Foreign Tax Credit Cannot Be Denied for Belated Filing of Form 67 – ITAT Kolkata Ruling

Case Overview

Atanu Mukherjee Vs ITO (ITAT Kolkata)
Assessment Year: 2020-21
Date of Order: 20th December, 2022

The Income Tax Appellate Tribunal, Kolkata, delivered a significant ruling in favour of the assessee by holding that a mere delay in filing Form 67 cannot serve as a valid ground for denial of Foreign Tax Credit (FTC). The Tribunal set aside the order of the Commissioner of Income Tax (Appeals), NFAC, Delhi, dated 02.06.2022, which had confirmed the Assessing Officer's decision to disallow the FTC claim solely on procedural grounds.

Background and Facts of the Case

The assessee, an individual and tax resident of India, filed a belated return of income on 31st March 2021 for Assessment Year 2020-21, declaring a total income of ₹93,44,290/-. During the relevant previous year, the assessee was employed with two employers — M/s Dastur International INC in the United States of America and M/s M N Dastur Company India Pvt. Ltd. in India.

The salary income earned by the assessee for services specifically rendered in the United States during the period from April 2019 to March 2020 was duly offered to tax in India. Accordingly, the assessee claimed Foreign Tax Credit of ₹20,92,790/- under Section 90(2) of the Income-tax Act, 1961, in respect of taxes already paid in the USA, invoking the provisions of the India–USA Double Taxation Avoidance Agreement (DTAA).

Processing of Return and Denial of FTC

When the return was processed under Section 143(1) of the Income-tax Act, 1961, an intimation dated 24.12.2021 was issued. While the total returned income of ₹93,44,290/- was accepted without any adjustment, the FTC claim of ₹20,92,790/- was entirely disallowed. The basis for this disallowance was that Form 67, as prescribed under Rule 128 of the Income-tax Rules, 1962, had not been filed within the due date stipulated under Rule 128(9).

As a direct consequence of this disallowance, a tax demand of ₹28,48,010/- was raised against the assessee. Additionally, interest under Section 234A, Section 234B, and Section 234C of the Act amounting to ₹7,55,223/- was also charged.

First Appellate Stage – CIT(A) Order

Aggrieved by the demand, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), NFAC. However, the CIT(A) dismissed the appeal and upheld the Assessing Officer's order. The CIT(A) concluded as follows: