Gujarat High Court Rules: Late Filing of Form 67 Does Not Extinguish DTAA Foreign Tax Credit Entitlement

Case Overview

Case Name: Deepak Pragjibhai Gondaliya Vs PCIT (Gujarat High Court)

Forum: Gujarat High Court

Subject Matter: Writ petition under Articles 226/227 of the Constitution of India challenging rejection of condonation of delay in filing Form No. 67 for Assessment Year 2020-21

Background and Factual Matrix

The Gujarat High Court was called upon to adjudicate a writ petition filed against an order dated 23.12.2022 passed by the Principal Commissioner of Income Tax, Vadodara-1 under Section 119(2)(b) of the Income Tax Act, 1961. The said order had refused to condone the delay in filing Form No. 67 for Assessment Year 2020-21, thereby effectively denying the assessee the benefit of foreign tax credit under the Double Taxation Avoidance Agreement (DTAA) between India and Bangladesh.

Facts of the Case

The assessee, employed as Executive Vice President — Scientific Affairs with Square Pharmaceutical Limited in Bangladesh from 16.06.2019, filed his Return of Income for AY 2020-21 on 30.10.2020 declaring a total income of ₹1,37,73,200/-. During the course of his employment in Bangladesh, the assessee had earned salary income equivalent to ₹42,46,561/- (in Indian currency), on which taxes were duly discharged in Bangladesh. This was evidenced by certificates dated 27.10.2019 and 28.10.2019 issued by the Deputy Commissioner of Income Tax, Taxes Zone-II, Dhaka.

By virtue of Article 16 of the DTAA between India and Bangladesh, the assessee was legally entitled to claim a foreign tax credit of ₹13,03,772/- against his Indian tax liability on the said salary income. However, he failed to file Form No. 67 as mandated under Rule 128(1) of the Income-tax Rules, 1962 within the prescribed timeline.

The return was processed under Section 143(1) of the Income Tax Act, 1961, and an intimation was issued by CPC, Bangalore on 24.12.2021. Only thereafter — on 04.01.2022 — did the assessee submit Form No. 67, which was clearly beyond the prescribed due date.

Steps Taken by the Assessee After the Default

Recognizing the oversight, the assessee pursued multiple remedial avenues:

  1. Filed an application under Section 119(2)(b) on 12.10.2022 before the Principal Commissioner of Income Tax, Vadodara, seeking condonation of delay in filing Form No. 67
  2. Filed applications under Section 154 of the Act seeking rectification of the intimation issued under Section 143(1) — these were rejected by the Revenue
  3. Filed an appeal before the Commissioner (Appeals) — dismissed vide order dated 12.12.2023

The PCIT rejected the condonation application on 23.12.2022 on the ground that the assessee had not established genuine hardship as required under Section 119(2)(b). The PCIT noted that the assessee had merely stated that filing of Form No. 67 was an inadvertent omission, which the authority treated as a general and non-specific reason insufficient to constitute genuine hardship.

Arguments Advanced Before the High Court

Contentions of the Assessee

The assessee's learned advocate submitted that:

  • The assessee had duly disclosed all foreign income earned in Bangladesh and the taxes paid thereon in the Return of Income
  • The benefit of the DTAA cannot be denied merely on account of a procedural lapse in timely filing of Form No. 67
  • The entitlement to foreign tax credit under the DTAA remained intact on merits, as the underlying facts — salary earned in Bangladesh and taxes paid there — were never in dispute
  • Filing of Form No. 67 is directory and procedural in character, not a substantive condition going to the root of the claim
  • The PCIT adopted an unduly narrow and restrictive interpretation of the phrase "genuine hardship" under Section 119(2)(b)

Reliance was placed on multiple decisions including:

  • Nirzari Amitbhai Mehta v. Principal Commissioner of Income-Tax, [2024] 168 taxmann.com 674 (Gujarat)
  • Surat Smart City Development Ltd. v. Principal Commissioner of Income-Tax, [2024] 169 taxmann.com 222 (Gujarat)
  • Shri Visha Oswal Tap. Shantibhuvan Upashray and Derasar v. Commissioner of Income-Tax (Exemptions), [2024] 167 taxmann.com 170 (Gujarat)
  • Shri 108 Parshwanath Bhakti Vihar Jain Trust v. Commissioner of Income Tax (Exemption), [2024] 166 taxmann.com 732 (Gujarat)
  • Nileshkumar Uttamchand Rathod v. Office of the Principal Commissioner of Income Tax, [2024] 160 taxmann.com 345 (Gujarat)
  • Chintan Navnitlal Parikh (HUF) v. Deputy Secretary (OT and WT), CBDT, [2023] 154 taxmann.com 544 (Gujarat)
  • Sarvodaya Charitable Trust v. Income Tax Officer (Exemption), [2021] 125 taxmann.com 75 (Gujarat)
  • Pankaj Kailash Agarwal v. Assistant Commissioner of Income-Tax, [2024] 161 taxmann.com 383 (Bombay)

Contentions of the Revenue

The Senior Standing Counsel for the Revenue submitted that: