PUKHRAJ SINGH GUJRAL,CHANDIGARH V. CPC, BENGALURU

ITA 637/CHANDI/2024

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The case revolves around the denial of a Foreign Tax Credit (FTC) claimed by the assessee, Pukhraj Singh Gujral, for taxes paid on professional income earned in Canada. The Income Tax Department initially disallowed the FTC due to the late filing of Form No. 67, required under Rule 128(9) of the Income Tax Rules, 1962. The assessee appealed against this decision, arguing that the procedural requirement of filing the form by the due date is not mandatory and citing various judicial precedents that support this view. The Tribunal, after considering the arguments and precedents, ruled in favor of the assessee, allowing the FTC claim.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 112257 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2022-2023
• Other Referred Cases: Brinda RamKrishna v. ITO, Sonakshi Sinha v. CIT(A), Duraiswamy Kumaraswamy v. CIT, Venigandla Krishna v. ITO, Natco Pharma Limited v. DCIT, Ashish Agarwal v. ITO, Harbans Singh v. CIT, Akshay Devendra Birari v. Dy. CIT, CPC, 42 Hertz Software India (P.) Ltd. v. Asstt. CIT, CES Limited v. The Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJEET KAUR
• Assessee Lawyers: YOGESH MONGA; C.A VIRTUAL
• Keywords: Set aside; Revised return; Rectification of order; Charitable institution; Double taxation relief; Residential status; Procedural lapse
• Section: 143(1); 139(1); 90

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCHES, “SMC” CHANDIGARH HEARING THROUGH: HYBRID MODE BEFORE: SHRI. LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 637 /Chd/2024 िनधाᭅरण वषᭅ / Assessment Year : 2022-23 Pukhraj Singh Gujral 1528, Sector 36D, Chandigarh बनाम The CPC Bengaluru ᭭थायी लेखा सं./PAN NO: AALCS8303C अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Yogesh Monga, C.A (Virtual) राज᭭व कᳱ ओर से/ Revenue by : Dr Ranjeet Kaur, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 03/04/2025 उदघोषणा कᳱ तारीख/Date of Pronouncement : 16/04/2025 आदेश/Order PER LALIET KUMAR, J.M This is an appeal filed by the Assessee against the order of the Ld. CIT, Appeal Addl/JCIT(A) Nashik, dt. 22/02/2024 pertaining to Assessment Year 2022-23. 2. At the outset the Registry has pointed out that the appeal of the assessee is barred by limitation by 30 days. 3. After considering the condonation application filed by the assessee, I find that sufficient cause has been shown for the delay, which is hereby condoned. Accordingly, the appeal is admitted for adjudication. 4. Ld. DR had no objection if the delay is condoned. 5. Accordingly, the appeal is admitted for adjudication 6. In the present appeal, the Assessee / Revenue has raised the following grounds: 1. That the CPC is bad, and against law and facts 2 2. The CPC is erred in not giving benefit of Rs. 10,32,088/- as taxes paid outside India while passing the rectification order. 3. That the appellant craves leave to add, amend, alter or withdraw any ground of appeal before final hearing 7. Briefly the facts of the case are that the assessee is an individual and filed his income tax return for the A.Y. 2022-2/3 on 27.08.2022, declaring a total income of Rs. 49,37,172/-. This income in/cluded Rs. 49,35,911/- earned as professional income from Canada, on which taxes amounting to Rs. 10,32,088/- were paid in Canada. The assessee claimed relief for this foreign tax credit (FTC) under Section 90 of the Income Tax Act, 1961, by filing Form No. 67 on 27.08.2022, after the due date for filing the return under Section 139(1), which was 31.07.2022. The CPC, Bengaluru, processed the return under Section 143(1) on 26.10.2022 and disallowed the FTC claim of Rs. 10,32,088/-, citing non-compliance with Rule 128(9) of the Income Tax Rules, 1962, which requires Form No. 67 to be filed on or before the due date of filing the return. 8. Against the assessment order the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A), vide order dated 22.02.2024, upheld the AO’s disallowance of the FTC claim. The CIT(A) observed that Rule 128(9) explicitly requires Form No. 67 to be furnished on or before the due date of filing the return under Section 139(1). Since the assessee filed Form No. 67 on 27.08.2022, after the due date of 31.07.2022, the claim did not comply with the procedural mandate. The CIT(A) rejected the assessee’s reliance on various judicial pronouncements, noting that these were from non-jurisdictional tribunals and lacked finality, as no Supreme Court ruling confirmed their position. The CIT(A) further held that Rule 128(9) was not merely procedural but a substantive condition for claiming FTC, and non-compliance justified the disallowance. The Ld. CIT(A) upheld the addition made by the CPC and dismissed the appeal of the assessee. 9. Against the order of the Ld. CIT(A) the assessee came in appeal before us. 10. During the course of hearing the Ld. Counsel for the Assessee submitted that the disallowance of FTC was erroneous and contrary to law. It was argued that Rule 128(9) is a procedural requirement and not mandatory, as neither the Income Tax Act nor the Rules explicitly state that failure to file Form No. 67 by the due date results 3 in denial of FTC. The assessee emphasized that Section 90, read with the Double Taxation Avoidance Agreement (DTAA) between India and Canada, grants a substantive right to claim FTC, which cannot be curtailed by subordinate legislation like Rule 128. Reliance was placed on judicial precedents, including Brinda RamKrishna v. ITO (ITAT Bangalore), Sonakshi Sinha v. CIT(A) (ITAT Mumbai), and others, which held that filing Form No. 67 is directory, and FTC cannot be denied for procedural delays if the form is filed before assessment completion. The assessee further cited the amendment to Rule 128(9) effective from 01.04.2022, allowing Form No. 67 to be filed by the end of the assessment year, and argued that this liberalized approach supported their claim. Additionally, reference was made to a favorable order in a similar case involving Pavit Gujral, where FTC was allowed despite a delayed Form No. 67 filing. 11. The DR supported the orders of the AO and CIT(A), stating that Rule 128(9) is a mandatory requirement for claiming FTC. The DR argued that the timeline for filing Form No. 67, as prescribed under Rule 128(9), is integral to the process of claiming relief under Section 90, and non-compliance renders the claim invalid. It was submitted that the assessee’s filing of Form No. 67 on 27.08.2022, after the due date of 31.07.2022, violated the explicit condition of the rule. The DR contended that judicial precedents cited by the assessee were not binding as they were from non- jurisdictional tribunals and lacked a definitive ruling from the Supreme Court. The DR further argued that the DTAA does not override procedural requirements under domestic law, and the assessee’s failure to comply with Rule 128(9) justified the disallowance. The amended Rule 128(9), effective post the relevant period, was stated to be inapplicable to A.Y. 2022-23. 12. We have heard the rival contention of both the parties and perused he material available on the record. We find merit in the assessee’s appeal. The core issue is whether the delay in filing Form No. 67 beyond the due date under Section 139(1) warrants the denial of FTC under Section 90. We observe that Section 90, in conjunction with the India-Canada DTAA, confers a substantive right to claim FTC for taxes paid abroad, subject to conditions prescribed under the Income Tax Rules. Rule 128(9), as applicable for A.Y. 2022-23, required Form No. 67 to be filed by the due date of the return under Section 139(1). However, neither the Act nor the Rules 4 explicitly mandate disallowance of FTC for delayed filing of Form No. 67. Consistent with decisions in Brinda RamKrishna (ITAT Bangalore), Sonakshi Sinha (ITAT Mumbai), and Nirmala Murali Relwani (ITAT Mumbai), we hold that filing Form No. 67 is a directory requirement, not mandatory, and a procedural lapse does not extinguish the substantive right to FTC, especially when the form was filed on 27.08.2022, well before the processing of the return on 26.10.2022. The amendment to Rule 128(9) effective from 01.04.2022, allowing filing until the end of the assessment year, further indicates a legislative intent to liberalize procedural compliance, though not directly applicable here. The CIT(A)’s dismissal of non-jurisdictional precedents is not tenable, as these rulings reflect a consistent judicial interpretation favouring the assessee. 12.1 The Hon’ble Madras High Court in the case of Duraiswamy Kumaraswamy in W.P.No.5834 of 2022 and W.M.P.Nos.5925 and 5927 of 2022 vide its judgement dt. 06.10.2023 had held as under: 9. In the present case, the petitioner initially worked at Kenya and subsequently, he became the resident of Indian from the assessment year 2018-2019 and 2019-2020. The petitioner admitted the fact that he has filed his return in India on 10.08.2019. The intimation under Section 143(1) was issued on 26.03.2020. However, he has filed the return without Form-67 which is required to be filed under Rule 128 to claim the benefit of FTC and the same came to be filed on 02.02.2021 which was well before the completion of the assessment year. The intimation under Section 143(1) was issued from the CPC only on 26.03.2021. 10. According to the learned counsel appearing for the respondent, the procedure under Rule 128 is mandatory and 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 FTC. 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 the benefits of FTC is filed. Therefore, it would be the amounts to due compliance under the Act. The petitioner referred to the Judgment of the Hon'ble Supreme Court in the case of Commissioner of Income-Tax, Maharashtra v. G.M.Knitting Industries (P) Limited in Civil Appeal Nos.10782 of 2013 and 4048 of 2014 dated 24.06.2015, wherein it was held that Form 3AA is required to be filed along 11. The law laid down by the Hon'ble Apex Court in Commissioner of Income-Tax, Maharashtra v. G.M.Knitting Industries (P) Limited in Civil Appeal Nos.10782 of 2013 and 4048 of 2014 dated 24.06.2015, which was referred above, would be squarely applicable to the present case. In the present case, the returns were filed without FTC. However, the same was filed before the passing of the final assessment order. The filing of FTC 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 the subsequent to the passing of assessment order. 12. Further, in the present case, the intimation under Section 143(1) was issued on 26.03.2021, but the FTC was filed on 02.02.2021. Thus, the respondent is supposed to have provided the due credit to the FTC of the petitioner. However, the FTC 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. 5 13. Accordingly the impugned order dated 25.01.2022 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 FTC filed by the petitioner on 02.02.2021. 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 FTC claim made by the petitioner and hence, the first respondent is directed to consider only on the aspect of rejection of FTC claim within a period of 8 weeks from the date of receipt of copy of this order. 12.2 Similarly the Coordinate Bench decision in the case of Income Tax Officer Vs. Venigandla Krishna in ITA No. 45/Hyd/2024 dt. 27/02/2024. We have heard learned DR and perused the material on record. On a careful consideration of the contentions raised by learned DR, we are of the considered opinion that this issue is squarely covered by the decision of the Co-ordinate Bench of the Tribunal in the case of Natco Pharma Limited vs. DCIT, in ITA No. 470/Hyd/2022, dt. 31/07/2023, wherein the identical issue has been decided as under: “10. Learned AR submits that filing of Form 67 in accordance with rule 128 of the tax rules is only a procedural requirement to enable the tax authorities to verify the FTC available to the assessee, but it does not take away altogether the right of the assessee to claim the FTC. Insofar as this issue is concerned, this is no longer res integra and we find that the Bangalore Bench of the Tribunal in the case of M/s.42 Hertz Software India Pvt.Ltd vide ITA No.29/Bang/2021 order dated 07/03/2022 for the assessment year 2017-18, decided an identical issue and held that FTC cannot be denied to the assessee, where the assessee filed FTC in Form 67, although belatedly since filing of such Form 67 is not mandatory but directory in nature. Relevant observation of the Tribunal from para 6 onwards reads as under:- \"6. There is no dispute that the Assessee is entitled to claim FTC. On perusal of provisions of Rule 128 (8) & (9), it is clear that, one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before filing of the returns. In our view, 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 in filing Form No.67. This view is fortified by the decision of coordinate bench of this Tribunal in case of Ms.Brinda Kumar Krishna vs. ITO in ITA no.454/Bang/2021 by order dated 17/11/2021”. A Co-ordinate Bench of this Tribunal in the cases of Shridhar Madhav Diwan vs. DCIT in ITA No. 102/Hyd/2023, dated 24/05/2023 and Purushothama Reddy Vankireddy vs. ADIT in ITA No. 526/Hyd/2022, dated 05/12/2022, followed the same and held the issue in favour of the assessee. These decisions are applicable to the facts of the case and while respectfully following the said view, we hold the issue in favour of assessee.” Respectfully following the said decision of the Co-ordinate Bench of the Tribunal, we deny the contentions of learned DR and while rejecting the plea taken by the Revenue, dismiss the grounds raised. 12.3 Further, I may also refer to the decision of Coordinate Bench in case of CES Limited Vs. The Deputy Commissioner of Income Tax in ITA No.474/Hyd/2023 dt. 22/03/2024. 6 We have heard the rival submissions and perused the material on record. We agree with the contentions put forth by the learned counsel for the assessee and hold that Rule 128(9) of the Rules does not provide for disallowance of FTC in case of delay in filing Form No.67, filing of Form No.67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and Rules cannot be contrary to the Act. Before me, ld. AR submitted that the case is already covered in favour of the assessee and filed the orders of Tribunal wherein the Tribunal gave decision in favour of assessee, including the order in ITA No.337/Hyd/2023. Further, the said decisions are not stayed or over-ruled by any of the higher Judicial Forums. In view of the above circumstances, I respectfully following the decision of the co-ordinate Bench of the Tribunal passed in the case of Ashish Agarwal Vs. ITO in ITA No.337/Hyd/2023 dt.26.09.2023, allow the appeal. Thus, the appeal of the assessee is allowed. 12.4 Lastly the Coordinate Amritsar Bench in the case of Harbans Singh [2024] 165 taxmann.com 146 (Amritsar - Trib.) has held as under: 10.1 In the instant case we find that the original return of income is within time u/s 139(1) of the Act 61, filed on a returned income of Rs. 14,92,640/-, which was subsequently revised u/s 139(5), at a higher figure of Rs.16,91,220/-, which is the finally assessed figure u/s 143(1) dated 28/10/2022, meaning thereby, the revised return has been considered and accepted by CPC, ignoring the claim of the assessee in Form 10-IE, which was also on record before the AO, on the date of assessment. Form 10.2 We find that an identical issue has been decided by the coordinate bench of the ITAT , Pune in the case of Akshay Devendra Birari v. Dy. CIT, CPC ITA no 782 PUN/ 2024 dated 05/06/2024/ [2024] 164 taxmann.com 58 (Pune - Trib.), where the Hon'ble Bench has held on the facts case that filing of Form 10-IE is not a mandatory requiredment but only directory in nature and CPC ought to have considered the same allowing the benefit of new tax regime. 10.3 We would also like to consider the decision of the Bangalore Bench of the tribunal in the case of 42 Hertz Software India (P.) Ltd. v. Asstt. CIT ITA No 29/Bang/ 2021, dated 07/03/2022/[2022] 139 taxmann.com 448 (Bangalore - Trib.), which relates to the matter of delayed filing of Form 67 , under Rule 128, in the matter of claim of FTC. On the facts of the case it was held that one of the requirements of Rule 128 for claiming FTC is that Form 67 is to be submitted by assessee before due date prescribed u/s 139(1) of the Act , but this requirement cannot be treated as mandatory, rather it is directory in nature , because Rule 128(9) does not provide for disallowance of FTC in case of delay in filing Form 67. Similar view has been taken in the case of Ms. Brinda RamaKrishna v. ITO(2022 (2) TMI 752- ITAT/[2022] 135 taxmann.com 358/193 ITD 840 (Bangalore - Trib.) Bangalore, for the purpose of Form 67 rwr 128 relating to FTC. 10.4 We also consider the decision of the ITAT , Ahmedabad Bench, in the case of Income-tax Officer (Exemptions) v. Ramji Mandir Religious and Charitable Trust [2024] 158 taxmann.com 114/205 ITD 150 (Ahmedabad - Trib.)(Ahmedabad), where in the matter of filing of Form 10/10B which is required to be furnished before due date u/s 139(1) of the Act, the tribunal held the same to be merely directory in nature and opined that the same cannot be so fatal so as to deny exemption u/s 11(2) specially when the said Form - 10/10B was available before the AO when intimation was passed by CPC, u/s 143(1). 10.5 Regarding the issue of technical glitch raised by the assessee , that Form 10-IE could not be uploaded in the portal within the time allowed u/s 139(1) , due to technical incompatibility in the portal we refer to a judgment of the Hon'ble Gujrat High court in the matter of section 115BBA of the Act , in the case of Pr. CIT v. KGY Glass Industries (P.) Ltd. [2023] 156 taxmann.com 18/296 Taxman 180/464 ITR 129, where Form 10-1C was required to be filed by the domestic company within time allowed u/s 139(1) of the Act ,opting to be taxed as per provisions of section 115BBA , was not practically possible due to technical glitches in the portal, the Hon'ble court 7 held that in absence of any fault on the part of the assessee , the assessee cannot be deprived of benefit under section 115BBA of the Act . 10.6 As such considering all aspects of the matter, and noting the legal conclusions derived at by various courts and tribunals, on the facts of respective cases, cited above, we are in agreement with the decision of the coordinate bench of the Pune tribunal in the case of Akshay Devendra Birani (supra), and we hold that requirement of filing Form 10-IE is directory in nature and not mandatory and it is sufficient compliance if the said Form is before the AO at the time of assessment. As such we direct the CPC to take into consideration the Form 10-IE filed by the assessee and pass appropriate orders. 12.5 Accordingly, we set aside the orders of the AO and CIT(A) and direct the AO to allow the FTC claim of Rs. 10,32,088 after verifying the supporting documents. The appeal is allowed. 13. In the result, the appeal of the assessee is allowed. (Order pronounced in the open Court on 16/04/2025) Sd/- ( LALIET KUMAR) JUDICIAL MEMBER AG Date: 16/04/2025 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File "