claim of FTC which cannot be denied on account of technical glitches/grounds, more particularly when DTAA provisions and section 90 would overrule such procedural requirement for lapses when substantive compliance has been made. 6. Considering holistically the factual matrix and the provisions of the Act u/s. 90/91 r.w. India-Australia DTAA and the judicial precedents discussed above, ld. Assessing Officer is directed to give credit for the foreign taxes paid by the assessee and claimed in her return. Accordingly, grounds raised by the assessee in this respect are allowed. 7. In the result, appeal of the assessee is allowed. Order is pronounced in the open court on 06 January, 2026 Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Dated: 06 January, 2026 MP, Sr.P.S. Copy to : 1 The Assessee 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT(A) BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "