Chennai ITAT Allows Full Foreign Tax Credit Despite Defect in Form 67

Background and Core Issue

The Chennai Bench of the Income Tax Appellate Tribunal in the case of Shrinivasan Ranganathan Vs ACIT examined whether an assessee can be denied part of the eligible Foreign Tax Credit (FTC) solely because Form 67 reflected a lower figure or was not appropriately revised, even when all foreign tax payment details were already on record.

The dispute arose from the assessee’s FTC claim under Section 90 / Section 91 of the Income Tax Act 1961, where the Assessing Officer (AO) restricted the credit to the amount initially reflected in Form 67, despite an enhanced eligible FTC becoming apparent during scrutiny due to additional Long Term Capital Gain (LTCG) income being offered to tax.

The Tribunal ultimately held that requirements under Rule 128 and Form 67 are procedural and directory, and such technical issues cannot override the assessee’s substantive right to full FTC, where foreign tax has actually been paid and is duly evidenced.

Facts of the Case

Return Filing and Original FTC Claim

  1. The assessee, a resident individual with income from India and the United States, filed a belated return of income for Assessment Year 2023-24 on 30.12.2023 under Section 139(4) declaring total income of **Rs. 33,25,85,490/-`.
  2. Along with the return, the assessee submitted Form No.67, claiming FTC of Rs. 8,70,22,525/- under Section 90 / Section 91.
  3. This Form 67 specified the details of US taxes paid; however, the FTC claim quantified in the form was limited to Rs. 8,70,22,525/-, which later turned out to be lower than the ultimately eligible amount after income enhancement.

Scrutiny Assessment and Enhanced Income

  • The case was picked for complete scrutiny and notice under Section 143(2) was issued on **19.06.2024`.
  • During the assessment proceedings, it came to light that capital gains of Rs. 3,83,92,903/-, which actually pertained to the assessee, had been erroneously reported as the income of the assessee’s spouse.
  • In response to notice under Section 142(1), the assessee filed a revised computation reflecting this LTCG as his own income, increasing his total income accordingly.

As a result of this enhanced LTCG:

  • The assessee asserted that the correct FTC entitlement came to Rs. 9,78,31,360/-, instead of the earlier figure of Rs. 8,70,22,525/- mentioned in Form 67.

Assessment Order and Restriction of FTC

The assessment was completed under Section 143(3) read with Section 144B vide order dated 11.03.2025, on the enhanced income including LTCG of Rs. 3,83,92,903/-.

However: